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ENJ Entergy New Orleans

Filed: 6 May 21, 2:46pm

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

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________

Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.

Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
1-11299ENTERGY CORPORATION1-35747ENTERGY NEW ORLEANS, LLC
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
(a Texas limited liability company)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-122975282-2212934
1-10764ENTERGY ARKANSAS, LLC1-34360ENTERGY TEXAS, INC.
(a Texas limited liability company)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
(a Texas corporation)
10055 Grogans Mill Road
The Woodlands, Texas 77380
Telephone (409) 981-2000
83-191866861-1435798
1-32718ENTERGY LOUISIANA, LLC1-09067SYSTEM ENERGY RESOURCES, INC.
(a Texas limited liability company)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 576-4000
(an Arkansas corporation)
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
47-446964672-0752777
1-31508ENTERGY MISSISSIPPI, LLC
(a Texas limited liability company)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
83-1950019
__________________________________________________________________________________________







Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of ClassTrading
Symbol
Name of Each Exchange
on Which Registered
Entergy CorporationCommon Stock, $0.01 Par ValueETRNew York Stock Exchange
Common Stock, $0.01 Par ValueETRNYSE Chicago, Inc.
   
Entergy Arkansas, LLCMortgage Bonds, 4.875% Series due September 2066EAINew York Stock Exchange
   
Entergy Louisiana, LLCMortgage Bonds, 4.875% Series due September 2066ELCNew York Stock Exchange
   
Entergy Mississippi, LLCMortgage Bonds, 4.90% Series due October 2066EMPNew York Stock Exchange
   
Entergy New Orleans, LLCMortgage Bonds, 5.0% Series due December 2052ENJNew York Stock Exchange
Mortgage Bonds, 5.50% Series due April 2066ENONew York Stock Exchange
   
Entergy Texas, Inc.5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share)ETI/PRNew York Stock Exchange




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 No

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

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

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

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes No
Common Stock OutstandingOutstanding at April 30, 2021
Entergy Corporation($0.01 par value)200,659,948

Entergy Corporation, Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2020, filed by the individual registrants with the SEC, and should be read in conjunction therewith.





TABLE OF CONTENTS
i

TABLE OF CONTENTS
ii

FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, projections, strategies, and future events or performance.  Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements involve a number of risks and uncertainties.  There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K and in this report, (b) Management’s Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):

resolution of pending and future rate cases and related litigation, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs, as well as delays in cost recovery resulting from these proceedings;
continuing long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the benefits of continued MISO participation, the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, the MISO-wide base rate of return on equity allowed or any MISO-related charges and credits required by the FERC, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
changes in utility regulation, including with respect to retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent return on equity criteria, transmission reliability requirements or market power criteria by the FERC or the U.S. Department of Justice;
changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned or actual shutdown and sale of each of the nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;
resolution of pending or future applications, and related regulatory proceedings and litigation, for license modifications or other authorizations required of nuclear generating facilities and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at Entergy’s nuclear generating facilities;
increases in costs and capital expenditures that could result from changing regulatory requirements, emerging operating and industry issues, and the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating facilities;


iii

FORWARD-LOOKING INFORMATION (Continued)

Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants, especially in light of the planned shutdown and sale of each of these nuclear plants;
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
changes in environmental laws and regulations, agency positions or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter and other regulated air emissions, heat and other regulated discharges to water, requirements for waste management and disposal and for the remediation of contaminated sites, wetlands protection and permitting, and changes in costs of compliance with environmental laws and regulations;
changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations;
the effects of changes in federal, state, or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, trade/tariff, domestic purchase requirements, or energy policies;
the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions or decisions;
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes (including from Hurricane Laura, Hurricane Delta, and Hurricane Zeta), 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, as well as any related unplanned outages;
the risk that an incident at any nuclear generation facility in the U.S. could lead to the assessment of significant retrospective assessments and/or retrospective insurance premiums as a result of Entergy’s participation in a secondary financial protection system, a utility industry mutual insurance company, and industry self-insurance programs;
effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land and wetland loss;
changes in the quality and availability of water supplies and the related regulation of water use and diversion;
Entergy’s ability to manage its capital projects, including completion of projects timely and within budget and to obtain the anticipated performance or other benefits, and its operation and maintenance costs;
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the northern United States and events and circumstances that could influence economic conditions in those areas, including power prices, and the risk that anticipated load growth may not materialize;
changes to federal income tax laws and regulations, including continued impact of the Tax Cuts and Jobs Act and its intended and unintended consequences on financial results and future cash flows;
the effects of Entergy’s strategies to reduce tax payments;
iv

FORWARD-LOOKING INFORMATION (Concluded)

changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments and acquisitions;
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
changes in inflation and interest rates;
the effects of litigation and government investigations or proceedings;
changes in technology, including (i) Entergy’s ability to implement new or emerging technologies, (ii) the impact of changes relating to new, developing, or alternative sources of generation such as distributed energy and energy storage, renewable energy, energy efficiency, demand side management and other measures that reduce load and government policies incentivizing development of the foregoing, and (iii) competition from other companies offering products and services to Entergy’s customers based on new or emerging technologies or alternative sources of generation;
Entergy’s ability to effectively formulate and implement plans to reduce its carbon emission rate and aggregate carbon emissions, including its commitment to achieve net-zero carbon emissions by 2050, and the potential impact on its business of attempting to achieve such objectives;
the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
the effects of a global event or pandemic, such as the COVID-19 global pandemic, including economic and societal disruptions; volatility in the capital markets (and any related increased cost of capital or any inability to access the capital markets or draw on available bank credit facilities); reduced demand for electricity, particularly from commercial and industrial customers; increased or unrecoverable costs; supply chain, vendor, and contractor disruptions; delays in completion of capital or other construction projects, maintenance, and other operations activities, including prolonged or delayed outages; impacts to Entergy’s workforce availability, health, or safety; increased cybersecurity risks as a result of many employees telecommuting; increased late or uncollectible customer payments; regulatory delays; executive orders affecting, or increased regulation of, Entergy’s business; changes in credit ratings or outlooks as a result of any of the foregoing; or other adverse impacts on Entergy’s ability to execute on its business strategies and initiatives or, more generally, on Entergy’s results of operations, financial condition, and liquidity;
Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills;
Entergy’s ability to attract, retain, and manage an appropriately qualified workforce;
changes in accounting standards and corporate governance;
declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;
the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by mid-2022, including the implementation of the planned shutdowns and sales of Indian Point 2, Indian Point 3, and Palisades;
the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;
the potential for the factors listed herein to lead to the impairment of long-lived assets; and
Entergy and its subsidiaries’ ability to successfully execute on their business strategies, including their ability to complete strategic transactions that Entergy may undertake.
v

DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or AcronymTerm
ALJAdministrative Law Judge
ANO 1 and 2Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSCArkansas Public Service Commission
ASUAccounting Standards Update issued by the FASB
BoardBoard of Directors of Entergy Corporation
CajunCajun Electric Power Cooperative, Inc.
capacity factorActual plant output divided by maximum potential plant output for the period
City CouncilCouncil of the City of New Orleans, Louisiana
COVID-19The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020
D.C. CircuitU.S. Court of Appeals for the District of Columbia Circuit
DOEUnited States Department of Energy
EntergyEntergy Corporation and its direct and indirect subsidiaries
Entergy CorporationEntergy 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 LouisianaEntergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy LouisianaEntergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy TexasEntergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale CommoditiesEntergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPAUnited States Environmental Protection Agency
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
Form 10-KAnnual Report on Form 10-K for the calendar year ended December 31, 2020 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand GulfUnit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWhGigawatt-hour(s), which equals one million kilowatt-hours
IndependenceIndependence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
vi

DEFINITIONS (Continued)
Abbreviation or AcronymTerm
Indian Point 2Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2020
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in
the Entergy Wholesale Commodities business segment, which ceased power production in April 2021
IRSInternal Revenue Service
ISOIndependent System Operator
kWKilowatt, which equals one thousand watts
kWhKilowatt-hour(s)
LPSCLouisiana Public Service Commission
MISOMidcontinent Independent System Operator, Inc., a regional transmission organization
MMBtuOne million British Thermal Units
MPSCMississippi Public Service Commission
MWMegawatt(s), which equals one thousand kilowatts
MWhMegawatt-hour(s)
Nelson Unit 6Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy 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 ratioGross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operationInstalled capacity owned and operated
NRCNuclear Regulatory Commission
PalisadesPalisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & OtherThe portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
PilgrimPilgrim Nuclear Power Station (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in May 2019 and was sold in August 2019
PPAPurchased power agreement or power purchase agreement
PUCTPublic Utility Commission of Texas
Registrant SubsidiariesEntergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
River BendRiver Bend Station (nuclear), owned by Entergy Louisiana
SECSecurities and Exchange Commission
System AgreementAgreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System EnergySystem Energy Resources, Inc.
TWhTerawatt-hour(s), which equals one billion kilowatt-hours
vii

DEFINITIONS (Concluded)
Abbreviation or AcronymTerm
Unit Power Sales AgreementAgreement, dated as of June 10, 1982, as amended and approved by the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
UtilityEntergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companiesEntergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Waterford 3Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana
weather-adjusted usageElectric usage excluding the effects of deviations from normal weather
White BluffWhite Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas
viii

ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

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

The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.  
The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of the operation and planned shutdown and sale of each of the Entergy Wholesale Commodities nuclear power plants.

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

The COVID-19 Pandemic

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic and its effects on Entergy’s business.

Hurricane Laura, Hurricane Delta, and Hurricane Zeta

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Laura, Hurricane Delta, and Hurricane Zeta” in the Form 10-K for a discussion of Hurricane Laura, Hurricane Delta, and Hurricane Zeta, which caused significant damage to portions of the Utility’s service territories in Louisiana, including New Orleans, Texas, and to a lesser extent, in Arkansas and Mississippi. See Note 2 to the financial statements herein for discussion of storm cost recovery filings made by Entergy Louisiana and Entergy Texas in April 2021. Entergy New Orleans expects to initiate its storm cost recovery proceeding in May 2021.

Winter Storm Uri

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for February 2021 for Entergy were approximately $720 million, including $145 million for Entergy Arkansas, $285 million for Entergy Louisiana, $65 million for Entergy Mississippi, $35 million for Entergy New Orleans, and $185 million for Entergy Texas. This compares to fuel and purchased power costs for February 2020 for Entergy of $245 million, including $40 million for Entergy Arkansas, $95 million for Entergy Louisiana, $35 million for Entergy Mississippi, $25 million for Entergy New Orleans, and $50 million for Entergy Texas. See Note 2 to the financial statements herein for discussion of storm cost recovery filings made by Entergy Louisiana and Entergy Texas in April 2021. See Note 2 to the financial statements herein and in the Form 10-K for discussion of fuel cost recovery at the Utility operating companies.





1

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Results of Operations

First Quarter 2021 Compared to First Quarter 2020

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2021 to the first quarter 2020 showing how much the line item increased or (decreased) in comparison to the prior period:

Utility
Entergy
Wholesale
Commodities

Parent &
Other (a)

Entergy
(In Thousands)
2020 Net Income (Loss) Attributable to Entergy Corporation$319,816 ($110,975)($90,127)$118,714 
Operating revenues501,987 (84,330)417,659 
Fuel, fuel-related expenses, and gas purchased for resale102,680 1,094 (10)103,764 
Purchased power155,967 7,143 10 163,120 
Other regulatory charges (credits) - net39,958 — — 39,958 
Other operation and maintenance36,589 (32,049)162 4,702 
Asset write-offs, impairments, and related charges— (1,822)— (1,822)
Taxes other than income taxes(255)(13,641)304 (13,592)
Depreciation and amortization37,052 (22,148)(95)14,809 
Other income (deductions)30,046 218,171 6,257 254,474 
Interest expense13,847 (1,106)(3,013)9,728 
Other expenses(3,239)1,718 — (1,521)
Income taxes112,683 46,100 (21,647)137,136 
2021 Net Income (Loss) Attributable to Entergy Corporation$356,567 $37,577 ($59,579)$334,565 

(a)Parent & Other includes eliminations, which are primarily intersegment activity.

First quarter 2020 results of operations include losses of $211 million (pre-tax) on Entergy Wholesale Commodities’ nuclear decommissioning trust fund investments reflecting the equity market decline in March 2020 associated with the COVID-19 pandemic. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.
2

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Revenues

Utility

Following is an analysis of the change in operating revenues comparing the first quarter 2021 to the first quarter 2020:
Amount
(In Millions)
2020 operating revenues$2,095 
Fuel, rider, and other revenues that do not significantly affect net income323 
Volume/weather97 
Retail electric price96 
Return of unprotected excess accumulated deferred income taxes to customers(14)
2021 operating revenues$2,597 

The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The volume/weather variance is primarily due to an increase of 990 GWh, or 4%, in billed electricity usage, including the effect of more favorable weather on residential sales, partially offset by a decrease in industrial usage and decreased demand from mid to small customers. The decrease in industrial usage is primarily due to decreased demand from existing customers in the chemicals and petroleum refining industries as a result of the COVID-19 pandemic and plant shutdowns and operational issues. The decrease in industrial usage is partially offset by an increase in demand from expansion projects, primarily in the transportation, metals, and chemicals industries. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

The retail electric price variance is primarily due to:

increases in Entergy Louisiana’s formula rate plan revenues, including an interim increase effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station, an increase in the transmission recovery mechanism effective September 2020, and an interim increase effective December 2020 due to the inclusion of the first-year revenue requirement for the Washington Parish Energy Center;
increases in Entergy Mississippi’s formula rate plan rates effective with the first billing cycle of April 2020 and the implementation of a vegetation management rider effective with the April 2020 billing cycle;
an increase in Entergy New Orleans’s formula rate plan revenues resulting from the recovery of New Orleans Power Station costs, effective November 2020; and
the implementation of the generation cost recovery rider effective January 2021, an increase in the transmission cost recovery factor rider effective March 2021, and an increase in the distribution cost recovery factor rider effective March 2021, each at Entergy Texas.

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

3

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In first quarter 2021, $41 million was returned to customers through reductions in operating revenues as compared to $27 million in first quarter 2020. There is no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     

Billed electric energy sales for Utility for the three months ended March 31, 2021 and 2020 are as follows:
20212020% Change
(GWh)
Residential9,599 8,126 18 
Commercial6,134 6,244 (2)
Industrial11,458 11,815 (3)
Governmental579 595 (3)
Total retail27,770 26,780 
Sales for resale4,299 3,117 38 
Total32,069 29,897 

See Note 13 to the financial statements herein for additional discussion of operating revenues.

Entergy Wholesale Commodities

Operating revenues for Entergy Wholesale Commodities decreased from $332 million for the first quarter 2020 to $248 million for the first quarter 2021 primarily due to the shutdown of the Indian Point 2 plant in April 2020.

Following are key performance measures for Entergy Wholesale Commodities for the first quarters 2021 and 2020:
20212020
Owned capacity (MW) (a)2,2463,274
GWh billed4,4136,757
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor99%99%
GWh billed3,9886,259
Average energy price ($/MWh)$51.86$47.42
Average capacity price ($/kW-month)$0.23$1.07

The Entergy Wholesale Commodities nuclear power plants had no refueling outage days in the first quarters 2021 and 2020.

(a)The reduction in owned capacity is due to the shutdown of the 1,028 MW Indian Point 2 plant in April 2020.
4

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $566 million for the first quarter 2020 to $602 million for the first quarter 2021 primarily due to:

lower nuclear insurance refunds of $13 million;
an increase of $7 million in non-nuclear generation expenses due to higher expenses associated with plants placed in service, including the Lake Charles Power Station, which began commercial operation in March 2020, the New Orleans Power Station which began commercial operation in May 2020, the Washington Parish Energy Center purchased in November 2020, and the Montgomery County Power Station which began commercial operation in January 2021;
an increase of $7 million in vegetation maintenance costs; and
an increase of $5 million in nuclear generation expenses primarily due to spending on sanitation and social distancing protocols as a result of COVID-19.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Lake Charles Power Station and the Montgomery County Power Station.

Other regulatory charges (credits) - net includes the reversal in 2021 of the remaining $39 million regulatory liability for Entergy Arkansas’s 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding and $29 million recorded in first quarter 2020, at Entergy Louisiana, due to a settlement with the IRS related to the uncertain tax position regarding the Hurricane Isaac Louisiana Act 55 financing because the savings will be shared with customers. See Note 2 to the financial statements herein and in the Form 10-K for discussion of Entergy Arkansas’s 2020 formula rate plan filing. See Note 3 to the financial statements in the Form 10-K for further discussion of the settlement and savings obligation.

Other income increased primarily due to changes in decommissioning trust fund activity, partially offset by a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the Lake Charles Power Station project and the Montgomery County Power Station project.

Interest expense increased primarily due to:

the issuance by Entergy Louisiana of $350 million of 2.90% Series mortgage bonds in March 2020;
the issuance by Entergy Louisiana of $1.1 billion of 0.62% Series mortgage bonds, $300 million of 2.90% Series mortgage bonds, and $300 million of 1.60% Series mortgage bonds, each in November 2020;
the issuance by Entergy Louisiana of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021; and
a decrease in the allowance for borrowed funds used during construction due to higher construction work in progress in 2020, including the Lake Charles Power Station project and the Montgomery County Power Station project.

The increase was partially offset by the repayments by Entergy Louisiana of $200 million of 5.25% Series mortgage bonds and $100 million of 4.70% Series mortgage bonds, each in December 2020.
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Management's Financial Discussion and Analysis


Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $131 million for the first quarter 2020 to $99 million for the first quarter 2021 primarily due to:

a decrease of $28 million primarily resulting from the absence of expenses from the Indian Point 2 plant after it was shut down in April 2020; and
a decrease of $6 million in severance and retention expenses. Severance and retention expenses were incurred in 2021 and 2020 due to management’s strategy to exit the Entergy Wholesale Commodities merchant power business.

See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses resulting from management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet.

Taxes other than income taxes decreased primarily due to lower payroll taxes and lower ad valorem taxes.

Depreciation and amortization expenses decreased primarily due to:

the absence of depreciation expense from the Indian Point 2 plant, after it was shut down in April 2020; and
the effect of recording in 2021 a final judgment to resolve claims in the Palisades damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded included $9 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.

Other income increased primarily due to losses on decommissioning trust fund investments in the first quarter 2020. These losses reflected the equity market decline in March 2020 associated with the COVID-19 pandemic. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Income Taxes

The effective income tax rate was 16.3% for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (136.6%) for the first quarter 2020. The difference in the effective income tax rate for the first quarter 2020 versus the federal statutory rate of 21% was primarily due to the settlement with the IRS on the treatment of funds received in conjunction with the Louisiana Act 55 financing of Hurricane Isaac storm costs, permanent differences related to income tax deductions for stock-based compensation, amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for discussion of the IRS settlement and the income tax deductions for stock-based compensation. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
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Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Exit from the Merchant Power Business

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” in the Form 10-K for a discussion of management’s strategy to shut down and sell all remaining plants in the Entergy Wholesale Commodities merchant nuclear fleet.  Following are updates to that discussion.

Planned Shutdown and Sale of Indian Point 2 and Indian Point 3

As discussed in the Form 10-K, in April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 has been shut down and defueled, to a Holtec subsidiary for decommissioning the plants. The sale will include the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for the three units.

In November 2019, Entergy and Holtec submitted a license transfer application to the NRC. The NRC issued an order approving the application in November 2020, subject to the NRC’s authority to condition, revise, or rescind the approval order based on the resolution of four pending hearing requests. In January 2021 the NRC issued an order denying all four hearing requests challenging the license transfer application. In January 2021, New York State filed a petition for review with the D.C. Circuit asking the court to vacate the NRC’s January 2021 order denying the State’s hearing request, as well as the NRC’s November 2020 order approving the license transfers. In January 2021 the D.C. Circuit issued a scheduling order, setting deadlines for initial procedural filings in March 2021. In March 2021 additional parties also filed petitions for review with the D.C. Circuit seeking review of the same NRC orders. In March 2021 the court consolidated all of the appeals into the same proceeding. The court has yet to issue a scheduling order for briefing.

In November 2019, Entergy and Holtec also submitted a petition to the New York State Public Service Commission (NYPSC) seeking an order from the NYPSC disclaiming jurisdiction or abstaining from review of the transaction or, alternatively, approving the transaction. Closing is also conditioned on obtaining from the New York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as being consistent with applicable standards. In April 2021, Entergy and Holtec filed a joint settlement proposal with the NYPSC that resolves all issues among all parties. These issues include financial assurance, site restoration, financial reporting, continued funding for state and local emergency management and response activities, a memorandum of understanding with local taxing jurisdictions, and the dismissal of the federal appeals described in the preceding paragraph. The NYPSC is expected to take action on the joint settlement proposal at its May 13, 2021 meeting.

Indian Point 2 permanently ceased operations on April 30, 2020 and Indian Point 3 permanently ceased operations on April 30, 2021. The transaction is targeted to close in May 2021, following the defueling of Indian Point 3. The Indian Point transaction is expected to result in a $285 million net loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of agreed adjustments. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.

Planned Shutdown and Sale of Palisades

As discussed in the Form 10-K, in July 2018, Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site, for $1,000 (subject to adjustment for net liabilities and other amounts) to a Holtec subsidiary. The sale will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning.
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Management's Financial Discussion and Analysis


In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. The NRC has indicated that it expects to complete its review of the application by January 2022. In February 2021 several parties filed with the NRC petitions to intervene and requests for hearing challenging the license transfer application. In March 2021, Entergy and Holtec filed answers opposing the petitions to intervene and hearing requests, and the petitioners filed replies. In March 2021 an additional party also filed a petition to intervene and request for hearing. Entergy and Holtec filed an answer to the March 2021 petition in April 2021.

Subject to the conditions discussed in the Form 10-K, the transaction is expected to close by the end of 2022. As of March 31, 2021, Entergy’s adjusted net investment in Palisades was $30 million. The primary variables in the ultimate loss or gain that Entergy will incur on the transaction are the values of the nuclear decommissioning trust and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.

Costs Associated with Entergy Wholesale Commodities Strategic Transactions

Entergy expects to incur employee retention and severance expenses associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business of approximately $40 million in 2021, of which $13 million has been incurred as of March 31, 2021, and a total of approximately $15 million in 2022. In addition, Entergy Wholesale Commodities incurred impairment charges of $3 million primarily related to expenditures for capital assets for the three months ended March 31, 2021. These costs were charged to expense as incurred as a result of the impaired value of certain of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business.

Liquidity and Capital Resources

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

Capital Structure and Resources

Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 2021 is primarily due to the net issuance of debt in 2021.
March 31, 2021December 31,
2020
Debt to capital69.6 %68.3 %
Effect of excluding securitization bonds(0.1 %)(0.2 %)
Debt to capital, excluding securitization bonds (a)69.5 %68.1 %
Effect of subtracting cash(1.5 %)(1.7 %)
Net debt to net capital, excluding securitization bonds (a)68.0 %66.4 %

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

As of March 31, 2021, 22.2% of the debt outstanding is at the parent company, Entergy Corporation, 77.3% is at the
Utility, and 0.5% is at Entergy Wholesale Commodities. Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and commercial paper, finance lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents.  Entergy uses
8

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2024.  The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2021 was 1.63% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2021:
CapacityBorrowingsLetters
of Credit
Capacity
Available
(In Millions)
$3,500$55$6$3,439
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets.  Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy or one of the Registrant Subsidiaries (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur.  See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of March 31, 2021, Entergy Corporation had approximately $1,028 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 2021 was 0.34%.

Certain of the Utility operating companies have a total of $72 million in storm reserve escrow accounts at March 31, 2021.

Equity Distribution Program

In January 2021, Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may also enter into forward sale agreements for the sale of its common stock. The aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement may not exceed an aggregate gross sales price of $1 billion. Entergy has not issued any shares or entered into any forward sale agreements under this program.

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Management's Financial Discussion and Analysis

Capital Expenditure Plans and Other Uses of Capital

See the table and discussion in the Form 10-K under “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital,” that sets forth the amounts of planned construction and other capital investments by operating segment for 2021 through 2023. Following are updates to that discussion.

Liberty County Solar Facility

In September 2020, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to acquire the 100 MW Liberty County Solar Facility and a determination that Entergy Texas’s acquisition of the facility through a tax equity partnership is in the public interest. In its preliminary order, the PUCT determined that, in considering Entergy Texas’s application, it would not specifically address whether Entergy Texas’s use of a tax equity partnership is in the public interest. In March 2021 intervenors and PUCT staff filed testimony, and Entergy Texas filed rebuttal testimony in April 2021. A hearing on the merits was held in April 2021. Post-hearing briefs and reply briefs are due in May 2021. Closing is expected to occur in 2023.

Hardin County Peaking Facility

In April 2020, Entergy Texas and East Texas Electric Cooperative, Inc. filed a joint report and application seeking PUCT approvals related to two transactions: (1) Entergy Texas’s acquisition of the Hardin County Peaking Facility from East Texas Electric Cooperative, Inc.; and (2) Entergy Texas’s sale of a 7.56% partial interest in the Montgomery County Power Station to East Texas Electric Cooperative, Inc. The two transactions, currently expected to close in June 2021, are interdependent. In October 2020, Entergy Texas filed an unopposed settlement agreement supporting approval of the transactions. Key provisions of the settlement include: Entergy Texas will propose to depreciate its investment in Hardin County Peaking Facility through the end of 2041; Entergy Texas’s recovery of its investment in Hardin County Peaking Facility will be capped at approximately $36 million; and Entergy Texas will not seek recovery of an acquisition adjustment, if any, or transaction costs for either transaction. The settlement was approved by the PUCT in April 2021.

Dividends

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities.  At its April 2021 meeting, the Board declared a dividend of $0.95 per share, which is the same quarterly dividend per share that Entergy has paid since the third quarter 2020.

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2021 and 2020 were as follows:
20212020
(In Millions)
Cash and cash equivalents at beginning of period$1,759 $426 
Cash flow provided by (used in):  
Operating activities(49)659 
Investing activities(1,513)(1,045)
Financing activities1,546 1,424 
Net increase (decrease) in cash and cash equivalents(16)1,038 
Cash and cash equivalents at end of period$1,743 $1,464 

Operating Activities

Entergy’s operating activities used $49 million of cash for the three months ended March 31, 2021 compared to providing $659 million of cash for the three months ended March 31, 2020 primarily due to the following activity:

increased fuel costs as a result of Winter Storm Uri. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
an increase of approximately $200 million in storm spending;
an increase of $92 million in pension contributions in 2021 as compared to the same period in 2020. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding;
income tax payments of $9 million in 2021 compared to income tax refunds of $23 million in 2020. Entergy had net income tax payments in 2021 as a result of amended Mississippi state tax returns filed, offset by federal income tax refunds received associated with the completion of the 2014-2015 IRS audit. Entergy had income tax refunds in 2020 as a result of an overpayment on a prior year state income tax return;
a decrease of $18 million of nuclear insurance refunds; and
the effect of more favorable weather on billed Utility sales in 2021.

Investing Activities

Net cash flow used in investing activities increased $468 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:

an increase of $524 million in distribution construction expenditures primarily due to storm spending in 2021. See Hurricane Laura, Hurricane Delta, and Hurricane Zeta above for discussion of storm restoration efforts;
an increase of $138 million in transmission construction expenditures primarily due to storm spending in 2021, partially offset by a lower scope of work on projects performed in 2021 as compared to 2020. See Hurricane Laura, Hurricane Delta, and Hurricane Zeta above for discussion of storm restoration efforts; and
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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

a decrease of $46 million in proceeds received from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.

The increase was partially offset by:

a decrease of $84 million of non-nuclear generation construction expenditures primarily due to higher spending in 2020 on the Montgomery County Power Station and Lake Charles Power Station projects;
a decrease of $41 million in nuclear construction expenditures primarily due to decreased spending on various projects in 2021;
a decrease of $37 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
a decrease of $32 million in decommissioning trust fund investment activity;
a decrease of $26 million in information technology expenditures primarily due to decreased spending on various technology projects; and
$25 million in plant upgrades for the Choctaw Generating Station in March 2020. See Note 14 to the financial statements in the Form 10-K for further discussion of the Choctaw Generating Station purchase.

Financing Activities

Net cash flow provided by financing activities increased $122 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to long-term debt activity providing approximately $2,330 million of cash in 2021 compared to providing approximately $1,581 million of cash in 2020.

The increase was partially offset by:

an increase of $595 million in net repayments of commercial paper in 2021 compared to 2020; and
a decrease of $39 million in treasury stock issuances in 2021 due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2020 to satisfy stock option exercises.

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

Rate, Cost-recovery, and Other Regulation

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

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

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Management's Financial Discussion and Analysis
Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets.  Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of March 31, 2021 (2021 represents the remainder of the year):

Entergy Wholesale Commodities Nuclear Portfolio
20212022
Energy
Percent of planned generation under contract (a):
Unit-contingent (b)98%99%
Planned generation (TWh) (c) (d)5.82.8
Average revenue per MWh on contracted volumes:
Expected based on market prices as of March 31, 2021$56.4$47.1
Capacity
Percent of capacity sold forward (e):
Bundled capacity and energy contracts (f)86%98%
Capacity contracts (g)13%—%
Total99%98%
Planned net MW in operation (average) (d)1,158338
Average revenue under contract per kW per month (applies to capacity contracts only)$0.1$—
Total Energy and Capacity Revenues (h)
Expected sold and market total revenue per MWh$55.8$46.8
Sensitivity: -/+ $10 per MWh market price change$55.7-$56.0$46.7-$47.0

(a)Percent of planned generation output sold under contracts.
(b)Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages. Certain unit-contingent sales include a guarantee
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Management's Financial Discussion and Analysis

of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(c)Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operating characteristics.
(d)Assumes the shutdown of Indian Point 3 on April 30, 2021 and planned shutdown of Palisades on May 31, 2022. For a discussion regarding the shutdown of the Indian Point 3 plant and planned shutdown of the Palisades plant, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” above.
(e)Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(f)A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(g)A contract for the sale of an installed capacity product in a regional market.
(h)Excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.  Cash and letters of credit are also acceptable forms of credit support. At March 31, 2021, based on power prices at that time, Entergy had liquidity exposure of $51 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $7 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of March 31, 2021, Entergy would have been required to provide approximately $30 million of additional cash or letters of credit under some of the agreements. As of March 31, 2020, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $7 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.

As of March 31, 2021, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investment grade credit ratings.

Nuclear Matters

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

NRC Reactor Oversight Process

As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and “multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Nuclear generating plants owned and operated by Entergy’s Utility and Entergy Wholesale Commodities businesses are currently in Column 1, except for Grand Gulf, which is in Column 3.
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In March 2021 the NRC placed Grand Gulf in Column 3 based on the incidence of five unplanned plant scrams during calendar year 2020, some of which were related to upgrades made to the plant’s turbine control system during the spring 2020 refueling outage. The NRC plans to conduct a supplemental inspection of Grand Gulf in accordance with its inspection procedures for nuclear plants in Column 3.

Critical Accounting Estimates

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

New Accounting Pronouncements

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

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
20212020
(In Thousands, Except Share Data)
OPERATING REVENUES
Electric$2,538,420 $2,050,638 
Natural gas58,168 43,976 
Competitive businesses248,250 332,565 
TOTAL2,844,838 2,427,179 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale501,167 397,403 
Purchased power379,734 216,614 
Nuclear refueling outage expenses43,739 50,218 
Other operation and maintenance706,786 702,084 
Asset write-offs, impairments, and related charges3,273 5,095 
Decommissioning98,642 93,684 
Taxes other than income taxes156,702 170,294 
Depreciation and amortization414,519 399,710 
Other regulatory charges (credits) - net32,279 (7,679)
TOTAL2,336,841 2,027,423 
OPERATING INCOME507,997 399,756 
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction14,577 35,953 
Interest and investment income (loss)143,315 (216,853)
Miscellaneous - net(60,929)23,389 
TOTAL96,963 (157,511)
INTEREST EXPENSE
Interest expense205,886 205,589 
Allowance for borrowed funds used during construction(6,013)(15,444)
TOTAL199,873 190,145 
INCOME BEFORE INCOME TAXES405,087 52,100 
Income taxes65,942 (71,194)
CONSOLIDATED NET INCOME339,145 123,294 
Preferred dividend requirements of subsidiaries4,580 4,580 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION$334,565 $118,714 
Earnings per average common share:
Basic$1.67 $0.59 
Diluted$1.66 $0.59 
Basic average number of common shares outstanding200,525,549 199,790,016 
Diluted average number of common shares outstanding201,059,665 200,901,349 
See Notes to Financial Statements.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
20212020
(In Thousands)
Net Income$339,145 $123,294 
Other comprehensive income (loss)
Cash flow hedges net unrealized loss (net of tax benefit of $7,869 and $5,777)(29,580)(21,710)
Pension and other postretirement liabilities (net of tax expense of $6,314 and $15,076)22,967 53,899 
Net unrealized investment gain (loss) (net of tax expense (benefit) of ($25,581) and $8,743)(44,687)15,744 
Other comprehensive income (loss)(51,300)47,933 
Comprehensive Income287,845 171,227 
Preferred dividend requirements of subsidiaries4,580 4,580 
Comprehensive Income Attributable to Entergy Corporation$283,265 $166,647 
See Notes to Financial Statements.
17

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
20212020
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income$339,145 $123,294 
Adjustments to reconcile consolidated net income to net cash flow provided by (used in) operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization580,571 568,596 
Deferred income taxes, investment tax credits, and non-current taxes accrued240,431 (31,405)
Asset write-offs, impairments, and related charges3,278 4,962 
Changes in working capital:
Receivables(52,690)70,357 
Fuel inventory26,878 (15,389)
Accounts payable(175,651)(127,727)
Taxes accrued(231,182)(44,241)
Interest accrued(3,778)(4,791)
Deferred fuel costs(353,099)30,560 
Other working capital accounts(43,582)(21,758)
Changes in provisions for estimated losses(60,923)(35,829)
Changes in other regulatory assets89,910 99,275 
Changes in other regulatory liabilities(14,464)(450,905)
Changes in pension and other postretirement liabilities(166,733)(113,071)
Other(227,676)607,132 
Net cash flow provided by (used in) operating activities(49,565)659,060 
INVESTING ACTIVITIES
Construction/capital expenditures(1,552,103)(1,043,608)
Allowance for equity funds used during construction14,577 35,953 
Nuclear fuel purchases(47,916)(85,334)
Payment for purchase of assets(24,633)
Changes in securitization account(1,304)(70)
Payments to storm reserve escrow account(10)(1,557)
Receipts from storm reserve escrow account44,205 40,589 
Decrease in other investments12,521 2,265 
Litigation proceeds for reimbursement of spent nuclear fuel storage costs15,735 62,162 
Proceeds from nuclear decommissioning trust fund sales3,225,510 687,487 
Investment in nuclear decommissioning trust funds(3,224,487)(718,741)
Net cash flow used in investing activities(1,513,272)(1,045,487)
See Notes to Financial Statements.
18

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
20212020
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt3,676,242 3,195,345 
Treasury stock979 39,964 
Retirement of long-term debt(1,346,172)(1,614,578)
Changes in credit borrowings and commercial paper - net(599,860)(4,911)
Other10,380 (756)
Dividends paid:
Common stock(190,595)(185,763)
Preferred stock(4,580)(4,763)
Net cash flow provided by financing activities1,546,394 1,424,538 
Net increase (decrease) in cash and cash equivalents(16,443)1,038,111 
Cash and cash equivalents at beginning of period1,759,099 425,722 
Cash and cash equivalents at end of period$1,742,656 $1,463,833 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized$202,451 $203,466 
Income taxes$9,015 ($23,063)
See Notes to Financial Statements.
19

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2021 and December 31, 2020
(Unaudited)
20212020
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$67,574 $128,851 
Temporary cash investments1,675,082 1,630,248 
Total cash and cash equivalents1,742,656 1,759,099 
Accounts receivable:
Customer883,352 833,478 
Allowance for doubtful accounts(119,027)(117,794)
Other158,838 135,208 
Accrued unbilled revenues415,253 434,835 
Total accounts receivable1,338,416 1,285,727 
Deferred fuel costs226,619 4,380 
Fuel inventory - at average cost146,056 172,934 
Materials and supplies - at average cost972,771 962,185 
Deferred nuclear refueling outage costs182,721 179,150 
Prepayments and other179,315 196,424 
TOTAL4,788,554 4,559,899 
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds7,339,088 7,253,215 
Non-utility property - at cost (less accumulated depreciation)355,819 343,328 
Other169,094 214,222 
TOTAL7,864,001 7,810,765 
PROPERTY, PLANT, AND EQUIPMENT
Electric60,901,229 59,696,443 
Natural gas621,682 610,768 
Construction work in progress1,311,997 2,012,030 
Nuclear fuel591,124 601,281 
TOTAL PROPERTY, PLANT, AND EQUIPMENT63,426,032 62,920,522 
Less - accumulated depreciation and amortization24,403,999 24,067,745 
PROPERTY, PLANT, AND EQUIPMENT - NET39,022,033 38,852,777 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $92,585 as of March 31, 2021 and $119,238 as of December 31, 2020)5,986,639 6,076,549 
Deferred fuel costs240,555 240,422 
Goodwill377,172 377,172 
Accumulated deferred income taxes56,068 76,289 
Other332,606 245,339 
TOTAL6,993,040 7,015,771 
TOTAL ASSETS$58,667,628 $58,239,212 
See Notes to Financial Statements.
20

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2021 and December 31, 2020
(Unaudited)
20212020
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$629,019 $1,164,015 
Notes payable and commercial paper1,027,629 1,627,489 
Accounts payable1,697,206 2,739,437 
Customer deposits391,032 401,512 
Taxes accrued209,829 441,011 
Interest accrued198,013 201,791 
Deferred fuel costs22,386 153,113 
Pension and other postretirement liabilities63,752 61,815 
Current portion of unprotected excess accumulated deferred income taxes65,056 63,683 
Other207,984 206,640 
TOTAL4,511,906 7,060,506 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued4,568,106 4,361,772 
Accumulated deferred investment tax credits217,888 212,494 
Regulatory liability for income taxes-net1,465,852 1,521,757 
Other regulatory liabilities2,363,919 2,323,851 
Decommissioning and asset retirement cost liabilities6,528,450 6,469,452 
Accumulated provisions181,912 242,835 
Pension and other postretirement liabilities2,684,343 2,853,013 
Long-term debt (includes securitization bonds of $146,881 as of March 31, 2021 and $174,635 as of December 31, 2020)24,075,456 21,205,761 
Other798,210 807,219 
TOTAL42,884,136 39,998,154 
Commitments and Contingencies
Subsidiaries' preferred stock without sinking fund219,410 219,410 
EQUITY
Common stock, $.01 par value, authorized 500,000,000 shares; issued 270,035,180 shares in 2021 and 20202,700 2,700 
Paid-in capital6,520,052 6,549,923 
Retained earnings10,041,152 9,897,182 
Accumulated other comprehensive loss(500,507)(449,207)
Less - treasury stock, at cost (69,402,016 shares in 2021 and 69,790,346 shares in 2020)5,046,221 5,074,456 
Total common shareholders' equity11,017,176 10,926,142 
Subsidiaries' preferred stock without sinking fund35,000 35,000 
TOTAL11,052,176 10,961,142 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$58,667,628 $58,239,212 
See Notes to Financial Statements.
21

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
Common Shareholders’ Equity
Subsidiaries’ Preferred StockCommon
Stock
Treasury
Stock
Paid-in
Capital
Retained EarningsAccumulated Other Comprehensive LossTotal
(In Thousands)
Balance at December 31, 2019$35,000 $2,700 ($5,154,150)$6,564,436 $9,257,609 ($446,920)$10,258,675 
Implementation of accounting standards(419)(419)
Balance at January 1, 202035,000 2,700 (5,154,150)6,564,436 9,257,190 (446,920)10,258,256 
Consolidated net income (a)4,580 118,714 123,294 
Other comprehensive income47,933 47,933 
Common stock issuances related to stock plans73,580 (53,753)19,827 
Common stock dividends declared(185,763)(185,763)
Preferred dividend requirements of subsidiaries (a)(4,580)(4,580)
Balance at March 31, 2020$35,000 $2,700 ($5,080,570)$6,510,683 $9,190,141 ($398,987)$10,258,967 
Balance at December 31, 2020$35,000 $2,700 ($5,074,456)$6,549,923 $9,897,182 ($449,207)$10,961,142 
Consolidated net income (a)4,580 334,565 339,145 
Other comprehensive loss(51,300)(51,300)
Common stock issuances related to stock plans28,235 (29,871)(1,636)
Common stock dividends declared(190,595)(190,595)
Preferred dividend requirements of subsidiaries (a)(4,580)(4,580)
Balance at March 31, 2021$35,000 $2,700 ($5,046,221)$6,520,052 $10,041,152 ($500,507)$11,052,176 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2021 and first quarter 2020 each includes $4.1 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.
22

ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

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

Vidalia Purchased Power Agreement

See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.

ANO Damage, Outage, and NRC Reviews

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

Spent Nuclear Fuel Litigation

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.
    
In January 2021 the U.S. Court of Federal Claims issued a final judgment in the amount of $23.1 million in favor of Entergy Nuclear Palisades and against the DOE in the second round Palisades damages case. Entergy received payment from the U.S. Treasury in February 2021. The effects of recording the judgment were reductions to plant, other operation and maintenance expense, and taxes other than income taxes. The Palisades damages awarded included $15.7 million related to costs previously capitalized, $7.1 million related to costs previously recorded as other operation and maintenance expenses, and $0.3 million related to costs previously recorded as taxes other than income taxes. Of the $15.7 million previously capitalized, Entergy recorded $9.1 million as a reduction to previously-recorded depreciation expense.

Nuclear Insurance

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

Non-Nuclear Property Insurance

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

23

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Employment and Labor-related Proceedings

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

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

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

Grand Gulf-Related Agreements

See Note 8 to the financial statements in the Form 10-K for information regarding Grand Gulf-related agreements.


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

Regulatory Assets and Regulatory Liabilities

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

Fuel and purchased power cost recovery

Entergy Arkansas

Energy Cost Recovery Rider

In March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01052 per kWh to $0.00959 per kWh. The redetermined rate calculation also included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. The redetermined rate became effective with the first billing cycle in April 2021 through the normal operation of the tariff.

Entergy Louisiana

In February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021 Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over 5 months beginning in April 2021. The incremental fuel costs remain subject to review for reasonableness and eligibility for recovery through the fuel adjustment clause mechanism. At its April 2021 meeting, the LPSC authorized its staff to review the prudence of the February 2021 fuel costs incurred by all LPSC jurisdictional utilities.

In March 2021 the LPSC staff provided notice of an audit of Entergy Louisiana’s purchased gas adjustment clause filings covering the period January 2018 through December 2020. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period. No audit report has been filed.


24

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas

In February 2021, Entergy Texas filed an application to implement a fuel refund for a cumulative over-recovery of approximately $75 million that is primarily attributable to settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas planned to issue the refund over the period of March through August 2021. On February 22, 2021, Entergy Texas filed a motion to abate its fuel refund proceeding to assess how the February 2021 winter storm impacted Entergy Texas’s fuel over-recovery position. In March 2021, Entergy Texas withdrew its application to implement the fuel refund. Entergy Texas is continuing to evaluate its fuel balance and will file a subsequent refund or surcharge application consistent with the requirements of the PUCT’s rules.

Retail Rate Proceedings

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

Filings with the APSC (Entergy Arkansas)

Retail Rates

2020 Formula Rate Plan Filing

As discussed in the Form 10-K, in December 2020, Entergy Arkansas filed a petition for rehearing of the APSC’s decision in the 2020 formula rate plan proceeding regarding the 2019 netting adjustment, and in January 2021 the APSC granted further consideration of Entergy Arkansas’s petition. Based on the progress of the proceeding to date, in December 2020, Entergy Arkansas recorded a regulatory liability of $43.5 million to reflect the netting adjustment for 2019, as included in the APSC’s December 2020 order, which would be returned to customers in 2021. Entergy Arkansas also requested an extension of the formula rate plan rider for a second five-year term. In March 2021 the Arkansas Governor signed HB1662 into law (Act 404). Act 404 clarified aspects of the original formula rate plan legislation enacted in 2015, including with respect to the extension of a formula rate plan, the methodology for the netting adjustment, and debt and equity levels; it also reaffirmed the customer protections of the original formula rate plan legislation, including the cap on annual formula rate plan rate changes. Pursuant to Act 404, Entergy Arkansas’s formula rate plan rider is extended for a second five-year term. Entergy Arkansas filed a compliance tariff in its formula rate plan docket in April 2021 to effectuate the netting provisions of Act 404, which reflected a net change in required formula rate plan rider revenue of $39.8 million, effective with the first billing cycle of May 2021. In April 2021 the APSC issued an order approving the compliance tariff and recognizing the formula rate plan extension. Also in April 2021, Entergy Arkansas filed for approval of modifications to the formula rate plan tariff incorporating the provisions in Act 404, and the APSC approved the tariff modifications in April 2021. Given the APSC general staff’s support for the expedited approval of these filings by the APSC, Entergy Arkansas supported an amendment to Act 404 to achieve a reduced return on equity from 9.75% to 9.65% to apply for years applicable to the extension term; that amendment was signed by the Arkansas Governor in April 2021 and is now Act 894. Based on the APSC’s order issued in April 2021, in the first quarter 2021 Entergy Arkansas reversed the remaining regulatory liability for the netting adjustment for 2019.

COVID-19 Orders

See the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. In March 2021 the APSC issued an order confirming the lifting of the moratorium on service disconnects effective in May 2021. As of March 31, 2021, Entergy Arkansas recorded a regulatory asset of $11.4 million for costs associated with the COVID-19 pandemic.

25

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the LPSC (Entergy Louisiana)

Retail Rates - Electric

2017 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station (formerly St. Charles Power Station). In February 2021, LPSC staff filed testimony that substantially all the costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for recovery from customers. LPSC staff further recommended that the LPSC consider monitoring the remaining $3.1 million that was estimated to be incurred for completion of the project in the event the final costs exceed the estimated amounts. Settlement discussions are in progress.

Request for Extension and Modification of Formula Rate Plan

As discussed in the Form 10-K, in May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate plan. The parties reached a settlement in April 2021 regarding Entergy Louisiana’s proposed FRP extension. Entergy Louisiana and the LPSC staff filed a joint motion asking the LPSC to consider and approve the uncontested settlement at the May 2021 LPSC meeting. Key terms of the settlement include: a three year term (test years 2020, 2021, and 2022) covering a rate-effective period of September 2021 through August 2024; a 9.50% return on equity, with a smaller, 50 basis point deadband above and below (9.0%-10.0%); elimination of sharing if earnings are outside the deadband; a $63 million rate increase for test year 2020 (exclusive of riders); continuation of existing riders (transmission, additional capacity, etc.); addition of a distribution recovery mechanism permitting $225 million per year of distribution investment above a baseline level to be recovered dollar for dollar; modification of the tax mechanism to allow timely rate changes in the event the federal corporate income tax rate is changed from 21%; a cumulative rate increase limit of $70 million (exclusive of riders) for test years 2021 and 2022; and deferral of up to $7 million per year in 2021 and 2022 of expenditures on vegetation management for outside of right of way hazard trees.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees and disconnects for non-payment was extended until the first billing cycle after July 16, 2020. In January 2021, Entergy Louisiana resumed disconnections for customers in all customer classes with past-due balances that have not made payment arrangements. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of March 31, 2021, Entergy Louisiana recorded a regulatory asset of $47.8 million for costs associated with the COVID-19 pandemic.

Filings with the MPSC (Entergy Mississippi)

2021 Formula Rate Plan Filing

In March 2021, Entergy Mississippi submitted its formula rate plan 2021 test year filing and 2020 look-back filing showing Entergy Mississippi’s earned return for the historical 2020 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2021 calendar year to be below the formula rate plan bandwidth. The 2020 test year filing shows a $95.4 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.69% return on rate base,
26

Entergy Corporation and Subsidiaries
Notes to Financial Statements
within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $44.3 million. The 2021 evaluation report also includes $3.9 million in demand side management costs for which the MPSC approved realignment of recovery from the energy efficiency rider to the formula rate plan. These costs are not subject to the 4% cap and result in a total change in formula rate plan revenues of $48.2 million. The 2020 look-back filing compares actual 2020 results to the approved benchmark return on rate base and reflects the need for a $16.8 million interim increase in formula rate plan revenues. In addition, the 2020 look-back filing includes an interim capacity adjustment true-up for the Choctaw Generating Station, which increases the look-back interim rate adjustment by $1.7 million. These interim rate adjustments total $18.5 million. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $22.1 million interim rate increase, reflecting a cap equal to 2% of 2020 retail revenues, effective with the April 2021 billing cycle, subject to refund, pending a final MPSC order. The $3.9 million of demand side management costs and the Choctaw Generating Station true-up of $1.7 million, which are not subject to the 2% cap of 2020 retail revenues, were included in the April 2021 rate adjustments. A final order is expected in the second quarter 2021, with the resulting final rates, including amounts above the 2% cap of 2020 retail revenues, effective July 2021.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. In December 2020, Entergy Mississippi resumed disconnections for commercial, industrial, and governmental customers with past-due balances that have not made payment arrangements. In January 2021, Entergy Mississippi resumed disconnecting service for residential customers with past-due balances that have not made payment arrangements. As of March 31, 2021, Entergy Mississippi recorded a regulatory asset of $16.3 million for costs associated with the COVID-19 pandemic.

Filings with the City Council (Entergy New Orleans)

COVID-19 Orders

As discussed in the Form 10-K, in June 2020 the City Council established the City Council Cares Program and directed Entergy New Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC proceeding, currently being held in escrow, and approximately $15 million of non-securitized storm reserves to fund this program, which was intended to provide temporary bill relief to customers who became unemployed during the COVID-19 pandemic. The program became effective July 1, 2020 and offered qualifying residential customers bill credits of $100 per month for up to four months, for a maximum of $400 in residential customer bill credits. As of March 31, 2021 the program expired and credits of $4.3 million have been applied to customer bills under the City Council Cares Program.

Additionally, as discussed in the Form 10-K, in February 2021 the City Council adopted a resolution suspending residential customer disconnections for non-payment of utility bills and suspending the assessment and accumulation of late fees on residential customers with past-due balances through May 15, 2021. As of March 31, 2021, Entergy New Orleans recorded a regulatory asset of $14.8 million for costs associated with the COVID-19 pandemic.

Filings with the PUCT and Texas Cities (Entergy Texas)

Distribution Cost Recovery Factor (DCRF) Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $26.3 million annually, or $6.8 million in incremental annual revenues beyond Entergy Texas’s currently effective
27

Entergy Corporation and Subsidiaries
Notes to Financial Statements
DCRF rider based on its capital invested in distribution between January 1, 2020 and August 31, 2020. In February 2021 the administrative law judge with the State Office of Administrative Hearings approved Entergy Texas’s agreed motion for interim rates, which went into effect in March 2021. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding. This case has been remanded to the PUCT for consideration of a final order at a future open meeting.

Transmission Cost Recovery Factor (TCRF) Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $51 million annually, or $31.6 million in incremental annual revenues beyond Entergy Texas’s currently effective TCRF rider based on its capital invested in transmission between July 1, 2019 and August 31, 2020. A procedural schedule was established with a hearing scheduled in March 2021. In February 2021, Entergy Texas filed an agreed motion to abate the procedural schedule, noting that the parties had reached a settlement in principle, and the administrative law judge granted the motion to abate. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2021 and resolving all issues in the proceeding. In March 2021 the administrative law judge granted the motion for interim rates, admitted evidence, and remanded this case to the PUCT for consideration of a final order at a future open meeting.

COVID-19 Orders

As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. In January 2021, Entergy Texas resumed disconnections for customers with past-due balances that have not made payment arrangements. As of March 31, 2021, Entergy Texas recorded a regulatory asset of $10.7 million for costs associated with the COVID-19 pandemic.

Generation Cost Recovery Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider with an initial annual revenue requirement of approximately $91 million to begin recovering a return of and on its capital investment in the Montgomery County Power Station through August 31, 2020. In December 2020, Entergy Texas filed an unopposed settlement supporting a generation cost recovery rider with an annual revenue requirement of approximately $86 million. On January 14, 2021, the PUCT approved the generation cost recovery rider settlement rates on an interim basis and abated the proceeding. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include investment in Montgomery County Power Station after August 31, 2020. In April 2021 the ALJ issued an order unabating the proceeding to consider Entergy Texas’s updated application and establishing a procedural schedule that will result in administrative approval of Entergy Texas’s application in June 2021 if it is unopposed by parties to the proceeding.

In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which is expected to close in June 2021. The initial generation cost recovery rider rates proposed in the application represent no change from the generation cost recovery rider rates to be established in Entergy Texas’s previous generation cost recovery rider proceeding. Once Entergy Texas has acquired the Hardin County Peaking Facility, its investment in the facility will be reflected in an updated filing to Entergy Texas’s application, which will be made within 60 days of the acquisition’s closing.

28

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas Opportunity Sales Proceeding

As discussed in the Form 10-K, in May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting approval of a special rider tariff to recover from its retail customers the costs of the opportunity sales payments made to the other Utility operating companies, and in July 2020 the APSC issued a decision finding that Entergy Arkansas’s application is not in the public interest. In September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of these payments. The court held a hearing in February 2021 regarding issues addressed in the pre-trial conference report, and the parties await further instructions from the court.

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule in the System Energy proceeding was further revised in order to allow parties to address the Opinion No. 569-A methodology. The parties and FERC trial staff filed final rounds of testimony in August 2020. The hearing before a FERC ALJ occurred in late-September through early-October 2020, post-hearing briefing took place in November and December 2020.

In March 2021 the FERC ALJ issued an initial decision. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $59 million, which includes interest through March 31, 2021, and the estimated resulting annual rate reduction would be approximately $46 million. The estimated refund will continue to accrue interest until a final FERC decision is issued. Based on the course of the proceeding to date, System Energy has recorded a provision of $36 million, including interest, as of March 31, 2021.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021, the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions are due in May 2021. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that
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Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through March 31, 2021, is approximately $422 million, plus interest, which is approximately $115 million through March 31, 2021. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through March 31, 2021.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before the FERC, which will review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

Also as discussed in the Form 10-K, in November 2020 the IRS issued a Revenue Agent’s Report (RAR) for the 2014/2015 tax year and in December 2020 Entergy executed it. The RAR contained an adjustment to System Energy’s uncertain nuclear decommissioning tax position. As a result of the RAR, in December 2020, System Energy filed amendments to its new Federal Power Act section 205 filings to establish an ongoing rate base credit for the accumulated deferred income taxes resulting from the decommissioning uncertain tax position and to credit excess accumulated deferred income taxes arising from the successful portion of the decommissioning uncertain tax position. The amendments both propose the inclusion of the RAR as support for the filings. In December 2020 the LPSC, APSC, and City Council filed a protest in response to the amendments, reiterating their prior objections to the filings. In February 2021 the FERC issued an order accepting System Energy’s Federal Power Act section 205 filings subject to refund, setting them for hearing, and holding the hearing in abeyance.

In December 2020, System Energy filed a new Federal Power Act section 205 filing to provide a one-time, historical credit to customers of $25.2 million for the accumulated deferred income taxes that would have been created by the decommissioning uncertain tax position if the IRS’s decision had been known in 2016. In January 2021 the LPSC, APSC, MPSC, and City Council filed a protest to the filing. In February 2021, the FERC issued an order accepting System Energy’s Federal Power Act section 205 filing subject to refund, setting it for hearing, and holding the hearing in abeyance. The one-time credit was made during the first quarter 2021.

LPSC Authorization of Additional Complaints

As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement, and the first of the additional complaints was filed by the LPSC, the APSC, the MPSC and the City Council in September 2020. The second of the additional complaints was filed at the FERC in March 2021 by the LPSC, the APSC, and the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. The second complaint contains two primary allegations. First, it alleges that, based on the plant’s capacity factor and alleged safety performance, System Energy and the other
30

Entergy Corporation and Subsidiaries
Notes to Financial Statements
respondents imprudently operated Grand Gulf during the period 2016-2020, and it seeks refunds of at least $360 million in alleged replacement energy costs, in addition to other costs, including those that can only be identified upon further investigation. Second, it alleges that the performance and/or management of the 2012 extended power uprate of Grand Gulf was imprudent, and it seeks refunds of all costs of the 2012 uprate that are determined to result from imprudent planning or management of the project. In addition to the requested refunds, the complaint asks that the FERC modify the Unit Power Sales Agreement to provide for full cost recovery only if certain performance indicators are met and to require pre-authorization of capital improvement projects in excess of $125 million before related costs may be passed through to customers in rates. In April 2021, System Energy and the other respondents filed their motion to dismiss and answer to the complaint. System Energy requested that the FERC dismiss the claims within the complaint. With respect to the claim concerning operations, System Energy argues that the complaint does not meet its legal burden because, among other reasons, it fails to allege any specific imprudent conduct. With respect to the claim concerning the uprate, System Energy argues that the complaint fails because, among other reasons, the complainants’ own conduct prevents them from raising a serious doubt as to the prudence of the uprate. System Energy also requests that the FERC dismiss other elements of the complaint, including the proposed modifications to the Unit Power Sales Agreement, because they are not warranted.

Storm Cost Recovery Filings with Retail Regulators

Entergy Louisiana

Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri

In August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild.

In October 2020, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments to facilitate issuance of shorter-term bonds to provide interim financing for restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy Louisiana’s capital structure and cost rate of debt for ratemaking purposes, including the allowance for funds used during construction, shorter-term debt up to $1.1 billion issued by Entergy Louisiana to fund costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta costs on an interim basis. In November 2020 the LPSC issued an order approving the joint motion, and Entergy Louisiana issued $1.1 billion of 0.62% Series mortgage bonds due November 2023. Also in November 2020, Entergy Louisiana drew $257 million from its funded storm reserves.

In February 2021, two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing incremental outages. As discussed above in “Fuel and purchased power recovery,” Entergy Louisiana is recovering the incremental fuel costs associated with Winter Storm Uri over a five-month period from April 2021 through August 2021.

In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by the storms are currently estimated to be approximately $2.05 billion, including approximately $1.74 billion in capital costs and approximately $310 million in non-capital costs. Including carrying costs through January 2022, Entergy Louisiana is seeking an LPSC determination that $2.10 billion was prudently incurred and, therefore, is eligible for recovery from customers. Additionally, Entergy Louisiana is requesting that the LPSC determine that re-establishment of a storm escrow
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Entergy Corporation and Subsidiaries
Notes to Financial Statements
account to the previously authorized amount of $290 million is appropriate. Entergy Louisiana intends to supplement this application with a request regarding the financing and recovery of the recoverable storm restoration costs.

Entergy New Orleans

Hurricane Zeta

In October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Zeta are currently estimated to be approximately $36 million, including approximately $28 million in capital costs and approximately $8 million in non-capital costs. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. Entergy New Orleans expects to initiate its storm cost recovery proceeding in May 2021.

Entergy Texas

Hurricane Laura, Hurricane Delta, and Winter Storm Uri

In August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In April 2021, Entergy Texas filed an application with the PUCT requesting a determination that its system restoration costs associated with Hurricane Laura, Hurricane Delta, and Winter Storm Uri of approximately $250 million, including approximately $200 million in capital costs and approximately $50 million in non-capital costs were reasonable and necessary to enable Entergy Texas to restore electric service to its customers and Entergy Texas’s electric utility infrastructure. The filing currently includes only a portion of the Winter Storm Uri costs. Entergy Texas expects to initiate a proceeding later in 2021 to securitize the costs approved by the PUCT.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 3.  EQUITY (Entergy Corporation and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
For the Three Months Ended March 31,
20212020
(In Millions, Except Per Share Data)
IncomeShares$/shareIncomeShares$/share
Basic earnings per share
Net income attributable to Entergy Corporation$334.6 200.5 $1.67 $118.7 199.8 $0.59 
Average dilutive effect of:
Stock options0.4 (0.01)0.7 
Other equity plans0.2 0.4 
Diluted earnings per share$334.6 201.1 $1.66 $118.7 200.9 $0.59 
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 1.0 million for the three months ended March 31, 2021 and approximately 0.5 million for the three months ended March 31, 2020.

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

Dividends declared per common share were $0.95 for the three months ended March 31, 2021 and $0.93 for the three months ended March 31, 2020.

Treasury Stock

During the three months ended March 31, 2021, Entergy Corporation issued 388,330 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards.  Entergy Corporation did not repurchase any of its common stock during the three months ended March 31, 2021.

Retained Earnings

On April 12, 2021, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.95 per share, payable on June 1, 2021, to holders of record as of May 6, 2021.

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2021 by component:
Cash flow
hedges
net
unrealized
gain (loss)
Pension
and
other
postretirement
liabilities
Net
unrealized
investment
gain (loss)
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, January 1, 2021$28,719 ($534,576)$56,650 ($449,207)
Other comprehensive income (loss) before reclassifications1,482 (45,301)(43,819)
Amounts reclassified from accumulated other comprehensive income (loss)(31,062)22,967 614 (7,481)
Net other comprehensive income (loss) for the period(29,580)22,967 (44,687)(51,300)
Ending balance, March 31, 2021($861)($511,609)$11,963 ($500,507)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2020 by component:
Cash flow
hedges
net
unrealized
gain (loss)
Pension
and
other
postretirement
liabilities
Net
unrealized
investment
gain (loss)
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, January 1, 2020$84,206 ($557,072)$25,946 ($446,920)
Other comprehensive income (loss) before reclassifications52,846 34,349 17,713 104,908 
Amounts reclassified from accumulated other comprehensive income (loss)(74,556)19,550 (1,969)(56,975)
Net other comprehensive income (loss) for the period(21,710)53,899 15,744 47,933 
Ending balance, March 31, 2020$62,496 ($503,173)$41,690 ($398,987)
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Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2021 and 2020:
Pension and Other
Postretirement Liabilities
20212020
(In Thousands)
Beginning balance, January 1,$4,327 $4,562 
Other comprehensive income (loss) before reclassifications10,050 
Amounts reclassified from accumulated other comprehensive income (loss)(407)(583)
Net other comprehensive income (loss) for the period(407)9,467 
Ending balance, March 31,$3,920 $14,029 
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 2021 and 2020 were as follows:
Amounts reclassified
from AOCI
Income Statement Location
20212020
(In Thousands)
Cash flow hedges net unrealized gain (loss)
   Power contracts$39,367 $94,423 Competitive business operating revenues
   Interest rate swaps(48)(48)Miscellaneous - net
Total realized gain (loss) on cash flow hedges39,319 94,375 
Income taxes(8,257)(19,819)Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)$31,062 $74,556 
Pension and other postretirement liabilities
   Amortization of prior-service credit$5,248 $3,719 (a)
   Amortization of loss(34,529)(27,318)(a)
Total amortization(29,281)(23,599)
Income taxes6,314 4,049 Income taxes
Total amortization (net of tax)($22,967)($19,550)
Net unrealized investment gain (loss)
Realized gain (loss)($972)$3,116 Interest and investment income
Income taxes358 (1,147)Income taxes
Total realized investment gain (loss) (net of tax)($614)$1,969 
Total reclassifications for the period (net of tax)$7,481 $56,975 

(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost.  See Note 6 to the financial statements herein for additional
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Entergy Corporation and Subsidiaries
Notes to Financial Statements
details.
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended March 31, 2021 and 2020 were as follows:
Amounts reclassified
from AOCI
Income Statement Location
20212020
(In Thousands)
Pension and other postretirement liabilities
   Amortization of prior-service credit$1,230 $1,089 (a)
   Amortization of loss(679)(301)(a)
Total amortization551 788 
Income taxes(144)(205)Income taxes
Total amortization (net of tax)407 583 
Total reclassifications for the period (net of tax)$407 $583 

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


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

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2024.  The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2021 was 1.63% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2021.
CapacityBorrowingsLetters
of Credit
Capacity
Available
(In Millions)
$3,500$55$6$3,439

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

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion.  As of March 31, 2021, Entergy Corporation had approximately $1,028 million of commercial paper outstanding.  The weighted-average interest rate for the three months ended March 31, 2021 was 0.34%.

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 2021 as follows:
CompanyExpiration
Date
Amount of
Facility
Interest Rate (a)Amount Drawn
as of
March 31, 2021
Letters of Credit
Outstanding as of
March 31, 2021
Entergy ArkansasApril 2022$25 million (b)2.75%$0$0
Entergy ArkansasSeptember 2024$150 million (c)1.21%$0$0
Entergy LouisianaSeptember 2024$350 million (c)1.21%$0$0
Entergy MississippiApril 2022$37.5 million (d)1.58%$0$0
Entergy MississippiApril 2022$35 million (d)1.58%$0$0
Entergy MississippiApril 2022$10 million (d)1.58%$0$0
Entergy New OrleansNovember 2021$25 million (c)1.36%$0$0
Entergy TexasSeptember 2024$150 million (c)1.58%$0$1.3 million

(a)The interest rate is the estimated interest rate as of March 31, 2021 that would have been applied to outstanding borrowings under the facility.
(b)Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
(d)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.

The commitment fees on the credit facilities range from 0.075% to 0.225% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization.  Each Registrant Subsidiary is in compliance with this covenant.

In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities primarily as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2021:
CompanyAmount of
Uncommitted Facility
Letter of Credit FeeMISO Letters of Credit
Issued as of
March 31, 2021 (a) (b)
Entergy Arkansas$25 million0.78%$1 million
Entergy Louisiana$125 million0.78%$12.8 million
Entergy Mississippi$65 million0.78%$1 million
Entergy New Orleans$15 million1.00%$2 million
Entergy Texas$50 million0.70%$30.2 million

(a)As of March 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Arkansas, $0.2 million for Entergy Louisiana, $0.4 million for Entergy Mississippi, and $0.1 million for Entergy New Orleans. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of March 31, 2021, in addition to the $1 million MISO letter of credit, Entergy Mississippi has $1 million of non-MISO letters of credit outstanding under this facility.
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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are effective through July 14, 2022. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements.  The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from internal and external short-term borrowings combined may not exceed the FERC-authorized limits.  The following were the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of March 31, 2021 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
 AuthorizedBorrowings
 (In Millions)
Entergy Arkansas$250$0
Entergy Louisiana$450$0
Entergy Mississippi$175$0
Entergy New Orleans$150$25
Entergy Texas$200$31
System Energy$200$0

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

See Note 17 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs).  To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs have commercial paper programs in place. Following is a summary as of March 31, 2021:
CompanyExpiration
Date
Amount
of
Facility
Weighted
 Average Interest
 Rate on
 Borrowings (a)
Amount
Outstanding as of
March 31, 2021
(Dollars in Millions)
Entergy Arkansas VIESeptember 2022$801.26%$4.8
Entergy Louisiana River Bend VIESeptember 2022$1051.24%$70.5
Entergy Louisiana Waterford VIESeptember 2022$1051.25%$73.2
System Energy VIESeptember 2022$1201.23%$63.4

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

The commitment fees on the credit facilities are 0.125% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, and System Energy VIEs.  Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization.

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entities had notes payable that were included in debt on the respective balance sheets as of March 31, 2021 as follows:
CompanyDescriptionAmount
Entergy Arkansas VIE3.65% Series L due July 2021$90 million
Entergy Arkansas VIE3.17% Series M due December 2023$40 million
Entergy Louisiana River Bend VIE2.51% Series V due June 2027$70 million
Entergy Louisiana Waterford VIE3.22% Series I due December 2023$20 million
System Energy VIE2.05% Series K due September 2027$90 million

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

Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained financing authorizations from the FERC that extend through July 14, 2022 for issuances by its nuclear fuel company variable interest entities.

Debt Issuances and Retirements

(Entergy Corporation)

In March 2021, Entergy Corporation issued $650 million of 1.90% Series senior notes due June 2028 and $650 million of 2.40% Series senior notes due June 2031. Entergy Corporation used the proceeds to repay a portion of its outstanding commercial paper and for general corporate purposes.

(Entergy Arkansas)

In March 2021, Entergy Arkansas issued $400 million of 3.35% Series mortgage bonds due June 2052. Entergy Arkansas expects to use, or has used, the proceeds, together with other funds, to finance in part the purchase of the Searcy Solar Facility, to repay a portion of the debt outstanding under its $150 million long-term revolving credit facility, to repay a portion of the debt outstanding under its $25 million short-term revolving credit facility, and for general corporate purposes.

(Entergy Louisiana)

In March 2021, Entergy Louisiana issued $500 million of 2.35% Series mortgage bonds due June 2032 and $500 million of 3.10% Series mortgage bonds due June 2041. Entergy Louisiana used the proceeds, together with other funds, to repay on or prior to maturity, its $200 million of 4.80% Series mortgage bonds due May 2021, to finance, on an interim basis, storm restoration costs related to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and the winter storms of February 2021, and for general corporate purposes.

In April 2021, Entergy Louisiana arranged for the issuance by the Louisiana Local Government Environmental Facilities and Community Development Authority of (i) $16.2 million of 2.00% pollution control revenue bonds Series 2021A due June 2030, and (ii) $182.480 million of 2.50% pollution control revenue bonds Series 2021B due April 2036, each of which is evidenced by a separate series of collateral trust mortgage bonds of Entergy Louisiana. A portion of the proceeds were applied in April 2021 to the refunding of $83.680 million of outstanding pollution control revenue bonds previously issued on behalf of Entergy Louisiana. The remainder of the proceeds were held in trust as of April 1, 2021 and are expected to be applied in June 2021 to the refunding of $115 million of outstanding pollution control revenue bonds previously issued on behalf of Entergy Louisiana.

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
(Entergy Mississippi)

In March 2021, Entergy Mississippi issued $200 million of 3.50% Series mortgage bonds due June 2051. Entergy Mississippi used the proceeds, together with other funds, to repay a portion of the debt outstanding under its three short-term revolving credit facilities with an aggregate commitment of $82.5 million and for general corporate purposes.

(Entergy Texas)

In May 2021, Entergy Texas redeemed $125 million of 2.55% Series mortgage bonds due June 2021.

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 2021 were as follows:
Book Value
of Long-Term Debt
Fair Value
of Long-Term Debt (a)
(In Thousands)
Entergy$24,704,475 $25,716,967 
Entergy Arkansas$3,958,751 $4,126,514 
Entergy Louisiana$10,059,885 $10,681,713 
Entergy Mississippi$1,981,429 $2,084,891 
Entergy New Orleans$642,412 $584,475 
Entergy Texas$2,465,827 $2,545,973 
System Energy$768,969 $785,758 

(a)Fair values were classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein.

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2020 were as follows:
Book Value
of Long-Term Debt
Fair Value
of Long-Term Debt (a)
(In Thousands)
Entergy$22,369,776 $24,813,818 
Entergy Arkansas$3,967,507 $4,355,632 
Entergy Louisiana$9,027,451 $10,258,294 
Entergy Mississippi$1,780,577 $2,021,432 
Entergy New Orleans$642,233 $620,634 
Entergy Texas$2,493,708 $2,765,193 
System Energy$805,274 $840,540 

(a)Fair values were classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein.


40

Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)

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

Stock Options

Entergy granted options on 508,704 shares of its common stock under the 2019 Omnibus Incentive Plan during the first quarter 2021 with a fair value of $12.27 per option.  As of March 31, 2021, there were options on 2,890,582 shares of common stock outstanding with a weighted-average exercise price of $90.75.  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of March 31, 2021.  The aggregate intrinsic value of the stock options outstanding as of March 31, 2021 was $41.6 million.

The following table includes financial information for outstanding stock options for the three months ended March 31, 2021 and 2020:
20212020
(In Millions)
Compensation expense included in Entergy’s net income$1.0 $1.0 
Tax benefit recognized in Entergy’s net income$0.3 $0.3 
Compensation cost capitalized as part of fixed assets and materials and supplies$0.4 $0.4 
Other Equity Awards

In January 2021 the Board approved and Entergy granted 392,382 restricted stock awards and 203,983 long-term incentive awards under the 2019 Omnibus Incentive Plan.  The restricted stock awards were made effective on January 28, 2021 and were valued at $95.87 per share, which was the closing price of Entergy’s common stock on that date.  Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the three-year vesting period. One-third of the restricted stock awards and accrued dividends will vest upon each anniversary of the grant date.  

In addition, long-term incentive awards were also granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned. To emphasize the importance of strong cash generation for the long-term health of its business, Entergy Corporation is replacing the cumulative adjusted earnings per share metric with a credit measure – adjusted funds from operations/debt ratio for the 2021-2023 performance period. Performance will be measured based 80 percent on relative total shareholder return and 20 percent on the credit measure.  The performance units were granted on January 28, 2021 and 80 percent were valued at $110.74 per share based on various factors, primarily market conditions; and 20 percent were valued at $95.87 per share, the closing price of Entergy’s common stock on that date.  Performance units have the same dividend rights as shares of Entergy common stock and are considered issued and outstanding shares of Entergy upon vesting. Performance units are expensed ratably over the three-year vesting period and compensation cost for the portion of the award based on cumulative adjusted earnings per share will be adjusted based on the number of units that ultimately vest. See Note 12 to the financial statements in the Form 10-K for a description of the Long-Term Performance Unit Program.

41

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for other outstanding equity awards for the three months ended March 31, 2021 and 2020:
20212020
(In Millions)
Compensation expense included in Entergy’s net income$10.8 $9.4 
Tax benefit recognized in Entergy’s net income$2.7 $2.4 
Compensation cost capitalized as part of fixed assets and materials and supplies$4.0 $3.4 

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

Components of Qualified Net Pension Cost    
Entergy’s qualified pension cost, including amounts capitalized, for the first quarters of 2021 and 2020, included the following components:
20212020
(In Thousands)
Service cost - benefits earned during the period$45,241 $40,379 
Interest cost on projected benefit obligation46,099 60,799 
Expected return on assets(105,713)(103,565)
Amortization of net loss104,392 87,259 
Net pension costs$90,019 $84,872 
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the first quarters of 2021 and 2020, included the following components:
2021Entergy
Arkansas
Entergy
Louisiana
Entergy
 Mississippi
Entergy
New Orleans
Entergy
Texas
System
Energy
(In Thousands)
Service cost - benefits earned during the period$7,418 $10,043 $2,364 $796 $1,801 $2,314 
Interest cost on projected benefit obligation8,341 9,562 2,462 1,029 1,949 2,142 
Expected return on assets(19,670)(22,538)(5,587)(2,622)(5,237)(4,778)
Amortization of net loss19,303 19,204 5,668 2,270 3,711 5,326 
Net pension cost$15,392 $16,271 $4,907 $1,473 $2,224 $5,004 

42

Entergy Corporation and Subsidiaries
Notes to Financial Statements
2020Entergy
Arkansas
Entergy
Louisiana
Entergy
 Mississippi
Entergy
New Orleans
Entergy
Texas
System
Energy
(In Thousands)
Service cost - benefits earned during the period$6,566 $8,794 $2,023 $663 $1,546 $1,965 
Interest cost on projected benefit obligation11,433 12,841 3,340 1,456 2,782 2,814 
Expected return on assets(19,622)(22,402)(5,757)(2,627)(5,486)(4,663)
Amortization of net loss16,897 16,627 4,748 2,005 3,265 4,279 
Net pension cost$15,274 $15,860 $4,354 $1,497 $2,107 $4,395 

Non-Qualified Net Pension Cost

Entergy recognized $4.6 million and $4.5 million in pension cost for its non-qualified pension plans in the first quarters of 2021 and 2020, respectively.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the first quarters of 2021 and 2020:
Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New Orleans
Entergy
Texas
(In Thousands)
2021$90 $44 $96 $8 $115 
2020$83 $37 $90 $8 $117 

Components of Net Other Postretirement Benefit Cost (Income)
Entergy’s other postretirement benefit cost (income), including amounts capitalized, for the first quarters of 2021 and 2020, included the following components:
 20212020
 (In Thousands)
Service cost - benefits earned during the period$6,645 $5,801 
Interest cost on accumulated postretirement benefit obligation (APBO)5,320 7,932 
Expected return on assets(10,805)(10,328)
Amortization of prior service credit(8,267)(5,922)
Amortization of net loss713 468 
Net other postretirement benefit income($6,394)($2,049)


43

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the first quarters of 2021 and 2020, included the following components:
2021Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New Orleans
Entergy
Texas
System
Energy
(In Thousands)
Service cost - benefits earned during the period$1,034 $1,544 $362 $109 $346 $335 
Interest cost on APBO932 1,130 278 130 317 220 
Expected return on assets(4,505)(1,384)(1,438)(2,548)(789)
Amortization of prior service credit(280)(1,230)(444)(229)(936)(109)
Amortization of net (gain) loss49 (91)19 (178)100 15 
Net other postretirement benefit cost (income)($2,770)$1,353 ($1,169)($1,606)($2,721)($328)

2020Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New Orleans
Entergy
Texas
System
Energy
(In Thousands)
Service cost - benefits earned during the period$828 $1,423 $351 $105 $303 $294 
Interest cost on APBO1,217 1,723 422 227 582 307 
Expected return on assets(4,326)(1,307)(1,355)(2,435)(748)
Amortization of prior service credit(661)(1,089)(321)(76)(550)(219)
Amortization of net (gain) loss55 (199)29 (38)212 20 
Net other postretirement benefit cost (income)($2,887)$1,858 ($826)($1,137)($1,888)($346)

Reclassification out of Accumulated Other Comprehensive Income (Loss)
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the first quarters of 2021 and 2020:
2021Qualified
Pension
Costs
Other
Postretirement
Costs
Non-Qualified
Pension Costs
Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$0 $5,288 ($40)$5,248 
Amortization of net loss(33,439)(495)(595)(34,529)
($33,439)$4,793 ($635)($29,281)
Entergy Louisiana
Amortization of prior service credit$0 $1,230 $0 $1,230 
Amortization of net gain (loss)(769)91 (1)(679)
($769)$1,321 ($1)$551 
44

Entergy Corporation and Subsidiaries
Notes to Financial Statements

2020Qualified
Pension
Costs
Other
Postretirement
Costs
Non-Qualified
Pension Costs
Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$0 $3,776 ($57)$3,719 
Amortization of net gain (loss)(26,462)(25)(831)(27,318)
($26,462)$3,751 ($888)($23,599)
Entergy Louisiana
Amortization of prior service credit$0 $1,089 $0 $1,089 
Amortization of net gain (loss)(499)199 (1)(301)
($499)$1,288 ($1)$788 

Accounting for Pension and Other Postretirement Benefits

In accordance with ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” the other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations and are presented by Entergy in miscellaneous - net in other income.

Other Postretirement Benefits

In March 2020, Entergy announced changes to its other postretirement benefits. Effective January 1, 2021, certain retired, former non-bargaining employees age 65 and older who are eligible for Entergy-sponsored retiree welfare benefits, and their eligible spouses who are age 65 and older (collectively, Medicare-eligible participants), are eligible to participate in a new Entergy-sponsored retiree health plan, and are no longer eligible for retiree coverage under the Entergy Corporation Companies’ Benefits Plus Medical, Dental and Vision Plans. Under the new Entergy retiree health plan, Medicare-eligible participants are eligible to participate in a health reimbursement arrangement which they may use towards the purchase of various types of qualified insurance offered through a Medicare exchange provider and for other qualified medical expenses. In accordance with accounting standards, the effects of this change were reflected in the March 31, 2020 other postretirement obligation.

Employer Contributions

Based on current assumptions, Entergy expects to contribute $356 million to its qualified pension plans in 2021.  As of March 31, 2021, Entergy had contributed $152.2 million to its pension plans.  Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans for their employees in 2021:
Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New Orleans
Entergy
Texas
System
Energy
(In Thousands)
Expected 2021 pension contributions$66,649 $59,882 $13,715 $5,395 $6,955 $18,663 
Pension contributions made through March 2021$21,361 $29,159 $4,799 $2,629 $2,935 $6,675 
Remaining estimated pension contributions to be made in 2021$45,288 $30,723 $8,916 $2,766 $4,020 $11,988 


45

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

Entergy’s reportable segments as of March 31, 2021 were Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity.
Entergy’s segment financial information for the first quarters of 2021 and 2020 was as follows:
UtilityEntergy
Wholesale
Commodities
All OtherEliminationsConsolidated
(In Thousands)
2021
Operating revenues$2,596,616 $248,219 $23 ($20)$2,844,838 
Income taxes$59,734 $15,560 ($9,352)$0 $65,942 
Consolidated net income (loss)$360,600 $38,124 ($27,680)($31,899)$339,145 
Total assets as of March 31, 2021$56,086,185 $3,793,754 $867,301 ($2,079,612)$58,667,628 
2020
Operating revenues$2,094,629 $332,549 $11 ($10)$2,427,179 
Income taxes($52,949)($30,540)$12,295 $0 ($71,194)
Consolidated net income (loss)$323,849 ($110,428)($58,228)($31,899)$123,294 
Total assets as of December 31, 2020$55,940,153 $3,800,378 $552,632 ($2,053,951)$58,239,212 

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

As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to shut down and sell all of the remaining plants in the merchant nuclear fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions.
46

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total restructuring charges for the first quarters of 2021 and 2020 were comprised of the following:
20212020
Employee retention and severance
expenses and other benefits-related costs
Contracted economic development costsTotalEmployee retention and severance
expenses and other benefits-related costs
Contracted economic development costsTotal
 (In Millions)
Balance as of January 1,$145 $14 $159 $129 $14 $143 
Restructuring costs accrued13 13 21 21 
Cash paid out
Balance as of March 31,$157 $14 $171 $150 $14 $164 

In addition, Entergy Wholesale Commodities incurred $3 million in the first quarter 2021 and $5 million in the first quarter 2020 of impairment and other related charges associated with these strategic decisions and transactions.

Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses associated with management’s strategy to exit the merchant power business of approximately $40 million in 2021, of which $13 million has been incurred as of March 31, 2021, and a total of approximately $15 million in 2022.

Registrant Subsidiaries

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


NOTE 8.  RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Market Risk

In the normal course of business, Entergy is exposed to a number of market risks.  Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument.  All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk.  Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.

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

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets.  In addition to its forward physical power and gas
47

Entergy Corporation and Subsidiaries
Notes to Financial Statements
contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk.  When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.

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

Derivatives

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

Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities.  Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation. Entergy Wholesale Commodities is hedging the variability in future cash flows with derivatives for forecasted power transactions through April 30, 2021.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 98% for the remainder of 2021, of which approximately 12% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2021 is 5.8 TWh.

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

Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.  As of March 31, 2021, a derivative contract with 1 counterparty is in a liability position (approximately $1 million total). In addition to the corporate guarantee, $6 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $7 million in letters of credit
48

Entergy Corporation and Subsidiaries
Notes to Financial Statements
were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2020, there were no derivative contracts with counterparties in a liability position. In addition to the corporate guarantee, $5 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $39 million in letters of credit were required to be posted by it counterparties to the Entergy subsidiary. If the Entergy Corporation credit rating falls below investment grade, Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.   

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy had executed natural gas swaps and options as of March 31, 2021 was 3 years for Entergy Louisiana and the maximum length of time over which Entergy had executed natural gas swaps as of March 31, 2021 was 7 months for Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of March 31, 2021 was 41,296,000 MMBtu for Entergy, including 21,920,000 MMBtu for Entergy Louisiana and 19,376,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2020, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2020 through May 31, 2021. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of March 31, 2021 was 23,009 GWh for Entergy, including 5,765 GWh for Entergy Arkansas, 10,716 GWh for Entergy Louisiana, 2,576 GWh for Entergy Mississippi, 1,055 GWh for Entergy New Orleans, and 2,820 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of March 31, 2021 and December 31, 2020. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans as of March 31, 2021 and for Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of December 31, 2020.

49

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31, 2021 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.
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Business
(In Millions)
Derivatives not designated as hedging instruments
Assets:
Natural gas swaps and optionsPrepayments and other (current portion)$1$0$1Utility
Financial transmission rightsPrepayments and other$4$—$4Utility and Entergy Wholesale Commodities
Liabilities:
Natural gas swaps and optionsOther current liabilities (current portion)$2$0$2Utility
Natural gas swaps and optionsOther non-current liabilities (non-current portion)$1$0$1Utility
50

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, 2020 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.
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Business
(In Millions)
Derivatives designated as hedging instruments    
Assets:    
Electricity swaps and optionsPrepayments and other (current portion)$39($1)$38Entergy Wholesale Commodities
Liabilities:    
Electricity swaps and optionsOther current liabilities (current portion)$1($1)$0Entergy Wholesale Commodities
Derivatives not designated as hedging instruments    
Assets:    
Natural gas swaps and optionsPrepayments and other (current portion)$1$0$1Utility
Natural gas swaps and optionsOther deferred debits and other assets (non-current portion)$1$0$1Utility
Financial transmission rightsPrepayments and other$9$0$9Utility and Entergy Wholesale Commodities
Liabilities:    
Natural gas swaps and optionsOther current liabilities (current portion)$6$0$6Utility
Natural gas swaps and optionsOther non-current liabilities (non-current portion)$1$0$1Utility

(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)Excludes cash collateral in the amount of $6 million posted as of March 31, 2021 and $5 million posted as of December 31, 2020. Also excludes letters of credit in the amount of $1 million posted and $7 million held as of March 31, 2021 and $1 million posted and $39 million held as of December 31, 2020.

51

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended March 31, 2021 and 2020 were as follows:
InstrumentAmount of gain (loss)
recognized in other
comprehensive income
Income Statement locationAmount of gain
(loss)
reclassified from
accumulated
other
comprehensive
income into
income (a)
(In Millions)(In Millions)
2021
Electricity swaps and options$2Competitive businesses operating revenues$39
2020
Electricity swaps and options$67Competitive businesses operating revenues$94

(a)Before taxes of $8 million and $20 million for the three months ended March 31, 2021 and 2020, respectively

Based on market prices as of March 31, 2021, unrealized gains (losses) recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled $0.3 million, which are expected to be reclassified from accumulated other comprehensive income to operating revenues in the next twelve months.  The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices.    

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


52

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended March 31, 2021 and 2020 were as follows:
InstrumentIncome Statement
location
Amount of gain (loss)
recorded in the income statement
(In Millions)
2021
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale(a)$7
Financial transmission rightsPurchased power expense(b)$128
Electricity swaps and options (c)Competitive business operating revenues($2)
2020
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale(a)($7)
Financial transmission rightsPurchased power expense(b)$13
Electricity swaps and options (c)Competitive business operating revenues$0

(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
(c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options.

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of March 31, 2021 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.
53

Entergy Corporation and Subsidiaries
Notes to Financial Statements
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Registrant
(In Millions)
Assets:
Natural gas swaps and optionsPrepayments and other$1.0$0$1.0Entergy Louisiana
Natural gas swaps and optionsOther deferred debits and other assets (non-current portion)$0.4$0$0.4Entergy Louisiana
Financial transmission rightsPrepayments and other$1.5($0.1)$1.4Entergy Arkansas
Financial transmission rightsPrepayments and other$1.3($0.1)$1.2Entergy Louisiana
Financial transmission rightsPrepayments and other$0.3$0$0.3Entergy Mississippi
Financial transmission rightsPrepayments and other$0.1$0$0.1Entergy New Orleans
Financial transmission rightsPrepayments and other$0.5$0$0.5Entergy Texas
Liabilities:
Natural gas swaps and optionsOther non-current liabilities$0.8$0$0.8Entergy Louisiana
Natural gas swapsOther current liabilities$2.3$0$2.3Entergy Mississippi

54

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, 2020 were as follows:
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Registrant
(In Millions)
Assets:
Natural gas swaps and optionsPrepayments and other $0.8$0$0.8Entergy Louisiana
Natural gas swaps and optionsOther deferred debits and other assets$0.5$0$0.5Entergy Louisiana
Financial transmission rightsPrepayments and other$2.9($0.2)$2.7Entergy Arkansas
Financial transmission rightsPrepayments and other$4.3($0.1)$4.2Entergy Louisiana
Financial transmission rightsPrepayments and other$0.6$0$0.6Entergy Mississippi
Financial transmission rightsPrepayments and other$0.2($0.1)$0.1Entergy New Orleans
Financial transmission rightsPrepayments and other$1.6$0$1.6Entergy Texas
Liabilities:
Natural gas swaps and optionsOther current liabilities$0.3$0$0.3Entergy Louisiana
Natural gas swaps and optionsOther non-current liabilities$1.3$0$1.3Entergy Louisiana
Natural gas swapsOther current liabilities$5.0$0$5.0Entergy Mississippi
Natural gas swapsOther current liabilities$0.3$0$0.3Entergy New Orleans

(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)As of March 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Arkansas, $0.2 million for Entergy Louisiana, $0.4 million for Entergy Mississippi, and $0.1 million for Entergy New Orleans. As of December 31, 2020, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Louisiana, $0.2 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, and $0.5 million for Entergy Texas.
55

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended March 31, 2021 and 2020 were as follows:
InstrumentIncome Statement LocationAmount of gain
(loss) recorded
in the income statement
Registrant
(In Millions)
2021
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale$1.8(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$5.2(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.1)(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$26.1(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$12.3(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$7.2(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$1.3(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$77.9(b)Entergy Texas
2020
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale($1.3)(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($5.2)(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.4)(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$4.6(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$5.3(b)Entergy Louisiana
Financial transmission rightsPurchased power expense($0.1)(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$0.4(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$2.4(b)Entergy Texas

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

56

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Values

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

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

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

The three levels of the fair value hierarchy are:

Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets.  Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.

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

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

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

Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources.  These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability.  Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.
57

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group.  The primary related functions of the Office of Corporate Risk Oversight 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 Office of Corporate Risk Oversight is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

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

The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes.  Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate.  As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.  

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

The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities
58

Entergy Corporation and Subsidiaries
Notes to Financial Statements
are performed by the Office of Corporate Risk Oversight.  The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group review these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer.  The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020.  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.
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$1,675 $0 $0 $1,675 
Decommissioning trust funds (a):
Equity securities807 807 
Debt securities (b)1,489 1,947 3,436 
Common trusts (c)3,102 
Securitization recovery trust account44 44 
Escrow accounts103 103 
Gas hedge contracts
Financial transmission rights
$4,119 $1,947 $4 $9,172 
Liabilities:
Gas hedge contracts$2 $1 $0 $3 

2020Level 1Level 2Level 3Total
(In Millions)
Assets:    
Temporary cash investments$1,630 $0 $0 $1,630 
Decommissioning trust funds (a):    
Equity securities1,533 1,533 
Debt securities (b)919 1,698 2,617 
Common trusts (c)3,103 
Power contracts38 38 
Securitization recovery trust account42 42 
Escrow accounts148 148 
Gas hedge contracts
Financial transmission rights
 $4,273 $1,699 $47 $9,122 
Liabilities:    
Gas hedge contracts$6 $1 $0 $7 

(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements herein for additional information on the investment portfolios.
59

Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b)The decommissioning trust funds fair values presented herein do not include the recognition of a credit loss valuation allowance of $6.4 million as of March 31, 2021 and $0.1 million as of December 31, 2020 on debt securities due to the adoption of ASU 2016-13. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses.
(c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2021 and 2020:
20212020
Power ContractsFinancial transmission rightsPower ContractsFinancial transmission rights
(In Millions)
Balance as of January 1,$38 $9 $118 $10 
Total gains (losses) for the period (a)
Included in earnings(2)(18)
Included in other comprehensive income67 
Included as a regulatory liability/asset119 
Settlements(38)(128)(82)(13)
Balance as of March 31,$0 $4 $85 $4 

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period was $0.7 million for the three months ended March 31, 2021 and $1 million for the three months ended March 31, 2020.
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO.

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 TypePositionChange to InputEffect on
Fair Value
Unit contingent discountElectricity swapsSellIncrease (Decrease)Decrease (Increase)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020.  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.

60

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$123.7 $0 $0 $123.7 
Decommissioning trust funds (a):
Equity securities53.3 53.3 
Debt securities89.9 336.0 425.9 
Common trusts (b)831.9 
Financial transmission rights1.4 1.4 
$266.9 $336.0 $1.4 $1,436.2 

2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$168.0 $0 $0 $168.0 
Decommissioning trust funds (a):
Equity securities1.3 1.3 
Debt securities98.2 349.7 447.9 
Common trusts (b)824.7 
Financial transmission rights2.7 2.7 
$267.5 $349.7 $2.7 $1,444.6 

Entergy Louisiana
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$601.6 $0 $0 $601.6 
Decommissioning trust funds (a):
Equity securities68.8 68.8 
Debt securities218.9 413.9 632.8 
Common trusts (b)1,177.7 
Securitization recovery trust account8.8 8.8 
Gas hedge contracts1.0 0.4 1.4 
Financial transmission rights1.2 1.2 
$899.1 $414.3 $1.2 $2,492.3 
Liabilities:
Gas hedge contracts$0 $0.8 $0 $0.8 

61

Entergy Corporation and Subsidiaries
Notes to Financial Statements
2020Level 1Level 2Level 3Total
 (In Millions)
Assets:    
Temporary cash investments$726.7 $0 $0 $726.7 
Decommissioning trust funds (a):    
Equity securities8.7 8.7 
Debt securities172.4 459.8 632.2 
Common trusts (b)1,153.1 
Securitization recovery trust account2.7 2.7 
Gas hedge contracts0.8 0.5 1.3 
Financial transmission rights4.2 4.2 
 $911.3 $460.3 $4.2 $2,528.9 
Liabilities:
Gas hedge contracts$0.3 $1.3 $0 $1.6 

Entergy Mississippi
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$76.7 $0 $0 $76.7 
Escrow accounts64.6 64.6 
Financial transmission rights0.3 0.3 
$141.3 $0 $0.3 $141.6 
Liabilities:
Gas hedge contracts$2.3 $0 $0 $2.3 

2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Escrow accounts$64.6 $0 $0 $64.6 
Financial transmission rights0.6 0.6 
 $64.6 $0 $0.6 $65.2 
Liabilities:
Gas hedge contracts$5.0 $0 $0 $5.0 

Entergy New Orleans
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Securitization recovery trust account$6.8 $0 $0 $6.8 
Escrow accounts38.8 38.8 
Financial transmission rights0.1 0.1 
$45.6 $0 $0.1 $45.7 
62

Entergy Corporation and Subsidiaries
Notes to Financial Statements

2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Securitization recovery trust account$3.4 $0 $0 $3.4 
Escrow accounts83.0 83.0 
Financial transmission rights0.1 0.1 
$86.4 $0 $0.1 $86.5 
Liabilities:
Gas hedge contracts$0.3 $0 $0 $0.3 

Entergy Texas
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Securitization recovery trust account$28.1 $0 $0 $28.1 
Financial transmission rights0.5 0.5 
$28.1 $0 $0.5 $28.6 

2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$248.6 $0 $0 $248.6 
Securitization recovery trust account36.2 36.2 
Financial transmission rights1.6 1.6 
$284.8 $0 $1.6 $286.4 
System Energy
2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$132.1 $0 $0 $132.1 
Decommissioning trust funds (a):
Equity securities60.6 60.6 
Debt Securities179.4 227.0 406.4 
Common trusts (b)782.8 
$372.1 $227.0 $0 $1,381.9 

63

Entergy Corporation and Subsidiaries
Notes to Financial Statements
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$216.4 $0 $0 $216.4 
Decommissioning trust funds (a):
Equity securities3.8 3.8 
Debt securities177.3 250.4 427.7 
Common trusts (b)784.4 
$397.5 $250.4 $0 $1,432.3 

(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2021.
Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New
Orleans
Entergy
Texas
 (In Millions)
Balance as of January 1,$2.7 $4.2 $0.6 $0.1 $1.6 
Gains (losses) included as a regulatory liability/asset24.8 9.3 6.9 1.2 76.8 
Settlements(26.1)(12.3)(7.2)(1.2)(77.9)
Balance as of March 31,$1.4 $1.2 $0.3 $0.1 $0.5 

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2020.
Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New
Orleans
Entergy
Texas
 (In Millions)
Balance as of January 1,$3.3 $4.5 $0.8 $0.3 $0.9 
Gains (losses) included as a regulatory liability/asset2.4 2.7 (0.6)0.1 1.8 
Settlements(4.6)(5.3)0.1 (0.4)(2.4)
Balance as of March 31,$1.1 $1.9 $0.3 $0 $0.3 


64

Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 9.  DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

The NRC requires Entergy subsidiaries to maintain nuclear decommissioning trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Indian Point 1, Indian Point 2, Indian Point 3, and Palisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for the Entergy Wholesale Commodities nuclear plants do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity.  Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. A portion of Entergy’s decommissioning trust funds were held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company were recognized in earnings. Generally, Entergy records gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 were $200 million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.

The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
Fair
Value
Total
Unrealized
Gains
Total
Unrealized
Losses
(In Millions)
2021
Debt Securities$3,436 $102 $43 
2020
Debt Securities$2,617 $197 $3 

The unrealized gains/(losses) above are reported before deferred taxes of $5 million as of March 31, 2021 and $31 million as of December 31, 2020 for debt securities. The amortized cost of available-for-sale debt securities was $3,376 million as of March 31, 2021 and $2,423 million as of December 31, 2020.  As of March 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.59%, an average duration of approximately 5.98 years, and an average maturity of approximately 8.45 years.

65

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
(In Millions)
Less than 12 months$1,748 $43 $187 $3 
More than 12 months
Total$1,751 $43 $189 $3 

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
20212020
(In Millions)
Less than 1 year$0 ($4)
1 year - 5 years1,027 672 
5 years - 10 years1,257 852 
10 years - 15 years492 377 
15 years - 20 years128 144 
20 years+532 576 
Total$3,436 $2,617 

During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $524 million and $400 million, respectively.  During the three months ended March 31, 2021 and 2020, gross gains of $11 million and $14 million, respectively, and gross losses of $11 million and $3 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2021 were $631 million for Indian Point 1, $760 million for Indian Point 2, $970 million for Indian Point 3, and $545 million for Palisades. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2020 were $631 million for Indian Point 1, $794 million for Indian Point 2, $991 million for Indian Point 3, and $554 million for Palisades. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

66

Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas

Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
Fair
Value
Total
Unrealized
Gains
Total
Unrealized
Losses
(In Millions)
2021
Debt Securities$425.9 $13.2 $6.8 
2020
Debt Securities$447.9 $27.7 $0.3 

The amortized cost of available-for-sale debt securities was $419.5 million as of March 31, 2021 and $420.4 million as of December 31, 2020.  As of March 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.42%, an average duration of approximately 6.40 years, and an average maturity of approximately 7.62 years.

The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 was $45.2 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
(In Millions)
Less than 12 months$139.1 $6.8 $29.9 $0.3 
More than 12 months
Total$139.1 $6.8 $29.9 $0.3 

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
 20212020
 (In Millions)
Less than 1 year$0 $0 
1 year - 5 years84.7 113.1 
5 years - 10 years179.2 189.8 
10 years - 15 years100.8 81.4 
15 years - 20 years26.7 28.5 
20 years+34.5 35.1 
Total$425.9 $447.9 
67

Entergy Corporation and Subsidiaries
Notes to Financial Statements

During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $13.8 million and $48.6 million, respectively.  During the three months ended March 31, 2021 and 2020, gross gains of $0.8 million and $4.5 million, respectively, and gross losses of $0.1 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Louisiana

Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
Fair
Value
Total
Unrealized
Gains
Total
Unrealized
Losses
(In Millions)
2021
Debt Securities$632.8 $31.2 $4.6 
2020
Debt Securities$632.2 $51.3 $0.5 

The amortized cost of available-for-sale debt securities was $606.3 million as of March 31, 2021 and $581.4 million as of December 31, 2020.  As of March 31, 2021, the available-for-sale debt securities had an average coupon rate of approximately 3.25%, an average duration of approximately 6.59 years, and an average maturity of approximately 11.56 years.

The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 was $64.9 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
(In Millions)
Less than 12 months$171.7 $4.6 $36.4 $0.5 
More than 12 months2.3 0.8 
Total$174.0 $4.6 $37.2 $0.5 

68

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
20212020
(In Millions)
Less than 1 year$0 $0 
1 year - 5 years89.3 117.0 
5 years - 10 years186.0 159.4 
10 years - 15 years113.7 101.2 
15 years - 20 years63.4 66.9 
20 years+180.4 187.7 
Total$632.8 $632.2 

During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $108.4 million and $67.4 million, respectively.  During the three months ended March 31, 2021 and 2020, gross gains of $3.3 million and $2.9 million, respectively, and gross losses of $3.2 million and $0.6 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

System Energy

System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
Fair
Value
Total
Unrealized
Gains
Total
Unrealized
Losses
(In Millions)
2021
Debt Securities$406.4 $14.3 $5.0 
2020
Debt Securities$427.7 $30.0 $0.8 

The amortized cost of available-for-sale debt securities was $397 million as of March 31, 2021 and $398.4 million as of December 31, 2020.  As of March 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.36%, an average duration of approximately 6.31 years, and an average maturity of approximately 9.62 years.

The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 was $43.1 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

69

Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
(In Millions)
Less than 12 months$157.5 $5.0 $28.9 $0.8 
More than 12 months
Total$157.5 $5.0 $28.9 $0.8 

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
20212020
(In Millions)
Less than 1 year$0 ($1.1)
1 year - 5 years136.2 134.7 
5 years - 10 years120.4 141.5 
10 years - 15 years35.1 31.5 
15 years - 20 years4.5 5.3 
20 years+110.2 115.8 
Total$406.4 $427.7 

During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $74.1 million and $92 million, respectively.  During the three months ended March 31, 2021 and 2020, gross gains of $1.2 million and $1.7 million, respectively, and gross losses of $1.6 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Allowance for expected credit losses

Entergy estimates the expected credit losses for its available-for-sale securities based on the current credit rating and remaining life of the securities.  To the extent an individual security is determined to be uncollectible it is written off against this allowance.  Entergy’s available-for-sale securities are held in trusts managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Specifically, available-for-sale securities are subject to credit worthiness restrictions, with requirements for both the average credit rating of the portfolio and minimum credit ratings for individual debt securities.  As of March 31, 2021 and December 31, 2020, Entergy’s allowance for expected credit losses related to available-for-sale securities were $6.4 million and $0.1 million, respectively. Entergy did not record any impairments of available-for-sale debt securities for the three months ended March 31, 2021 and 2020.


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

See “Income Tax Audits” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax audits, the Tax Cuts and Jobs Act, and other income tax matters involving Entergy. The following are updates to that discussion.
70

Entergy Corporation and Subsidiaries
Notes to Financial Statements

Tax Cuts and Jobs Act

During the second quarter 2018, the Registrant Subsidiaries began returning unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This manner of regulatory accounting affects the effective tax rate for the period as compared to the statutory tax rate. The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows:
Three Months
Ended March 31,
20212020
(In Millions)
Entergy$41 $30 
Entergy Arkansas$8 $13 
Entergy Louisiana$8 $8 
Entergy New Orleans$0 $3 
Entergy Texas$7 $6 
System Entergy$18 $0 


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

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at March 31, 2021 were $496.4 million for Entergy, $39.6 million for Entergy Arkansas, $330.4 million for Entergy Louisiana, $24.1 million for Entergy Mississippi, $4 million for Entergy New Orleans, $44.6 million for Entergy Texas, and $17.7 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2020 were $745 million for Entergy, $59.7 million for Entergy Arkansas, $460.5 million for Entergy Louisiana, $31.4 million for Entergy Mississippi, $9.2 million for Entergy New Orleans, $116.8 million for Entergy Texas, and $17.7 million for System Energy.


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

See Note 17 to the financial statements in the Form 10-K for a discussion of variable interest entities.  See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facilities, commercial paper borrowings, and long-term debt.

System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 5 to the financial statements in the Form 10-K. System Energy made payments under this arrangement, including interest, of $8.6 million in the three months ended March 31, 2021 and in the three months ended March 31, 2020.

71

Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

Operating Revenues

See Note 19 to the financial statements in the Form 10-K for a discussion of revenue recognition.  Entergy’s total revenues for the three months ended March 31, 2021 and 2020 were as follows:
20212020
(In Thousands)
Utility:
Residential$966,855 $798,028 
Commercial572,676 538,940 
Industrial597,652 557,515 
Governmental56,798 52,582 
    Total billed retail2,193,981 1,947,065 
Sales for resale (a)205,075 53,725 
Other electric revenues (b)80,261 50,166 
    Revenues from contracts with customers2,479,317 2,050,956 
Other revenues (c)59,103 (318)
    Total electric revenues2,538,420 2,050,638 
Natural gas58,168 43,976 
Entergy Wholesale Commodities:
Competitive businesses sales from contracts with customers (a)232,113 216,002 
Other revenues (c)16,137 116,563 
    Total competitive businesses revenues248,250 332,565 
    Total operating revenues$2,844,838 $2,427,179 




72

Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ total revenues for the three months ended March 31, 2021 and 2020 were as follows:
2021Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New
Orleans
Entergy
Texas
(In Thousands)
Residential$237,182 $335,760 $147,636 $66,427 $179,850 
Commercial106,416 224,649 97,936 47,799 95,876 
Industrial103,412 347,009 33,980 6,789 106,462 
Governmental4,256 18,616 10,543 16,380 7,003 
    Total billed retail451,266 926,034 290,095 137,395 389,191 
Sales for resale (a)110,085 80,428 40,311 4,696 74,073 
Other electric revenues (b)19,583 43,910 3,950 (3,359)17,529 
Revenues from contracts with customers580,934 1,050,372 334,356 138,732 480,793 
Other revenues (c)2,452 29,291 2,263 416 (573)
    Total electric revenues583,386 1,079,663 336,619 139,148 480,220 
Natural gas27,981 30,187 
    Total operating revenues$583,386 $1,107,644 $336,619 $169,335 $480,220 

2020Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New
Orleans
Entergy
Texas
(In Thousands)
Residential$219,688 $259,860 $127,102 $50,899 $140,480 
Commercial111,245 202,246 96,798 45,505 83,146 
Industrial101,088 322,342 36,390 7,347 90,348 
Governmental4,030 16,754 10,327 15,851 5,620 
    Total billed retail436,051 801,202 270,617 119,602 319,594 
Sales for resale (a)41,140 78,530 14,422 10,170 8,629 
Other electric revenues (b)1,596 32,008 6,443 763 10,702 
Revenues from contracts with customers478,787 911,740 291,482 130,535 338,925 
Other revenues (c)3,125 801 2,440 (7,104)411 
    Total electric revenues481,912 912,541 293,922 123,431 339,336 
Natural gas18,106 25,871 
    Total operating revenues$481,912 $930,647 $293,922 $149,302 $339,336 



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