ETR-03-31-2015-10Q
Table of Contents

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

FORM 10-Q

(Mark One)
 
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the Quarterly Period Ended March 31, 2015
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from ____________ to ____________

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

Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
1-11299
ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
 
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
 
 
 
 
 
 
 
 
 
 
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
 
0-05807
ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-0273040
 
 
 
 
 
 
 
 
 
 
0-20371
ENTERGY GULF STATES LOUISIANA, L.L.C.
(a Louisiana limited liability company)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 576-4000
74-0662730
 
1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
9425 Pinecroft
The Woodlands, Texas 77380
Telephone (409) 981-2000
61-1435798
 
 
 
 
 
 
 
 
 
 
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 576-4000
75-3206126
 
1-09067
SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
 
 
 
 
 
__________________________________________________________________________________________


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Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes R No o

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

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

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No R
Common Stock Outstanding
 
Outstanding at April 30, 2015
Entergy Corporation
($0.01 par value)
179,522,178

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2014, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2015

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

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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2015

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


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FORWARD-LOOKING INFORMATION

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

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

resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
the termination of Entergy Arkansas’s participation in the System Agreement, which occurred in December 2013, the termination of Entergy Mississippi’s participation in the System Agreement in November 2015, the termination of Entergy Texas’s, Entergy Gulf States Louisiana’s, and Entergy Louisiana’s participation in the System Agreement after expiration of the proposed 60-month notice period or such other period as approved by the FERC;
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ move to MISO, which occurred in December 2013, including the effect of current or projected MISO market rules and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC;
changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned or potential shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;
resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications or other authorizations required of nuclear generating facilities;
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities;
Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants;
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;

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FORWARD-LOOKING INFORMATION (Concluded)

changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, and other regulated air and water emissions, and changes in costs of compliance with environmental and other laws and regulations;
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel disposal fees charged by the U.S. government related to such sites;
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
effects of climate change;
changes in the quality and availability of water supplies and the related regulation of water use and diversion;
Entergy’s ability to manage its capital projects and operation and maintenance costs;
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeast United States and events and circumstances that could influence economic conditions in those areas, and the risk that anticipated load growth may not materialize;
the effects of Entergy’s strategies to reduce tax payments;
changes in the financial markets, particularly those affecting the availability of capital and Entergy’s ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions;
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
changes in inflation and interest rates;
the effect of litigation and government investigations or proceedings;
changes in technology, including with respect to new, developing, or alternative sources of generation;
the potential effects of threatened or actual terrorism, cyber attacks or data security breaches, including increased security costs, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
Entergy’s ability to attract and retain talented management and directors;
changes in accounting standards and corporate governance;
declines in the market prices of marketable securities and resulting funding requirements for Entergy’s defined benefit pension and other postretirement benefit plans;
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites;
the implementation of the shutdown of Vermont Yankee and the related decommissioning of Vermont Yankee;
the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;
factors that could lead to impairment of long-lived assets; and
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture.


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DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym
Term
AFUDC
Allowance for Funds Used During Construction
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASLB
Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
Cajun
Cajun Electric Power Cooperative, Inc.
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council or Council
Council of the City of New Orleans, Louisiana
D.C. Circuit
U.S. Court of Appeals for the District of Columbia Circuit
DOE
United States Department of Energy
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Texas
Entergy Texas, Inc., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale
Commodities (EWC)
Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPA
United States Environmental Protection Agency
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2014 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
FTR
Financial transmission right
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment


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DEFINITIONS (Concluded)

Abbreviation or Acronym
Term
IRS
Internal Revenue Service
ISO
Independent System Operator
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
MISO
Midcontinent Independent System Operator, Inc., a regional transmission organization
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatts
MWh
Megawatt-hour(s)
Net debt to net capital ratio
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Palisades
Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement or power purchase agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Gulf States Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. Entergy Arkansas terminated its participation in the System Agreement effective December 18, 2013.
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather
White Bluff
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas

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ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

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

The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.  
The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Results of Operations

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2015 to the first quarter 2014 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)
1st Quarter 2014 Consolidated Net Income (Loss)
 

$205,440

 

$242,470

 

($41,857
)
 

$406,053

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
73,119

 
(221,439
)
 
(915
)
 
(149,235
)
Other operation and maintenance
 
58,188

 
(20,296
)
 
(3,492
)
 
34,400

Asset write-off, impairments, and related charges
 

 
(2,270
)
 

 
(2,270
)
Taxes other than income taxes
 
10,198

 
(7,622
)
 
479

 
3,055

Depreciation and amortization
 
11,733

 
(7,884
)
 
(587
)
 
3,262

Other income
 
14,340

 
22,940

 
(5,102
)
 
32,178

Interest expense
 
5,861

 
854

 
(2,026
)
 
4,689

Other expenses
 
2,982

 
6,444

 

 
9,426

Income taxes
 
(23,813
)
 
(48,687
)
 
6,005

 
(66,495
)
 
 
 
 
 
 
 
 
 
1st Quarter 2015 Consolidated Net Income (Loss)
 

$227,750



$123,432



($48,253
)


$302,929


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

Refer to “ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS” for further information with respect to operating statistics.


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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$1,337

Retail electric price
68

Volume/weather
9

MISO deferral
(10
)
Other
6

2015 net revenue

$1,410


The retail electric price variance is primarily due to:

formula rate plan increases at Entergy Gulf States Louisiana and Entergy Louisiana, as approved by the LPSC, effective December 2014 and January 2015;
an annual net rate increase at Entergy Mississippi of $16 million, effective February 2015, as a result of the MPSC order in the June 2014 rate case;
an increase in energy efficiency rider revenue primarily due to an increase in the energy efficiency rider at Entergy Arkansas, as approved by the APSC, effective July 2014 and new energy efficiency riders at Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi that began in the fourth quarter 2014. Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have a minimal effect on net income; and
an annual base rate increase of $18.5 million at Entergy Texas, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case.

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

The volume/weather variance is primarily due to an increase in industrial usage and an increase in unbilled sales volume, partially offset by the effect of less favorable weather on billed residential and commercial sales. The increase in industrial usage is primarily in the chemicals industry. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Unbilled Revenue in the Form 10-K for further discussion of the accounting for unbilled revenues.

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


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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$748

Vermont Yankee shutdown in December 2014
(144
)
Nuclear realized price changes
(99
)
Mark-to-market
(55
)
Nuclear volume, excluding Vermont Yankee
67

Other
10

2015 net revenue

$527


As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $221 million in the first quarter 2015 compared to the first quarter 2014 primarily due to:

a decrease in net revenue as a result of Vermont Yankee ceasing power production in December 2014;
lower realized wholesale energy prices; and
in the fourth quarter 2014, Entergy Wholesale Commodities entered into electricity derivative instruments that were not designated as hedges, including additional financial power sales to lock in margins on some in-the-money purchased call options. When these positions settled, the turnaround of the positive year-end 2014 mark contributed to the negative mark-to-market variance for first quarter 2015. In the fourth quarter 2013, Entergy Wholesale Commodities also entered into similar transactions. The effect of increases in forward prices resulted in negative mark-to-market activity in fourth quarter 2013. The turnaround of the negative 2013 mark resulted in a positive mark in first quarter 2014, which also contributed to the negative mark-to-market variance for first quarter 2015. See Note 16 to the financial statements in the Form 10-K and Note 8 to the financial statements herein for discussion of derivative instruments.

The decrease was partially offset by higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer refueling outage days in the first quarter 2015 as compared to the first quarter 2014.

Following are key performance measures for Entergy Wholesale Commodities for the first quarter 2015 and 2014:
 
2015
 
2014
Owned capacity (MW) (a)
5,463
 
6,068
GWh billed
9,592
 
10,014
Average revenue per MWh
$67.00
 
$90.68
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
90%
 
82%
GWh billed
8,618
 
9,079
Average revenue per MWh
$65.78
 
$88.86
Refueling Outage Days:
 
 
 
Indian Point 2
 
24
Indian Point 3
23
 
Palisades
 
56

(a)
The reduction in owned capacity is due to the retirement of the 605 MW Vermont Yankee plant in December 2014.

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants” in the Form 10-K for a discussion of the effects of sustained low natural gas prices and power market structure challenges on market prices for electricity in the New York and New England power regions over the past few years. The higher realized revenue in first quarter 2014 compared to first quarter 2015 was due to significantly higher Northeast spot market prices in first quarter 2014 as a result of sustained cold weather across the entire region combined with limited liquefied natural gas imports and natural gas infrastructure constraints.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $497 million for the first quarter 2014 to $555 million for the first quarter 2015 primarily due to:

an increase of $20 million in fossil-fueled generation expenses primarily due to an increase in scope of work done during plant outages;
an increase of $14 million in energy efficiency costs.  These costs are recovered through energy efficiency riders and have a minimal effect on net income;
an increase of $12 million in nuclear generation expenses primarily due to increased costs related to an NRC inspection in first quarter 2015, higher labor costs, including contract labor, higher materials costs, and higher NRC fees;
an increase of $7 million in transmission expenses primarily due to an increase in costs related to the participation in the MISO RTO. The net income effect is partially offset due to deferrals of some of these costs in certain jurisdictions.  See Note 2 to the financial statements in the Form 10-K for further information on the deferrals; and
an increase of $5 million primarily due to losses of $1 million on the sale of surplus diesel inventory in 2015 compared to gains of $4 million on the sale of surplus oil inventory in 2014.

The increase was partially offset by:

a decrease of $8 million in compensation and benefits costs primarily due to a decrease in the accrual for incentive-based compensation, partially offset by an increase in net periodic pension and other postretirement benefit costs as a result of lower discount rates and changes in retirement and mortality assumptions.  See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
a decrease of $5 million due to the timing of annual Nuclear Electric Insurance Limited distributions in 2015 as compared to 2014.

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

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

Other income increased primarily due to:

an increase in earnings on decommissioning trust fund investments in the first quarter 2015 as compared to the first quarter 2014. There is no effect on net income as the trust fund earnings are offset by a corresponding amount of regulatory charges; and
an increase in distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing. The distributions

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

on preferred membership interests are eliminated in consolidation and have no effect on Entergy's net income because the investment is in another Entergy subsidiary. See Note 2 to the financial statements in the Form 10-K for a discussion of the Act 55 storm cost financing.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $233 million for the first quarter 2014 to $212 million for the first quarter 2015 primarily due to the shutdown of Vermont Yankee, which ceased power production in December 2014. The decrease was partially offset by lower deferral of costs for future amortization as a result of fewer refueling outage days.

Taxes other than income taxes decreased due to decreased ad valorem and payroll taxes primarily as a result of the shutdown of Vermont Yankee, which ceased power production in December 2014.

Depreciation and amortization expenses decreased primarily due to decreases in depreciable asset balances as a result of the shutdown of Vermont Yankee, which ceased power production in December 2014. See Note 1 to the financial statements in the Form 10-K for further discussion of impairment of long-lived assets.

Other income increased primarily due to realized decommissioning trust gains in the first quarter 2015 that resulted from portfolio reallocations for the Vermont Yankee nuclear decommissioning trust funds.

Other expenses increased primarily due to an increase in nuclear refueling outage costs that are being amortized over the estimated period to the next outage.

Income Taxes

The effective income tax rate was 33.2% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain income tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS, partially offset by certain book and tax differences related to utility plant items. See Note 10 to the financial statements for a discussion of the finalized tax and interest computations for the 2006-2007 audit.

The effective income tax rate was 34.8% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to a deferred state income tax reduction related to a New York tax law change. See Note 3 to the financial statements in the Form 10-K for a discussion of the New York tax law change.

Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants
 
See the Form 10-K for a discussion of the NRC operating licenses for Indian Point 2 and Indian Point 3 and the NRC license renewal joint application in process for these plants.  Following are updates to the discussion regarding the NRC and related proceedings.

In March 2015 the NRC resolved the remaining appeals from the ASLB’s Track 1 decisions in favor of Entergy and NRC staff. Those appeals addressed electrical transformers and environmental justice. Initial filings in response to the NRC’s request for additional information on Severe Accident Mitigation Alternatives (SAMA) issues raised by the pending two SAMA-related appeals were completed. There is no deadline for the NRC to act once further filings have been made.


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In March 2015 the ASLB granted New York State’s motions to amend and update two of the remaining three previously-admitted Track 2 contentions. The ASLB also directed the parties to state their availability for Track 2 hearings starting in mid-November 2015.

In March 2015 the New York State Department of Environmental Conservation (NYSDEC) staff withdrew from consideration at trial before the ALJs its proposal for annual fish protection outages of 92 days. NYSDEC staff and Riverkeeper continue to advance other annual outage proposals. NYSDEC staff also withdrew from further consideration a $24 million annual interim payment that had been proposed as a condition of the draft water pollution control permit.

In March 2015, New York State Department of State’s (NYSDOS) motion for reargument or, alternatively, leave to appeal the December 2014 Coastal Zone Management Act grandfathering decision to the New York State Court of Appeals was denied by the Appellate Division. In April 2015, as permitted by New York rules, NYSDOS filed a separate motion directly with the State Court of Appeals requesting leave to appeal that decision. In April 2015, Entergy filed with the State Court of Appeals an answer opposing NYSDOS’s motion for leave to appeal.

ANO Damage, Outage, and NRC Reviews
 
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews.

As discussed in the Form 10-K, in January 2015 the NRC issued its final risk significance determination for the flood barrier violation originally cited in the September 2014 report. The NRC’s final risk significance determination was classified as “yellow with substantial safety significance.” In March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column will require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. The additional NRC inspection activities at the site are expected to increase ANO’s operating costs. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur NRC inspection costs of approximately $35 million in 2015 and approximately $15 million in 2016.

Liquidity and Capital Resources

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

Capital Structure

Entergy’s capitalization is balanced between equity and debt, as shown in the following table.
 
March 31, 2015
 
December 31,
2014
Debt to capital
57.4
%
 
57.6
%
Effect of excluding the securitization bonds
(1.4
%)
 
(1.4
%)
Debt to capital, excluding securitization bonds (a)
56.0
%
 
56.2
%
Effect of subtracting cash
(2.3
%)
 
(2.8
%)
Net debt to net capital, excluding securitization bonds (a)
53.7
%
 
53.4
%


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

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

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2019.  Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.275% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2015 was 1.93% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2015:

Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)

$3,500

 

$508

 

$9

 

$2,983


A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above.  Entergy is currently in compliance with the covenant.  If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur.  See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

In January 2015, Entergy Nuclear Vermont Yankee entered into a credit facility with a borrowing capacity of $60 million and an uncommitted credit facility with a borrowing capacity of $85 million. Both facilities are guaranteed by Entergy Corporation and will expire in January 2018. As of March 31, 2015, no amounts were outstanding under these facilities. See Note 4 to the financial statements herein for additional discussion of these facilities.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion. As of March 31, 2015, Entergy Corporation had $762 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 2015 was 0.85%.

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 2015 through 2017. Following are updates to the discussion in the Form 10-K.


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Union Power Station Purchase Agreement

As discussed in the Form 10-K, in December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station. The purchase of the Union Power Station is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).  In December 2014, Entergy Texas filed its application with the PUCT seeking one of the two necessary PUCT approvals of the acquisition.  In April 2015 the Office of Public Utility Counsel filed testimony recommending that the Union Power Station transaction be determined not to be consistent with the public interest, and Texas Industrial Energy Consumers filed testimony concluding that serious concerns exist as to whether Entergy Texas needs the capacity of Union Power Station and whether Union Power Station is the most economical alternative. Also in April 2015, East Texas Electric Cooperative filed testimony raising certain transmission-related issues with respect to the proposed acquisition. In May 2015, PUCT staff filed testimony concluding that Entergy Texas had not adequately supported its demonstration of need for the facility or the extent of its due diligence in considering alternatives to the acquisition of Union Power Station. The PUCT staff further concluded that (i) Entergy Texas’ financial condition would remain adequate should it acquire the facility regardless of whether it was also allowed to recover its requested acquisition adjustment and (ii) Entergy Texas had not provided sufficient information for PUCT staff to determine the reasonable value of the facility. The PUCT has indicated that it will convene the hearing on the merits of the initial requested approval in June 2015.  Entergy Texas intends to file a rate application to seek cost recovery in the second quarter of 2015.  In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery.  The LPSC established a procedural schedule providing for a hearing on the merits in August 2015. The APSC established a procedural schedule providing for a hearing on the merits in September 2015. In February 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed a notification and report form pursuant to the HSR Act with the United States Department of Justice (DOJ) and Federal Trade Commission with respect to their planned acquisition of the Union Power Station.  Union Power Partners, L.P. (UPP), the seller, also filed a notification and report form in February 2015. In March 2015 the DOJ requested additional information and documentary material from each of the purchasing companies and UPP, which will have the effect of extending the DOJ review period. In March 2015, UPP, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed an application with the FERC requesting authorization for the transaction.  In April 2015, Entergy Texas and Entergy Gulf States Louisiana made a filing with the FERC to request authorization to recover their portions of the expected positive acquisition adjustment associated with the acquisition of the Union Power Station.  Also in April 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas made a filing with the FERC for approval of their proposed accounting treatment of the amortization expenses relating to the acquisition adjustment.  Closing is targeted to occur in late-2015.
    
Dividends

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities.  At its April 2015 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since the second quarter 2010.


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Management's Financial Discussion and Analysis

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Millions)
Cash and cash equivalents at beginning of period

$1,422

 

$739

 
 
 
 
Cash flow provided by (used in):
 

 
 

Operating activities
611

 
767

Investing activities
(700
)
 
(656
)
Financing activities
(152
)
 
58

Net increase (decrease) in cash and cash equivalents
(241
)
 
169

 
 
 
 
Cash and cash equivalents at end of period

$1,181

 

$908


Operating Activities

Net cash flow provided by operating activities decreased by $156 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

lower Entergy Wholesale Commodities net revenues in 2015 as compared to the same period in 2014, as discussed previously;
an increase in income tax payments of $62 million primarily due to payments made in 2015 for the final settlement of amounts outstanding associated with the 2006-2007 IRS audit;
an increase in spending of $49 million in 2015 related to Vermont Yankee, including severance and retention payments accrued in 2014 and defueling activities that took place after the plant ceased power production in December 2014; and
an increase of $20 million in pension contributions in 2015. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

The decrease was partially offset by:

higher Utility net revenues in 2015 as compared to the same period in 2014, as discussed above;
a decrease of $16 million in spending on nuclear refueling outages in 2015 as compared to the same period in 2014; and
a decrease of $15 million in storm restoration spending in 2015.

Investing Activities

Net cash flow used in investing activities increased by $44 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

an increase in construction expenditures primarily due to compliance with NRC post-Fukushima requirements, an overall higher scope of work on various projects, and a higher scope of work during plant outages in 2015 as compared to the same period in 2014, partially offset by a decrease in spending on the Ninemile Unit 6 self-build project and a decrease in storm restoration spending;

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a change in collateral deposit activity, reflected in the “Decrease in other investments” line on the Consolidated Statement of Cash Flows, as Entergy received net deposits of $21 million in 2014.  Entergy Wholesale Commodities’ forward sales contracts are discussed in the “Market and Credit Risk Sensitive Instruments” section below;
a decrease of $15 million in insurance proceeds primarily due to $13 million received in the first quarter 2015 related to the Baxter Wilson plant event and $24 million received in the first quarter 2014 for property damages related to the generator stator incident at ANO. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for a discussion of the Baxter Wilson plant event and the ANO stator incident; and
proceeds from the sale of aircraft in first quarter 2014.

The increase was partially offset by a decrease in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.

Financing Activities

Entergy’s financing activities used net cash flow of $152 million for the three months ended March 31, 2015 compared to providing $58 million the three months ended March 31, 2014 primarily due to:

long-term debt activity using approximately $197 million of cash in 2015 compared to providing $17 million of cash in 2014.  Included in the long-term debt activity is $187 million in 2015 and $140 million in 2014 for the repayment of borrowings on the Entergy Corporation long-term credit facility;
net issuances of commercial paper of $278 million in 2015 compared to net issuances of commercial paper of $14 million in 2014;
the repurchase of $25 million of Entergy common stock in 2015; and
a net decrease of $212 million in 2015 in short-term borrowings by the nuclear fuel company variable interest entities.

For details of long-term debt activity and Entergy’s commercial paper program in 2015, see Note 4 to the financial statements herein and Notes 4 and 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 the Form 10-K for a discussion of federal regulatory proceedings.  


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Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets.  In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.  In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk.  Certain hedge volumes have price downside and upside relative to market price movement.  The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations.  The sensitivities may not reflect the total maximum upside potential from higher market prices.  The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation.  Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of March 31, 2015 (2015 represents the remainder of the year):


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Entergy Wholesale Commodities Nuclear Portfolio
 
 
2015
 
2016
 
2017
 
2018
 
2019
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Unit-contingent (b)
 
44%
 
23%
 
14%
 
14%
 
16%
Unit-contingent with availability guarantees (c)
 
20%
 
17%
 
18%
 
3%
 
3%
Firm LD (d)
 
42%
 
43%
 
7%
 
—%
 
—%
Offsetting positions (e)
 
(19%)
 
—%
 
—%
 
—%
 
—%
Total
 
87%
 
83%
 
39%
 
17%
 
19%
Planned generation (TWh) (f) (g)
 
27
 
36
 
35
 
35
 
36
Average revenue per MWh on contracted volumes:
 
 
 
 
 
 
 
 
 
 
Minimum
 
$42
 
$45
 
$48
 
$56
 
$57
Expected based on market prices as of March 31, 2015
 
$43
 
$49
 
$50
 
$56
 
$57
Sensitivity: -/+ $10 per MWh market price change
 
$42-$45
 
$46-$53
 
$49-$53
 
$56
 
$57
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (h):
 
 
 
 
 
 
 
 
 
 
Bundled capacity and energy contracts (i)
 
17%
 
17%
 
18%
 
18%
 
18%
Capacity contracts (j)
 
40%
 
16%
 
16%
 
16%
 
7%
Total
 
57%
 
33%
 
34%
 
34%
 
25%
Planned net MW in operation (g)
 
4,406
 
4,406
 
4,406
 
4,406
 
4,406
Average revenue under contract per kW per month
(applies to capacity contracts only)
 
$5.1
 
$3.4
 
$5.6
 
$9.4
 
$11.1
 
 
 
 
 
 
 
 
 
 
 
Total Nuclear Energy and Capacity Revenues
 
 
 
 
 
 
 
 
 
 
Expected sold and market total revenue per MWh
 
$48
 
$50
 
$50
 
$52
 
$53
Sensitivity: -/+ $10 per MWh market price change
 
$46-$51
 
$47-$55
 
$44-$57
 
$44-$60
 
$45-$61

Entergy Wholesale Commodities Non-Nuclear Portfolio
 
 
2015
 
2016
 
2017
 
2018
 
2019
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Cost-based contracts (k)
 
38%
 
36%
 
34%
 
34%
 
34%
Firm LD (d)
 
7%
 
7%
 
7%
 
7%
 
7%
Total
 
45%
 
43%
 
41%
 
41%
 
41%
Planned generation (TWh) (f) (l)
 
4
 
6
 
6
 
6
 
6
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (h):
 
 
 
 
 
 
 
 
 
 
Cost-based contracts (k)
 
24%
 
24%
 
26%
 
26%
 
26%
Bundled capacity and energy contracts (i)
 
8%
 
8%
 
8%
 
8%
 
8%
Capacity contracts (j)
 
53%
 
53%
 
57%
 
57%
 
24%
Total
 
85%
 
85%
 
91%
 
91%
 
58%
Planned net MW in operation (l)
 
1,052
 
1,052
 
977
 
977
 
977


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(a)
Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights. Positions that are not classified as hedges are netted in the planned generation under contract.
(b)
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, seller is generally not liable to buyer for any damages.
(c)
A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(d)
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products. This also includes option transactions that may expire without being exercised.
(e)
Transactions for the purchase of energy, generally to offset a Firm LD transaction.
(f)
Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch.
(g)
Assumes NRC license renewals for plants whose current licenses expire within five years, and uninterrupted normal operation at all operating plants.  NRC license renewal applications are in process for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015).  For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” above and in the Form10-K.
(h)
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(i)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(j)
A contract for the sale of an installed capacity product in a regional market.
(k)
Contracts priced in accordance with cost-based rates, a ratemaking concept used for the design and development of rate schedules to ensure that the filed rate schedules recover only the cost of providing the service; these contracts are on owned non-utility resources located within Entergy’s Utility service area and were executed prior to receiving market-based rate authority under MISO.  The percentage sold assumes completion of the necessary transmission upgrades required for the approved transmission rights.
(l)
Non-nuclear planned generation and net MW in operation include purchases from affiliated and non-affiliated counterparties under long-term contracts and exclude energy and capacity from Entergy Wholesale Commodities’ wind investment. The decrease in planned net MW in operation beginning in 2017 is due to the expiration of a non-affiliated 75 MW contract.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on March 31, 2015 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $82 million for the remainder of 2015. As of March 31, 2014, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $148 million for the remainder of 2014.  A negative $10 per MWh change in the annual average energy price in the markets based on March 31, 2015 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($44) million for the remainder of 2015. As of March 31, 2014, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($142) million for the remainder of 2014.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements.  The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted

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power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At March 31, 2015, based on power prices at that time, Entergy had liquidity exposure of $172 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $6 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, 2015, Entergy would have been required to provide approximately $62 million of additional cash or letters of credit under some of the agreements. As of March 31, 2015, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $79 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets. 

As of March 31, 2015, substantially all of the counterparties or their guarantors for the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2019 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.

Critical Accounting Estimates

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

New Accounting Pronouncements

The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects.  Final pronouncements that result from these projects could have a material effect on Entergy’s future net income, financial position, or cash flows.

In February 2015 the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to Consolidation Analysis” which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The ASU affects (1) limited partnerships and similar legal entities, (2) evaluating fees paid to a decision maker or a service provider as a variable interest, (3) the effect of fee arrangements on the primary beneficiary determination, (4) the effect of related parties on the primary beneficiary determination, and (5) certain investment funds. ASU 2015-02 is effective for Entergy for the first quarter 2016. Entergy does not expect ASU 2015-02 to affect materially its results of operations, financial position, or cash flows.

In April 2015 the FASB issued ASU No. 2015-03, “Interest-Imputation of Interest (Subtopic 835-30):  Simplifying the Presentation of Debt Issuance Costs.”  The ASU states that debt issuance costs shall be reported in the balance sheet as a direct deduction from the associated debt liability.  ASU 2015-03 is effective for Entergy for the first quarter 2016. Entergy does not expect ASU 2015-03 to affect materially its results of operations, financial position, or cash flows.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
(In Thousands, Except Share Data)
OPERATING REVENUES
 
 
 
Electric

$2,217,989

 

$2,226,463

Natural gas
59,511

 
78,220

Competitive businesses
642,590

 
904,160

TOTAL
2,920,090

 
3,208,843

 
 
 
 
OPERATING EXPENSES
 
 
 
Operation and Maintenance:
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
630,453

 
543,829

Purchased power
342,023

 
574,627

Nuclear refueling outage expenses
64,870

 
59,544

Other operation and maintenance
770,110

 
735,710

Asset write-offs, impairments, and related charges

 
2,270

Decommissioning
69,899

 
65,799

Taxes other than income taxes
157,523

 
154,468

Depreciation and amortization
331,986

 
328,724

Other regulatory charges
10,457

 
3,995

TOTAL
2,377,321

 
2,468,966

 
 
 
 
OPERATING INCOME
542,769

 
739,877

 
 
 
 
OTHER INCOME
 
 
 
Allowance for equity funds used during construction
11,738

 
15,129

Interest and investment income
68,133

 
35,248

Miscellaneous - net
(9,020
)
 
(11,704
)
TOTAL
70,851

 
38,673

 
 
 
 
INTEREST EXPENSE
 
 
 
Interest expense
166,337

 
162,551

Allowance for borrowed funds used during construction
(6,117
)
 
(7,020
)
TOTAL
160,220

 
155,531

 
 
 
 
INCOME BEFORE INCOME TAXES
453,400

 
623,019

 
 
 
 
Income taxes
150,471

 
216,966

 
 
 
 
CONSOLIDATED NET INCOME
302,929

 
406,053

 
 
 
 
Preferred dividend requirements of subsidiaries
4,879

 
4,879

 
 
 
 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION

$298,050

 

$401,174

 
 
 
 
Earnings per average common share:
 
 
 
Basic

$1.66

 

$2.24

Diluted

$1.65

 

$2.24

Dividends declared per common share

$0.83

 

$0.83

 
 
 
 
Basic average number of common shares outstanding
179,658,981

 
178,797,829

Diluted average number of common shares outstanding
180,480,523

 
179,055,967

 
 
 
 
See Notes to Financial Statements.
 
 
 

15

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16

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
(In Thousands)
 
 
 
 
Net Income

$302,929

 

$406,053


 
 
 
Other comprehensive income (loss)
 
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
(net of tax expense (benefit) of ($15,898) and $7,225)
(29,330
)
 
13,754

Pension and other postretirement liabilities
 
 
 
(net of tax expense of $3,175 and $17,761)
8,448

 
(12,696
)
Net unrealized investment gains
 
 
 
(net of tax expense of $3,666 and $5,748)
4,003

 
22,989

Foreign currency translation
 
 
 
(net of tax expense (benefit) of ($296) and $40)
(551
)
 
75

Other comprehensive income (loss)
(17,430
)
 
24,122


 
 
 
Comprehensive Income
285,499

 
430,175

Preferred dividend requirements of subsidiaries
4,879

 
4,879

Comprehensive Income Attributable to Entergy Corporation

$280,620

 

$425,296

 
 
 
 
See Notes to Financial Statements.
 
 
 



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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 

$302,929

 

$406,053

Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
526,008

 
516,442

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
95,732

 
234,102

Changes in working capital:
 
 
 
 
Receivables
 
22,288

 
49,107

Fuel inventory
 
(22,553
)
 
15,940

Accounts payable
 
(153,700
)
 
32,870

Taxes accrued
 
(67,941
)
 
(79,829
)
Interest accrued
 
(42,551
)
 
(24,802
)
Deferred fuel costs
 
81,271

 
(161,189
)
Other working capital accounts
 
(90,619
)
 
(115,060
)
Changes in provisions for estimated losses
 
1,334

 
3,319

Changes in other regulatory assets
 
93,082

 
18,627

Changes in other regulatory liabilities
 
15,857

 
19,634

Changes in pensions and other postretirement liabilities
 
(52,509
)
 
(46,174
)
Other
 
(97,670
)
 
(101,883
)
Net cash flow provided by operating activities
 
610,958

 
767,157

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction/capital expenditures
 
(532,958
)
 
(483,350
)
Allowance for equity funds used during construction
 
13,077

 
15,883

Nuclear fuel purchases
 
(96,392
)
 
(142,672
)
Proceeds from sale of assets
 

 
10,100

Insurance proceeds received for property damages
 
12,745

 
28,226

Changes in securitization account
 
(251
)
 
(2,219
)
NYPA value sharing payment
 
(70,790
)
 
(72,000
)
Payments to storm reserve escrow account
 
(1,865
)
 
(1,897
)
Decrease in other investments
 
278

 
18,093

Proceeds from nuclear decommissioning trust fund sales
 
492,841

 
536,515

Investment in nuclear decommissioning trust funds
 
(516,564
)
 
(562,278
)
Net cash flow used in investing activities
 
(699,879
)
 
(655,599
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of:
 
 
 
 
Long-term debt
 
488,065

 
753,244

Treasury stock
 
23,156

 
35,538

Retirement of long-term debt
 
(685,258
)
 
(735,794
)
Repurchase of common stock
 
(25,078
)
 

Changes in credit borrowings and commercial paper - net
 
210,012

 
157,959

Other
 
(9,320
)
 

Dividends paid:
 
 
 
 
Common stock
 
(149,257
)
 
(148,275
)
Preferred stock
 
(4,879
)
 
(4,873
)
Net cash flow provided by (used in) financing activities
 
(152,559
)
 
57,799


 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(241,480
)
 
169,357


 
 
 
 
Cash and cash equivalents at beginning of period
 
1,422,026

 
739,126


 
 
 
 
Cash and cash equivalents at end of period
 

$1,180,546

 

$908,483

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

$203,786

 

$181,112

Income taxes
 

$65,919

 

$4,196

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$67,120

 

$131,327

Temporary cash investments
 
1,113,426

 
1,290,699

Total cash and cash equivalents
 
1,180,546

 
1,422,026

Accounts receivable:
 
 
 
 
Customer
 
638,721

 
596,917

Allowance for doubtful accounts
 
(35,884
)
 
(35,663
)
Other
 
174,030

 
220,342

Accrued unbilled revenues
 
291,040

 
321,659

Total accounts receivable
 
1,067,907

 
1,103,255

Deferred fuel costs
 
127,742

 
155,140

Accumulated deferred income taxes
 
22,953

 
27,783

Fuel inventory - at average cost
 
227,986

 
205,434

Materials and supplies - at average cost
 
929,843

 
918,584

Deferred nuclear refueling outage costs
 
278,900

 
214,188

Prepayments and other
 
304,108

 
343,223

TOTAL
 
4,139,985

 
4,389,633

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliates - at equity
 
34,864

 
36,234

Decommissioning trust funds
 
5,452,950

 
5,370,932

Non-utility property - at cost (less accumulated depreciation)
 
218,235

 
213,791

Other
 
407,639

 
405,169

TOTAL
 
6,113,688

 
6,026,126

 
 
 
 
 
PROPERTY, PLANT, AND EQUIPMENT
 
 
 
 
Electric
 
45,233,667

 
44,881,419

Property under capital lease
 
945,454

 
945,784

Natural gas
 
379,949

 
377,565

Construction work in progress
 
1,387,574

 
1,425,981

Nuclear fuel
 
1,523,612

 
1,542,055

TOTAL PROPERTY, PLANT, AND EQUIPMENT
 
49,470,256

 
49,172,804

Less - accumulated depreciation and amortization
 
20,662,229

 
20,449,858

PROPERTY, PLANT, AND EQUIPMENT - NET
 
28,808,027

 
28,722,946

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
803,744

 
836,064

Other regulatory assets (includes securitization property of $699,764 as of March 31, 2015 and $724,839 as of December 31, 2014)
 
4,877,838

 
4,968,553

Deferred fuel costs
 
238,706

 
238,102

Goodwill
 
377,172

 
377,172

Accumulated deferred income taxes
 
53,135

 
48,351

Other
 
965,238

 
920,907

TOTAL
 
7,315,833

 
7,389,149

 
 
 
 
 
TOTAL ASSETS
 

$46,377,533

 

$46,527,854

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$896,877

 

$899,375

Notes payable and commercial paper
 
808,419

 
598,407

Accounts payable
 
941,596

 
1,166,431

Customer deposits
 
415,195

 
412,166

Taxes accrued
 
60,167

 
128,108

Accumulated deferred income taxes
 
94,719

 
38,039

Interest accrued
 
163,459

 
206,010

Deferred fuel costs
 
146,078

 
91,602

Obligations under capital leases
 
2,557

 
2,508

Pension and other postretirement liabilities
 
58,786

 
57,994

Other
 
177,572

 
248,251

TOTAL
 
3,765,425

 
3,848,891

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
9,158,586

 
9,133,161

Accumulated deferred investment tax credits
 
251,616

 
247,521

Obligations under capital leases
 
29,051

 
29,710

Other regulatory liabilities
 
1,369,514

 
1,383,609

Decommissioning and asset retirement cost liabilities
 
4,513,168

 
4,458,296

Accumulated provisions
 
419,471

 
418,128

Pension and other postretirement liabilities
 
3,584,994

 
3,638,295

Long-term debt (includes securitization bonds of $762,101 as of March 31, 2015 and $784,862 as of December 31, 2014)
 
12,307,540

 
12,500,109

Other
 
539,429

 
557,649

TOTAL
 
32,173,369

 
32,366,478

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

 
210,760

 
 
 
 
 
EQUITY
 
 
 
 
Common Shareholders' Equity:
 
 
 
 
Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2015 and in 2014
 
2,548

 
2,548

Paid-in capital
 
5,351,690

 
5,375,353

Retained earnings
 
10,318,450

 
10,169,657

Accumulated other comprehensive loss
 
(59,737
)
 
(42,307
)
Less - treasury stock, at cost (75,238,343 shares in 2015 and 75,512,079 shares in 2014)
 
5,478,972

 
5,497,526

Total common shareholders' equity
 
10,133,979

 
10,007,725

Subsidiaries' preferred stock without sinking fund
 
94,000

 
94,000

TOTAL
 
10,227,979

 
10,101,725

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$46,377,533

 

$46,527,854

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 



Common Shareholders’ Equity


 
Subsidiaries’ Preferred Stock
 
Common
Stock
 
Treasury
Stock
 
Paid-in
Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$94,000

 

$2,548

 

($5,533,942
)
 

$5,368,131

 

$9,825,053

 

($29,324
)
 

$9,726,466

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
4,879

 

 

 

 
401,174

 

 
406,053

Other comprehensive income

 

 

 

 

 
24,122

 
24,122

Common stock issuances related to stock plans

 

 
56,440

 
(17,499
)
 

 

 
38,941

Common stock dividends declared

 

 

 

 
(148,275
)
 

 
(148,275
)
Preferred dividend requirements of subsidiaries (a)
(4,879
)
 

 

 

 

 

 
(4,879
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2014

$94,000

 

$2,548

 

($5,477,502
)
 

$5,350,632

 

$10,077,952

 

($5,202
)
 

$10,042,428

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$94,000

 

$2,548

 

($5,497,526
)
 

$5,375,353

 

$10,169,657

 

($42,307
)
 

$10,101,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
4,879

 

 

 

 
298,050

 

 
302,929

Other comprehensive loss

 

 

 

 

 
(17,430
)
 
(17,430
)
Common stock repurchases

 

 
(25,078
)
 

 

 

 
(25,078
)
Common stock issuances related to stock plans

 

 
43,632

 
(23,663
)
 

 

 
19,969

Common stock dividends declared

 

 

 

 
(149,257
)
 

 
(149,257
)
Preferred dividend requirements of subsidiaries (a)
(4,879
)
 

 

 

 

 

 
(4,879
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2015

$94,000

 

$2,548

 

($5,478,972
)
 

$5,351,690

 

$10,318,450

 

($59,737
)
 

$10,227,979

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2015 and 2014 include $3.2 million and $3.2 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity.


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ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2015
 
2014
 
(Decrease)
 
%

 
(Dollars in Millions)
 
 
Utility Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$882

 

$904

 

($22
)
 
(2
)
Commercial
 
583

 
577

 
6

 
1

Industrial
 
576

 
555

 
21

 
4

Governmental
 
52

 
53

 
(1
)
 
(2
)
Total retail
 
2,093

 
2,089

 
4

 

Sales for resale
 
60

 
119

 
(59
)
 
(50
)
Other
 
65

 
18

 
47

 
261

Total
 

$2,218

 

$2,226

 

($8
)
 


 
 
 
 
 
 
 
 
Utility Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
9,433

 
10,027

 
(594
)
 
(6
)
Commercial
 
6,721

 
6,800

 
(79
)
 
(1
)
Industrial
 
10,406

 
10,113

 
293

 
3

Governmental
 
592

 
584

 
8

 
1

Total retail
 
27,152

 
27,524

 
(372
)
 
(1
)
Sales for resale
 
1,811

 
2,234

 
(423
)
 
(19
)
Total
 
28,963

 
29,758

 
(795
)
 
(3
)

 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating Revenues
 

$643

 

$912

 

($269
)
 
(29
)
Billed Electric Energy Sales (GWh)
 
9,592

 
10,014

 
(422
)
 
(4
)


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ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

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

ANO Damage, Outage, and NRC Reviews

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

As discussed in the Form 10-K, in January 2015 the NRC issued its final risk significance determination for the flood barrier violation originally cited in the September 2014 report. The NRC’s final risk significance determination was classified as “yellow with substantial safety significance.” In March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column will require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. The additional NRC inspection activities at the site are expected to increase ANO’s operating costs. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur NRC inspection costs of approximately $35 million in 2015 and approximately $15 million in 2016.

Baxter Wilson Plant Event

See Note 8 to the financial statements in the Form 10-K for a discussion of the Baxter Wilson plant event. During the first quarter 2015, Entergy Mississippi received $27.8 million of previously accrued insurance proceeds with $12.7 million allocated to capital spending and $15.1 million allocated to operation and maintenance expenses.

Nuclear Fuel Enrichment Contracts

Entergy subsidiaries are parties to two contracts with American Centrifuge Enrichment, LLC (ACE) under which these subsidiaries purchase nuclear fuel enrichment services.  The term of each contract is from 2011 to 2022; however, each contract provided for cancellation of the parties’ purchase and sale obligations for 2016-2022 if, by August 1, 2014, ACE’s planned Advanced Centrifuge Plant was not in commercial operation and ACE did not identify to Entergy’s reasonable satisfaction how it would meet its contractual delivery obligations through output from ACE.  In August 2014, Entergy sent notice to ACE that the 2016-2022 obligations were canceled by the operation of this contractual provision.  United States Enrichment Corporation, ACE’s affiliate to which ACE assigned the contracts, has filed a demand for arbitration with the American Arbitration Association, claiming damages of approximately $165 million.  Entergy will participate in the arbitration proceedings and believes that ACE and United States Enrichment Corporation failed to satisfy the conditions required to avoid cancellation of the parties’ 2016-2022 performance obligations.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

Nuclear Insurance

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

Conventional Property Insurance

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

Employment Litigation

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

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

See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas.


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

Regulatory Assets 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 Mississippi

Mississippi Attorney General Complaint

The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution.  The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand.  Entergy believes the complaint is unfounded.  In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S. District Court in Jackson, Mississippi.  The Mississippi attorney general moved to remand the matter to state court.  In August 2012 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.

The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act.  In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC,

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Entergy Corporation and Subsidiaries
Notes to Financial Statements

and factual errors in the Attorney General’s complaint.  In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings.  

In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not considered “mass actions” under the Class Action Fairness Act, so as to establish federal subject matter jurisdiction. One day later the Attorney General renewed his motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies responded to that motion reiterating the additional grounds asserted for federal question jurisdiction, and the District Court held oral argument on the renewed motion to remand in February 2014. In April 2015 the District Court entered an order denying the renewed motion to remand, holding that the District Court has federal question subject matter jurisdiction. The District Court has not yet ruled on the defendant Entergy companies’ motion for judgment on the pleadings, which if granted would dismiss the case.

Entergy New Orleans

In February 2015, Entergy New Orleans filed an application with the City Council seeking authorization to enter into a power purchase agreement, subject to certain conditions, with Entergy Gulf States Louisiana to purchase on a life-of-unit basis 20% of the capacity and related energy of the two power blocks of the Union Power Station that Entergy Gulf States Louisiana is seeking to purchase. In the application, Entergy New Orleans also seeks authorization from the City Council for full and timely cost recovery in rates for all costs associated with the power purchase agreement. In April 2015 the City Council approved a procedural schedule for this proceeding that would provide for a City Council decision in July 2015.

Retail Rate Proceedings

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

Filings with the APSC

In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notifies the APSC of Entergy Arkansas’s intent to implement a formula rate review mechanism pursuant to Arkansas legislation passed in 2015, and requests a retail rate increase of $268.4 million, with a net increase in revenue of $167 million. The filing requests a 10.2% return on common equity.

Filings with the LPSC

Retail Rates - Gas (Entergy Gulf States Louisiana)

In January 2015, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2014.  The filing showed an earned return on common equity of 7.20%, which results in a $706 thousand rate increase.  In April 2015 the LPSC issued findings recommending two adjustments to Entergy Gulf States Louisiana’s as-filed results, and an additional recommendation that does not affect current year results. The LPSC staff’s recommended adjustments increase the earned return on equity for the test year to 7.24%. Entergy Gulf States Louisiana accepted the LPSC staff’s recommendations and a revenue increase of $688 thousand will be required as opposed to the $706 thousand requested by Entergy Gulf States Louisiana. The resulting change will be implemented with the first billing cycle of May 2015.

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

As discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC in September 2014 seeking authorization to undertake the transactions that would result in the combination

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Entergy Corporation and Subsidiaries
Notes to Financial Statements

of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. In the proceedings with the LPSC, Entergy Louisiana and Entergy Gulf States Louisiana estimate that the business combination could produce up to $128 million in customer benefits including proposed guaranteed savings of $97 million in the first ten years.  In April 2015 the LPSC staff and intervenors filed testimony in the LPSC business combination proceeding. The testimony recommends an extensive set of conditions that would be required in order to recommend that the LPSC find that the business combination is in the public interest. The LPSC staff’s primary concern appears to be potential shifting in fuel costs between legacy Entergy Louisiana and Entergy Gulf States Louisiana customers. In May 2015, Entergy Louisiana and Entergy Gulf States Louisiana filed rebuttal testimony. The hearing in the LPSC proceeding is scheduled to take place in June 2015. Entergy Louisiana and Entergy Gulf States Louisiana have requested that the LPSC issue its decision regarding the business combination in August 2015.

Entergy Louisiana and Entergy Gulf States Louisiana filed applications with the FERC requesting authorization for the business combination and Entergy Louisiana and Entergy New Orleans filed applications with the FERC requesting authorization of the Algiers asset transfer. In April 2015 the FERC issued orders approving certain of those business combination and the Algiers asset transfer applications. Other FERC applications related to the business combination remain pending.

Algiers Asset Transfer (Entergy Louisiana and Entergy New Orleans)

As discussed in the Form 10-K, in October 2014 Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently serve Entergy Louisiana’s customers in Algiers. In March 2015 the City Council’s Utility advisors filed direct testimony recommending that the Algiers asset transfer be approved subject to certain conditions that Entergy Louisiana and Entergy New Orleans believe they will be able to satisfy. If the necessary approvals are obtained from the City Council, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015. In April 2015 the FERC issued an order approving the Algiers asset transfer.

System Agreement Cost Equalization Proceedings

See Note 2 to the financial statements in the Form 10-K for a discussion of the proceedings regarding the System Agreement, including the FERC’s October 2011 order that concluded the FERC did have the authority to order refunds, but decided that it would exercise its equitable discretion and not require refunds for the 20-months period from September 13, 2001 - May 2, 2003. Because the ruling on refunds relied on findings in the interruptible load proceeding, the FERC concluded that the refund ruling will be held in abeyance pending the outcome of the rehearing requests in that proceeding. In March 2015, in light of the December 2014 decision by the D.C. Circuit in the interruptible load proceeding, Entergy filed with the FERC a motion to establish briefing schedule on refund issues and initial brief addressing refund issues. The initial brief argued that the FERC, in response to the D.C. Circuit decision, should clarify its policy on refunds and find that refunds are not required in this proceeding.

Rough Production Cost Equalization Rates

2007 Rate Filing Based on Calendar Year 2006 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In March 2015 the D.C. Circuit issued an unpublished order dismissing in part and denying in part the petition for review by the LPSC and denying the petition for review by Entergy.

2008 Rate Filing Based on Calendar Year 2007 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In April 2015, after issuance of the March 2015 unpublished opinion of the D.C. Circuit related to the 2007 rate proceeding, as

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discussed above, Entergy filed an unopposed motion for voluntary dismissal of the petition for review of the FERC’s interest determination. In May 2015 the U.S. Supreme Court denied the LPSC’s petition for a writ of certiorari of the Fifth Circuit’s decision.

2009 Rate Filing Based on Calendar Year 2008 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In May 2015 the U.S. Supreme Court denied the LPSC’s petition for a writ of certiorari of the Fifth Circuit’s decision.

2011 Rate Filing Based on Calendar Year 2010 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years.

2012 Rate Filing Based on Calendar Year 2011 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years.

2013 Rate Filing Based on Calendar Year 2012 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years.

2014 Rate Filing Based on Calendar Year 2013 Production Costs

See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years.

Interruptible Load Proceeding

As discussed in the Form 10-K, in May 2013 the LPSC filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit seeking review of FERC prior orders in the interruptible load proceeding that concluded that the FERC would exercise its discretion and not order refunds in this proceeding. In December 2014 the D.C. Circuit issued an order on the LPSC’s appeal and remanded the case back to the FERC. The D.C. Circuit rejected the LPSC’s argument that there is a presumption in favor of refunds, but it held that the FERC had not adequately explained its decision to deny refunds and directed the FERC “to consider the relevant factors and weigh them against one another.” In March 2015, Entergy filed with the FERC a motion to establish a briefing schedule on remand and an initial brief on remand to address the December 2014 decision by the D.C. Circuit. The initial brief on remand argued that the FERC, in response to the D.C. Circuit decision, should clarify its policy on refunds and find that refunds are not required in the interruptible load proceeding.


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Notes to Financial Statements

Storm Cost Recovery Filings with Retail Regulators

Entergy New Orleans

As discussed in the Form 10-K, in January 2015, Entergy New Orleans filed with the City Council an application requesting that the City Council grant a financing order authorizing the securitization of Entergy New Orleans’s storm costs, storm reserves, and issuance costs pursuant to Louisiana Act 64. In February 2015 the City Council approved a resolution establishing an expedited procedural schedule that provided for a hearing on the securitization application in late-April 2015, with a decision to be rendered no later than May 2015. In April 2015 the City Council’s Utility advisors filed direct testimony recommending that the proposed securitization be approved subject to certain limited modifications, and Entergy New Orleans filed rebuttal testimony later in April 2015. Also in April 2015, the parties’ joint motion to continue the hearing to facilitate settlement negotiations was granted.

Texas Power Price Lawsuit

See Note 2 to the financial statements in the Form 10-K for a discussion of this lawsuit. In May 2015 the Court of Appeals granted plaintiffs’ motion for rehearing, withdrew its prior opinion, and set the case for resubmission in June 2015, without further argument.


NOTE 3.  EQUITY  (Entergy Corporation, Entergy Gulf States Louisiana, and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31,
 
2015
 
2014
 
(In Millions, Except Per Share Data)
Basic earnings per share
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Net income attributable to Entergy Corporation

$298.1

 
179.7

 

$1.66

 

$401.2

 
178.8

 

$2.24

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 
0.5

 
(0.01
)
 
 
 

 

Other equity plans
 
 
0.3

 

 
 
 
0.3

 

Diluted earnings per share

$298.1

 
180.5

 

$1.65

 

$401.2

 
179.1

 

$2.24


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 3.5 million for the three months ended March 31, 2015 and approximately 9.0 million for the three months ended March 31, 2014.

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

Treasury Stock

During the three months ended March 31, 2015, Entergy Corporation issued 599,136 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based

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awards.  During the three months ended March 31, 2015, Entergy Corporation repurchased 325,400 shares of its common stock for a total purchase price of $25.1 million.

Retained Earnings

On April 1, 2015, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.83 per share, payable on June 1, 2015 to holders of record as of May 14, 2015.

Comprehensive Income

Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana.  The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2015 by component:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
Beginning balance, December 31, 2014

$98,118

 

($569,789
)
 

$426,695

 

$2,669

 

($42,307
)
Other comprehensive income (loss) before reclassifications
(20,896
)
 
13

 
12,658

 
(551
)
 
(8,776
)
Amounts reclassified from accumulated other comprehensive income (loss)
(8,434
)
 
8,435

 
(8,655
)
 

 
(8,654
)
Net other comprehensive income (loss) for the period
(29,330
)
 
8,448

 
4,003

 
(551
)
 
(17,430
)
Ending balance, March 31, 2015

$68,788

 

($561,341
)
 

$430,698

 

$2,118

 

($59,737
)

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

($81,777
)
 

($288,223
)
 

$337,256

 

$3,420

 

($29,324
)
Other comprehensive income (loss) before reclassifications
140,052

 

 
24,723

 
75

 
164,850

Amounts reclassified from accumulated other comprehensive income (loss)
(126,298
)
 
(12,696
)
 
(1,734
)
 

 
(140,728
)
Net other comprehensive income (loss) for the period
13,754

 
(12,696
)
 
22,989

 
75

 
24,122

Ending balance, March 31, 2014

($68,023
)
 

($300,919
)
 

$360,245

 

$3,495

 

($5,202
)
 
 
 
 
 
 
 
 

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Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended March 31, 2015:
 
Pension and Other
Postretirement Liabilities
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
(In Thousands)
Beginning balance, December 31, 2014

($53,347
)
 

($25,876
)
Amounts reclassified from accumulated other
comprehensive income (loss)
422

 
(42
)
Net other comprehensive income (loss) for the period
422

 
(42
)
Ending balance, March 31, 2015

($52,925
)
 

($25,918
)

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

($28,202
)
 

($9,635
)
Amounts reclassified from accumulated other
comprehensive income (loss)
122

 
(302
)
Net other comprehensive income (loss) for the period
122

 
(302
)
Ending balance, March 31, 2014

($28,080
)
 

($9,937
)

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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended March 31, 2015 are as follows:

Amounts
reclassified
from
AOCI

Income Statement Location

(In Thousands)


Cash flow hedges net unrealized gain (loss)



   Power contracts

$13,522


Competitive business operating revenues
   Interest rate swaps
(546
)

Miscellaneous - net
Total realized gain (loss) on cash flow hedges
12,976




(4,542
)

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

$8,434








Pension and other postretirement liabilities




   Amortization of prior-service credit

$5,986


(a)
   Amortization of loss
(17,588
)

(a)
Total amortization
(11,602
)



3,167


Income taxes
Total amortization (net of tax)

($8,435
)






Net unrealized investment gain (loss)



Realized gain (loss)

$16,970


Interest and investment income

(8,315
)

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

$8,655








Total reclassifications for the period (net of tax)

$8,654




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


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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended March 31, 2014 are as follows:
 
Amounts
reclassified
from
AOCI
 
Income Statement Location
 
(In Thousands)
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
   Power contracts

$194,603

 
Competitive business operating revenues
   Interest rate swaps
(298
)
 
Miscellaneous - net
Total realized gain (loss) on cash flow hedges
194,305

 
 
 
(68,007
)
 
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)

$126,298

 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
   Amortization of prior-service credit

$5,078

 
(a)
   Amortization of loss
(8,981
)
 
(a)
   Settlement loss
(1,162
)
 
(a)
Total amortization
(5,065
)
 
 
 
17,761

 
Income taxes
Total amortization (net of tax)

$12,696

 
 
 
 
 
 
Net unrealized investment gain (loss)
 
 
 
Realized gain (loss)

$3,400

 
Interest and investment income
 
(1,666
)
 
Income taxes
Total realized investment gain (loss) (net of tax)

$1,734

 
 
 
 
 
 
Total reclassifications for the period (net of tax)

$140,728

 
 

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

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Notes to Financial Statements

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended March 31, 2015 are as follows:
 
Amounts reclassified
from AOCI
 
 
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Income Statement Location
 
(In Thousands)
 
 
Pension and other postretirement liabilities
 
 
 
 
 
   Amortization of prior-service credit

$1,022

 

$845

 
(a)
   Amortization of loss
(1,733
)
 
(802
)
 
(a)
Total amortization
(711
)
 
43

 
 
 
289

 
(1
)
 
Income tax expense (benefit)
Total amortization (net of tax)
(422
)
 
42

 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

($422
)
 

$42

 
 

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

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Gulf States Louisiana and Entergy Louisiana for the three months ended March 31, 2014 are as follows:
 
Amounts reclassified
from AOCI
 
 
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Income Statement Location
 
(In Thousands)
 
 
Pension and other postretirement liabilities
 
 
 
 
 
   Amortization of prior-service credit

$559

 

$844

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

 
 
 
101

 
(164
)
 
Income tax expense (benefit)
Total amortization (net of tax)
(122
)
 
302

 
 
 
 
 
 
 
 
Total reclassifications for the period (net of tax)

($122
)
 

$302

 
 

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



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

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2019.  Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.275% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the three months ended March 31, 2015 was 1.93% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2015.
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)

$3,500

 

$508

 

$9

 

$2,983


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

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion.  At March 31, 2015, Entergy Corporation had $762 million of commercial paper outstanding.  The weighted-average interest rate for the three months ended March 31, 2015 was 0.85%.

Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 2015 as follows:
Company
 
Expiration
Date
 
Amount of
Facility
 
Interest Rate (a)
 
Amount Drawn
as of
March 31, 2015
Entergy Arkansas
 
April 2015
 
$20 million (b)
 
1.68%
 
$—
Entergy Arkansas
 
March 2019
 
$150 million (c)
 
1.68%
 
$—
Entergy Gulf States Louisiana
 
March 2019
 
$150 million (d)
 
1.43%
 
$—
Entergy Louisiana
 
March 2019
 
$200 million (e)
 
1.43%
 
$—
Entergy Mississippi
 
May 2015
 
$37.5 million (f)
 
1.68%
 
$—
Entergy Mississippi
 
May 2015
 
$35 million (f)
 
1.68%
 
$—
Entergy Mississippi
 
May 2015
 
$20 million (f)
 
1.68%
 
$—
Entergy Mississippi
 
May 2015
 
$10 million (f)
 
1.68%
 
$—
Entergy New Orleans
 
November 2015
 
$25 million
 
1.93%
 
$—
Entergy Texas
 
March 2019
 
$150 million (g)
 
1.68%
 
$—

(a)
The interest rate is the rate as of March 31, 2015 that would most likely apply to outstanding borrowings under the facility.
(b)
Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option. In April 2015, Entergy Arkansas renewed its credit facility through April 2016.
(c)
The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility.  As of March 31, 2015, no letters of credit were outstanding.  

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(d)
The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  As of March 31, 2015, no letters of credit were outstanding.  
(e)
The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  As of March 31, 2015, no letters of credit were outstanding.  
(f)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. Prior to expiration on May 31, 2015, Entergy Mississippi expects to renew all of its credit facilities.
(g)
The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility.  As of March 31, 2015, $1.3 million in letters of credit were outstanding.  

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

In addition, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations related to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2015:
Company
 
Amount of Uncommitted Facility
 
Letter of Credit Fee
 
Letters of Credit
Issued as of
March 31, 2015

Entergy Arkansas
 
$25 million
 
0.70
%
 
$2 million
Entergy Gulf States Louisiana
 
$75 million
 
0.70
%
 
$26 million
Entergy Louisiana
 
$50 million
 
0.70
%
 
$1 million
Entergy Mississippi
 
$40 million
 
0.70
%
 
$9.5 million
Entergy Mississippi
 
$40 million
 
1.50
%
 
$—
Entergy New Orleans
 
$15 million
 
0.75
%
 
$8.5 million
Entergy Texas
 
$50 million
 
0.70
%
 
$11 million

The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits are effective through October 31, 2015.  In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from the money pool and external short term borrowings combined may not exceed the FERC-authorized limits.  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of March 31, 2015 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:
 
Authorized
 
Borrowings
 
(In Millions)
Entergy Arkansas
$250
 
$—
Entergy Gulf States Louisiana
$200
 
$—
Entergy Louisiana
$250
 
$—
Entergy Mississippi
$175
 
$—
Entergy New Orleans
$100
 
$—
Entergy Texas
$200
 
$—
System Energy
$200
 
$—


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Notes to Financial Statements

Entergy Nuclear Vermont Yankee Credit Facilities

In January 2015, Entergy Nuclear Vermont Yankee entered into a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $60 million which expires in January 2018.  Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against this facility. This facility provides working capital to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Entergy Nuclear Vermont Yankee’s nuclear facilities. As of March 31, 2015, no amounts were outstanding under the facility.  The commitment fee is currently 0.25% of the undrawn commitment amount.  The rate as of March 31, 2015 that would most likely apply to outstanding borrowings under the facility was 1.93% on the drawn portion of the facility.

         Also in January 2015, Entergy Nuclear Vermont Yankee entered into an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018.  Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against this facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Entergy Nuclear Vermont Yankee’s nuclear facilities.  As of March 31, 2015, no amounts were outstanding under the facility. The rate as of March 31, 2015 that would most likely apply to outstanding borrowings under the facility was 1.93% on the drawn portion of the facility.

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

See Note 18 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIE).  The nuclear fuel company variable interest entities have credit facilities and also issue commercial paper to finance the acquisition and ownership of nuclear fuel as follows as of March 31, 2015:
Company
 
Expiration
Date
 
Amount
of
Facility
 
Weighted
Average
Interest
Rate on Borrowings (a)
 
Amount
Outstanding as of March 31, 2015
 
 

 
(Dollars in Millions)
Entergy Arkansas VIE
 
June 2016
 
$85
 
1.71%
 
$19.5
Entergy Gulf States Louisiana VIE
 
June 2016
 
$100
 
1.25%
 
$41.0
Entergy Louisiana VIE
 
June 2016
 
$90
 
1.48%
 
$27.3
System Energy VIE
 
June 2016
 
$125
 
n/a
 
$—

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

Amounts outstanding on the Entergy Gulf States Louisiana nuclear fuel company variable interest entity’s credit facility, if any, are included in long-term debt on its balance sheet and commercial paper outstanding for the other nuclear fuel company variable interest entities is classified as a current liability on the respective balance sheets.  The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Louisiana and Entergy Gulf States Louisiana VIEs and 0.125% of the undrawn commitment amount for the Entergy Arkansas and System Energy VIEs.  Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio of 70% or less of its total capitalization.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of March 31, 2015 as follows:
Company
 
Description
 
Amount
Entergy Arkansas VIE
 
3.23% Series J due July 2016
 
$55 million
Entergy Arkansas VIE
 
2.62% Series K due December 2017
 
$60 million
Entergy Arkansas VIE
 
3.65% Series L due July 2021
 
$90 million
Entergy Gulf States Louisiana VIE
 
3.25% Series Q due July 2017
 
$75 million
Entergy Gulf States Louisiana VIE
 
3.38% Series R due August 2020
 
$70 million
Entergy Louisiana VIE
 
3.30% Series F due March 2016
 
$20 million
Entergy Louisiana VIE
 
3.25% Series G due July 2017
 
$25 million
Entergy Louisiana VIE
 
3.92% Series H due February 2021
 
$40 million
System Energy VIE
 
5.33% Series G due April 2015 (a)
 
$60 million
System Energy VIE
 
4.02% Series H due February 2017
 
$50 million
System Energy VIE
 
3.78% Series I due October 2018
 
$85 million

(a)
In April 2015, the System Energy nuclear fuel company variable interest entity redeemed, at maturity, its $60 million of 5.33% Series G Notes.

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.

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 2015 are as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$13,204,417

 

$13,558,411

Entergy Arkansas

$2,671,406

 

$2,567,341

Entergy Gulf States Louisiana

$1,663,879

 

$1,753,434

Entergy Louisiana

$3,340,585

 

$3,477,366

Entergy Mississippi

$1,058,869

 

$1,111,044

Entergy New Orleans

$225,875

 

$229,573

Entergy Texas

$1,456,274

 

$1,611,345

System Energy

$699,429

 

$683,191


(a)
The values exclude lease obligations of $112 million at Entergy Louisiana and $39 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $80 million at Entergy, and include debt due within one year.
(b)
Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2014 were as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 
(In Thousands)
Entergy

$13,399,484

 

$13,607,242

Entergy Arkansas

$2,671,343

 

$2,517,633

Entergy Gulf States Louisiana

$1,622,817

 

$1,743,143

Entergy Louisiana

$3,356,579

 

$3,447,404

Entergy Mississippi

$1,058,838

 

$1,102,741

Entergy New Orleans

$225,866

 

$226,349

Entergy Texas

$1,478,931

 

$1,629,124

System Energy

$710,806

 

$677,475


(a)
The values exclude lease obligations of $128 million at Entergy Louisiana and $51 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $80 million at Entergy, and include debt due within one year.
(b)
Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades.


NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)

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

Stock Options

Entergy granted 456,100 stock options during the first quarter 2015 with a weighted-average fair value of $11.41 per option.  At March 31, 2015, there are 7,413,220 stock options outstanding with a weighted-average exercise price of $84.16.  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the difference in the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of March 31, 2015.  Because Entergy’s stock price at March 31, 2015 is less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of March 31, 2015 is zero. The intrinsic value of “in the money” stock options is $3.3 million as of March 31, 2015.
 
 
 
 
The following table includes financial information for stock options for the three months ended March 31, 2015 and 2014:
 
2015
 
2014
 
(In Millions)
Compensation expense included in Entergy’s net income

$1.1

 

$1.3

Tax benefit recognized in Entergy’s net income

$0.4

 

$0.5

Compensation cost capitalized as part of fixed assets and inventory

$0.2

 

$0.2



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Entergy Corporation and Subsidiaries
Notes to Financial Statements

Other Equity Plans

In January 2015 the Board approved and Entergy granted 292,750 restricted stock awards and 156,017 long-term incentive awards under the 2011 Equity Ownership and Long-term Cash Incentive Plan.  The restricted stock awards were made effective as of January 29, 2015 and were valued at $89.90 per share, which was the closing price of Entergy’s common stock on that date.  One-third of the restricted stock awards will vest upon each anniversary of the grant date.  The long-term incentive awards are granted in the form of performance units, which are equal to the cash value of shares of Entergy Corporation at the end of the performance period, which is the last day of the year.  The performance units were made effective as of January 29, 2015 and were valued at $99.02 per share.  Entergy considers various factors, primarily market conditions, in determining the value of the performance units.  Shares of the restricted stock awards have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period.  Shares of the performance units have the same dividend rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period.
 
 
 
 
The following table includes financial information for other equity plans for the three months ended March 31, 2015 and 2014:
 
2015
 
2014
 
(In Millions)
Compensation expense included in Entergy’s net income

$8.1

 

$7.4

Tax benefit recognized in Entergy’s net income

$3.1

 

$2.9

Compensation cost capitalized as part of fixed assets and inventory

$1.5

 

$1.1



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

Components of Qualified Net Pension Cost

Entergy’s qualified pension cost, including amounts capitalized, for the first quarters of 2015 and 2014, included the following components:
 
2015
 
2014
 
(In Thousands)
Service cost - benefits earned during the period

$43,762

 

$35,109

Interest cost on projected benefit obligation
75,694

 
72,519

Expected return on assets
(98,655
)
 
(90,366
)
Amortization of prior service cost
390

 
400

Amortization of loss
58,981

 
36,274

Special termination benefit
76

 

Net pension costs

$80,248

 

$53,936

    
 
 
 
 


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the first quarters of 2015 and 2014, included the following components:
2015
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
during the period
 

$6,661

 

$3,821

 

$4,778

 

$1,982

 

$849

 

$1,645

 

$1,957

Interest cost on projected
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit obligation
 
15,471

 
7,428

 
9,939

 
4,502

 
2,108

 
4,354

 
3,493

Expected return on assets
 
(20,026
)
 
(10,160
)
 
(12,541
)
 
(6,105
)
 
(2,725
)
 
(6,222
)
 
(4,568
)
Amortization of loss
 
13,564

 
5,775

 
9,176

 
3,724

 
2,013

 
3,238

 
3,264

Net pension cost
 

$15,670

 

$6,864

 

$11,352

 

$4,103

 

$2,245

 

$3,015

 

$4,146

2014
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
during the period
 

$5,023

 

$2,881

 

$3,546

 

$1,523

 

$666

 

$1,285

 

$1,446

Interest cost on projected
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit obligation
 
14,884

 
7,278

 
9,467

 
4,318

 
2,041

 
4,437

 
3,390

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

 
3,981

 
6,131

 
2,354

 
1,449

 
2,339

 
2,375

Net pension cost
 

$10,591

 

$4,652

 

$7,695

 

$2,497

 

$1,651

 

$2,130

 

$3,056

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Qualified Net Pension Cost

Entergy recognized $4.5 million and $10 million in pension cost for its non-qualified pension plans in the first quarters of 2015 and 2014, respectively. Reflected in the pension cost for non-qualified pension plans in the first quarter of 2014 is a $5.5 million settlement charge related to the payment of lump sum benefits out of the plan.

The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the first quarters of 2015 and 2014:
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
(In Thousands)
Non-qualified pension cost
 first quarter 2015

$113

 

$65

 

$3

 

$59

 

$16

 

$149

Non-qualified pension cost
 first quarter 2014

$161

 

$33

 

$1

 

$48

 

$23

 

$125

 
 
 
 
 
 
 
 
 
 
 
 
Reflected in Entergy Arkansas’s and Entergy Texas’s non-qualified pension costs in the first quarter of 2014 are $51 thousand and $6 thousand, respectively, in settlement charges related to the payment of lump sum benefits out of the plan.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

Components of Net Other Postretirement Benefit Cost

Entergy’s other postretirement benefit cost, including amounts capitalized, for the first quarters of 2015 and 2014, included the following components:
 
2015
 
2014
 
(In Thousands)
Service cost - benefits earned during the period

$11,326

 

$10,873

Interest cost on accumulated postretirement benefit obligation (APBO)
17,984

 
17,960

Expected return on assets
(11,344
)
 
(11,197
)
Amortization of prior service credit
(9,320
)
 
(7,898
)
Amortization of loss
7,893

 
2,786

Net other postretirement benefit cost

$16,539

 

$12,524

 
 
 
 
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the first quarters of 2015 and 2014, included the following components:
2015
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
during the period
 

$1,739

 

$1,247

 

$1,227

 

$507

 

$205

 

$500

 

$470

Interest cost on APBO
 
3,130

 
2,062

 
2,016

 
859

 
652

 
1,342

 
628

Expected return on assets
 
(4,798
)
 

 

 
(1,542
)
 
(1,201
)
 
(2,588
)
 
(911
)
Amortization of prior service
 
 
 
 
 
 
 
 
 
 
 
 
 
 
credit
 
(610
)
 
(1,022
)
 
(845
)
 
(229
)
 
(177
)
 
(681
)
 
(366
)
Amortization of loss
 
1,339

 
977

 
803

 
215

 
118

 
685

 
300

Net other postretirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit cost
 

$800

 

$3,264

 

$3,201

 

($190
)
 

($403
)
 

($742
)
 

$121

2014
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
 
(In Thousands)
Service cost - benefits earned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
during the period
 

$1,489

 

$1,224

 

$1,130

 

$475

 

$217

 

$595

 

$515

Interest cost on APBO
 
3,065

 
2,095

 
2,066

 
914

 
701

 
1,413

 
653

Expected return on assets
 
(4,784
)
 

 

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

 
303

 
378

 
37

 
14

 
200

 
111

Net other postretirement
 
 
 
 
 
 
 
 
 
 
 
 
 
 
benefit cost
 

($523
)
 

$3,063

 

$2,730

 

($246
)
 

($364
)
 

($707
)
 

$141

    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

Reclassification out of Accumulated Other Comprehensive Income

Entergy and the Registrant Subsidiaries reclassified the following costs out of accumulated other comprehensive income (before taxes and including amounts capitalized) for the first quarters of 2015 and 2014:
2015
 
Qualified
Pension
Costs
 
Other
Postretirement
Costs
 
Non-Qualified
Pension Costs
 
Total
 
 
(In Thousands)
 
 
Entergy
 
 
 
 
 
 
 
 
Amortization of prior service (cost)/credit
 

($389
)
 

$6,482

 

($107
)
 

$5,986

Amortization of loss
 
(12,627
)
 
(4,409
)
 
(552
)
 
(17,588
)
 
 

($13,016
)
 

$2,073

 

($659
)
 

($11,602
)
Entergy Gulf States Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service credit
 

$—

 

$1,022

 

$—

 

$1,022

Amortization of loss
 
(751
)
 
(977
)
 
(5
)
 
(1,733
)
 
 

($751
)
 

$45

 

($5
)
 

($711
)
Entergy Louisiana
 
 
 
 
 
 
 
 
Amortization of prior service credit
 

$—

 

$845

 

$—

 

$845

Amortization of loss
 

 
(802
)
 

 
(802
)
 
 

$—

 

$43

 

$—

 

$43


2014

Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


Entergy








Amortization of prior service (cost)/credit


($389
)


$5,571



($104
)


$5,078

Amortization of loss

(6,734
)

(1,673
)

(574
)

(8,981
)
Settlement loss





(1,162
)

(1,162
)



($7,123
)


$3,898



($1,840
)


($5,065
)
Entergy Gulf States Louisiana








Amortization of prior service credit


$—



$559



$—



$559

Amortization of loss

(478
)

(303
)

(1
)

(782
)



($478
)


$256



($1
)


($223
)
Entergy Louisiana








Amortization of prior service credit


$—



$844



$—



$844

Amortization of loss



(378
)



(378
)



$—



$466



$—



$466

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Notes to Financial Statements

Employer Contributions

Based on current assumptions, Entergy expects to contribute $396 million to its qualified pension plans in 2015.  As of March 31, 2015, Entergy had contributed $78.5 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 2015:
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
(In Thousands)
Expected 2015 pension contributions

$92,458

 

$32,471

 

$56,986

 

$22,473

 

$10,918

 

$17,167

 

$20,796

Pension contributions made through March 2015

$19,093

 

$5,959

 

$11,073

 

$4,385

 

$2,101

 

$3,279

 

$4,272

Remaining estimated pension contributions to be made in 2015

$73,365

 

$26,512

 

$45,913

 

$18,088

 

$8,817

 

$13,888

 

$16,524



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

Entergy Corporation

Entergy’s reportable segments as of March 31, 2015 are Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity.    
 
 
 
 
 
 
 
 
 
 
 
Entergy’s segment financial information for the three months ended March 31, 2015 and 2014 is as follows:
 
 
Utility
 
Entergy
Wholesale
Commodities*
 
All Other
 
Eliminations
 
Entergy
 
 
(In Thousands)
2015
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,277,510

 

$642,590

 

$—

 

($10
)
 

$2,920,090

Income taxes
 

$91,251

 

$70,190

 

($10,970
)
 

$—

 

$150,471

Consolidated net income (loss)
 

$227,750

 

$123,432

 

($16,354
)
 

($31,899
)
 

$302,929

2014
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,304,704

 

$912,122

 

$761

 

($8,744
)
 

$3,208,843

Income taxes
 

$115,064

 

$118,877

 

($16,975
)
 

$—

 

$216,966

Consolidated net income (loss)
 

$205,440

 

$242,470

 

($15,462
)
 

($26,395
)
 

$406,053

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

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Notes to Financial Statements

Registrant Subsidiaries

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


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

Market Risk

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

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

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets.  In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk.  When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.

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

Derivatives

Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions.  Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements.  Financially-settled cash flow hedges can include

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Notes to Financial Statements

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 that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at March 31, 2015 is approximately 3 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 87% for the remainder of 2015, of which approximately 63% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2015 is 27 TWh.

Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidity 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 collateral to secure its obligations when the current market prices exceed the contracted power prices.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guarantee.  As of March 31, 2015, derivative contracts with two counterparties were in a liability position (approximately $14 million total). In addition to the corporate guarantee, $1 million in cash collateral was required to be posted. As of March 31, 2014, derivative contracts with nine counterparties were in a liability position (approximately $98 million total) and, in addition to the corporate guarantee, $64 million in cash collateral was required to be posted. If the Entergy Corporation credit rating falls below investment grade, the effect of the corporate guarantee is typically ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures.  These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities.  All benefits or costs of the program are recorded in fuel costs.  The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans.  The total volume of natural gas swaps outstanding as of March 31, 2015 is 44,080,000 MMBtu for Entergy, 16,610,000 MMBtu for Entergy Gulf States Louisiana, 20,190,000 MMBtu for Entergy Louisiana, and 7,280,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.

During the second quarter 2014, Entergy participated in the annual FTR auction process for the MISO planning year of June 1, 2014 through May 31, 2015. FTRs are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records FTRs at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on FTRs held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on FTRs. The total volume of FTRs outstanding as of March 31, 2015 is 18,332 GWh for Entergy, including 4,010 GWh for Entergy Arkansas, 4,060 GWh for Entergy Gulf States Louisiana, 4,358 GWh for Entergy Louisiana, 2,031 GWh for Entergy Mississippi, 1,478 GWh for Entergy

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New Orleans, and 2,276 GWh for Entergy Texas. Credit support for FTRs held by the Utility operating companies is covered by cash or letters of credit issued by each Utility operating company as required by MISO. Credit support for FTRs held by Entergy Wholesale Commodities is covered by cash. As of March 31, 2015, letters of credit posted with MISO covered the FTR exposure for Entergy Texas. No cash collateral was required to be posted for FTR exposure for the Utility operating companies or Entergy Wholesale Commodities.

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31, 2015 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting arrangements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Business
 
 
 
 
(In Millions)
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$118
 
($47)
 
$71
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$39
 
($8)
 
$31
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities
(current portion)
 
$13
 
($13)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$8
 
($8)
 
$—
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$67
 
($10)
 
$57
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$2
 
($2)
 
$—
 
Entergy Wholesale Commodities
FTRs
 
Prepayments and other
 
$15
 
$—
 
$15
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities(current portion)
 
$57
 
($43)
 
$14
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$2
 
($2)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$21
 
$—
 
$21
 
Utility


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Notes to Financial Statements

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2014 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting arrangements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Business
 
 
 
 
(In Millions)
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$149
 
($53)
 
$96
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$48
 
$—
 
$48
 
Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$24
 
($24)
 
$—
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$97
 
($25)
 
$72
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$9
 
($8)
 
$1
 
Entergy Wholesale Commodities
FTRs
 
Prepayments and other
 
$50
 
($3)
 
$47
 
Utility and Entergy Wholesale Commodities
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$57
 
($55)
 
$2
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$8
 
($8)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$20
 
$—
 
$20
 
Utility

(a)
Represents the gross amounts of recognized assets/liabilities
(b)
Represents the netting of fair value balances with the same counterparty
(c)
Represents the net amounts of assets /liabilities presented on the Entergy Consolidated Balance Sheets
(d)
Excludes cash collateral in the amounts of $1 million posted as of March 31, 2015 and $25 million held as of December 31, 2014, respectively
 
 
 
 
 
 
 

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The effect of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended March 31, 2015 and 2014 are as follows:
Instrument
 
Amount of loss recognized in other
comprehensive income
 
Income Statement location
 
Amount of gain (loss)
 reclassified from
AOCI into income (a)

 
(In Millions)
 
 
 
(In Millions)
2015
 
 
 
 
 
 
Electricity swaps and options
 
($32)
 
Competitive businesses operating revenues
 
$14
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Electricity swaps and options
 
($174)
 
Competitive businesses operating revenues
 
($195)

(a)    Before taxes (benefit) of $5 million and ($68) million, respectively

At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended March 31, 2015 and 2014 was ($1) million and $1 million, respectively.

Based on market prices as of March 31, 2015, unrealized gains (losses) recorded in AOCI on cash flow hedges relating to power sales totaled $111 million of net unrealized gains (losses).  Approximately $88 million is expected to be reclassified from AOCI to operating revenues in the next twelve months.  The actual amount reclassified from AOCI, however, could vary due to future changes in market prices.    

Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge 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.

 
 
 
 
 
 
 

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The effect of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended March 31, 2015 and 2014 is as follows:
Instrument

Amount of gain recognized in AOCI

Income Statement
location

Amount of gain (loss)
recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2015
 

 
 
 
 
Natural gas swaps
 
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($19)
FTRs


Purchased power expense
(b)
$33
Electricity swaps and options de-designated as hedged items
 
$4
 
Competitive business operating revenues
 
($34)
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Natural gas swaps
 
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
$17
FTRs
 
 
Purchased power expense
(b)
$46
Electricity swaps and options de-designated as hedged items
 
$22
 
Competitive business operating revenues
 
$21

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


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Notes to Financial Statements

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of March 31, 2015 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
FTRs
 
Prepayments and other
 
$0.6
 
Entergy Arkansas
FTRs
 
Prepayments and other
 
$5.0
 
Entergy Gulf States Louisiana
FTRs
 
Prepayments and other
 
$3.8
 
Entergy Louisiana
FTRs
 
Prepayments and other
 
$0.9
 
Entergy Mississippi
FTRs
 
Prepayments and other
 
$1.4
 
Entergy New Orleans
FTRs
 
Prepayments and other
 
$3.4
 
Entergy Texas
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Natural gas swaps
 
Other current liabilities
 
$7.8
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Other current liabilities
 
$9.7
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$3.4
 
Entergy Mississippi

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2014 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
Assets:
 
 
 
 
 
 
FTRs
 
Prepayments and other
 
$0.7
 
Entergy Arkansas
FTRs
 
Prepayments and other
 
$14.4
 
Entergy Gulf States Louisiana
FTRs
 
Prepayments and other
 
$11.1
 
Entergy Louisiana
FTRs
 
Prepayments and other
 
$3.4
 
Entergy Mississippi
FTRs
 
Prepayments and other
 
$4.1
 
Entergy New Orleans
FTRs
 
Prepayments and other
 
$12.3
 
Entergy Texas
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Natural gas swaps
 
Other current liabilities
 
$8.2
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Other current liabilities
 
$7.6
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$2.8
 
Entergy Mississippi
Natural gas swaps
 
Other current liabilities
 
$0.9
 
Entergy New Orleans

(a)
No cash collateral was required to be posted as of March 31, 2015 and December 31, 2014, respectively.

 
 
 
 
 
 
 




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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, 2015 and 2014 are as follows:
Instrument

Income Statement Location

Amount of gain
(loss) recorded
in the income statement

Registrant
 
 
 
 
(In Millions)
 
 
2015
 
 
 

 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($7.9)
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($8.1)
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($3.0)
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.5)
 
Entergy New Orleans
 
 
 
 
 
 
 
FTRs
 
Purchased power expense
 
$15.1
 
Entergy Arkansas
FTRs
 
Purchased power expense
 
$7.4
 
Entergy Gulf States Louisiana
FTRs
 
Purchased power expense
 
$7.1
 
Entergy Louisiana
FTRs
 
Purchased power expense
 
$3.3
 
Entergy Mississippi
FTRs
 
Purchased power expense
 
$1.6
 
Entergy New Orleans
FTRs
 
Purchased power expense
 
($1.4)
 
Entergy Texas
 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$6.8
 
Entergy Gulf States Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$8.0
 
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$1.6
 
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$0.7
 
Entergy New Orleans
 
 
 
 
 
 
 
FTRs
 
Purchased power expense
 
$5.1
 
Entergy Arkansas
FTRs
 
Purchased power expense
 
$9.1
 
Entergy Gulf States Louisiana
FTRs
 
Purchased power expense
 
$8.0
 
Entergy Louisiana
FTRs
 
Purchased power expense
 
$7.8
 
Entergy Mississippi
FTRs
 
Purchased power expense
 
$2.9
 
Entergy New Orleans
FTRs
 
Purchased power expense
 
$12.8
 
Entergy Texas

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

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Notes to Financial Statements

the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.

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

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

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

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

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

Level 2 consists primarily of individually-owned debt instruments or shares in common trusts.  Common trust funds are stated at estimated fair value based on the fair market value of the underlying investments.

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

The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Entergy Wholesale Commodities Risk Control group and the Entergy Wholesale Commodities Accounting Policy and External Reporting group.  The primary functions of the Entergy Wholesale Commodities Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system.  The Risk Control group is also

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Notes to Financial Statements

responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Entergy Wholesale Commodities Accounting Policy and External Reporting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Entergy Wholesale Commodities Risk Control group reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting Policy and External Reporting group reports to the Vice President, Accounting Policy and External Reporting.

The amounts reflected as the fair value of 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 US Treasury rates for a risk-free return rate.  As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.  

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

The values of FTRs are based on unobservable inputs, including estimates of future congestion costs in MISO between applicable generation and load pricing nodes based on prices published by MISO.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Entergy Wholesale Commodities Risk Control group for the unregulated business and by the System Planning and Operations Risk Control group for the Utility operating companies.  Entergy’s Accounting Policy group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The System Planning and Operations Risk Control group reports to the Vice President and Treasurer.  The Accounting Policy group reports to the Vice President, Accounting Policy and External Reporting.



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Notes to Financial Statements

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2015 and December 31, 2014.  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$1,113

 

$—

 

$—

 

$1,113

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
485

 
2,842

(b)

 
3,327

Debt securities
 
877

 
1,249

 

 
2,126

Power contracts
 

 

 
159

 
159

Securitization recovery trust account
 
45

 

 

 
45

Escrow accounts
 
364

 

 

 
364

FTRs
 

 

 
15

 
15

 
 

$2,884

 

$4,091

 

$174

 

$7,149

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$14

 

$14

Gas hedge contracts
 
21

 



 
21

 
 

$21

 

$—



$14

 

$35


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

$1,291

 

$—

 

$—

 

$1,291

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
452

 
2,834

(b)

 
3,286

Debt securities
 
880

 
1,205

 

 
2,085

Power contracts
 

 

 
217

 
217

Securitization recovery trust account
 
44

 

 

 
44

Escrow accounts
 
362

 

 

 
362

FTRs
 

 

 
47

 
47

 
 

$3,029

 

$4,039

 

$264

 

$7,332

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$2

 

$2

Gas hedge contracts
 
20

 

 

 
20

 
 

$20

 

$—

 

$2

 

$22


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


 
 
 
 
 
 


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Notes to Financial Statements

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2015 and 2014:
 
2015
 
2014
 
Power Contracts
 
FTRs
 
Power Contracts
 
FTRs

(In Millions)
Balance as of January 1,

$215

 

$47

 

($133
)
 

$34

Realized gains (losses) included in earnings
52

 

 
5

 

Unrealized gains (losses) included in earnings
(87
)
 

 
16

 

Unrealized gains (losses) included in OCI
(26
)
 

 
(162
)
 

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

 
1

 

 
37

Purchases
10

 

 
5

 

Settlements
(19
)
 
(33
)
 
183

 
(46
)
Balance as of March 31,

$145

 

$15

 

($86
)
 

$25


The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of March 31, 2015:
Transaction Type
 
Fair Value
as of
March 31,
2015
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
Effect on
Fair Value
 
 
(In Millions)
 
 
 
 
 
 
(In Millions)
Electricity swaps
 
$109
 
Unit contingent discount
 
+/-
3%
 
$7
Electricity options
 
$36
 
Implied volatility
 
+/-
65%
 
$32

The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant
Unobservable
Input
 
Transaction Type
 
Position
 
Change to Input
 
Effect on
Fair Value
Unit contingent discount
 
Electricity swaps
 
Sell
 
Increase (Decrease)
 
Decrease (Increase)
Implied volatility
 
Electricity options
 
Sell
 
Increase (Decrease)
 
Increase (Decrease)
Implied volatility
 
Electricity options
 
Buy
 
Increase (Decrease)
 
Increase (Decrease)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of March 31, 2015 and December 31, 2014.  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.


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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Arkansas
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$112.3

 

$—

 

$—

 

$112.3

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
12.4

 
474.1

(b)

 
486.5

Debt securities
 
93.8

 
202.8

 

 
296.6

Securitization recovery trust account
 
8.1

 

 

 
8.1

Escrow accounts
 
12.2

 

 

 
12.2

FTRs
 

 

 
0.6

 
0.6

 
 

$238.8

 

$676.9

 

$0.6

 

$916.3


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

$208.0

 

$—

 

$—

 

$208.0

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
7.2

 
480.1

(b)

 
487.3

Debt securities
 
72.2

 
210.4

 

 
282.6

Securitization recovery trust account
 
4.1

 

 

 
4.1

Escrow accounts
 
12.2

 

 

 
12.2

FTRs
 

 

 
0.7

 
0.7

 
 

$303.7

 

$690.5

 

$0.7

 

$994.9


Entergy Gulf States Louisiana
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$114.8

 

$—

 

$—

 

$114.8

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
15.9

 
391.4

(b)

 
407.3

Debt securities
 
81.0

 
160.4

 

 
241.4

Escrow accounts
 
90.1

 

 

 
90.1

FTRs
 

 

 
5.0

 
5.0

 
 

$301.8

 

$551.8

 

$5.0

 

$858.6

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
      Gas hedge contracts
 

$7.8

 

$—

 

$—

 

$7.8



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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

$109.6

 

$—

 

$—

 

$109.6

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
10.5

 
385.4

(b)

 
395.9

Debt securities
 
81.9

 
159.9

 

 
241.8

Escrow accounts
 
90.1

 

 

 
90.1

FTRs
 

 

 
14.4

 
14.4

 
 

$292.1

 

$545.3

 

$14.4

 

$851.8

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$8.2

 

$—

 

$—

 

$8.2


Entergy Louisiana
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$167.5

 

$—

 

$—

 

$167.5

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
6.5

 
238.8

(b)

 
245.3

Debt securities
 
69.5

 
77.0

 

 
146.5

Escrow accounts
 
200.1

 

 

 
200.1

Securitization recovery trust account
 
8.5

 

 

 
8.5

FTRs
 

 

 
3.8

 
3.8

 
 

$452.1

 

$315.8

 

$3.8

 

$771.7

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
      Gas hedge contracts
 

$9.7

 

$—

 

$—

 

$9.7


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

$157.1

 

$—

 

$—

 

$157.1

Decommissioning trust funds (a):
 
 

 
 

 
 

 
 

Equity securities
 
4.8

 
234.8

(b)

 
239.6

Debt securities
 
68.7

 
75.3

 

 
144.0

Escrow accounts
 
200.1

 

 

 
200.1

Securitization recovery trust account
 
3.1

 

 

 
3.1

FTRs
 

 

 
11.1

 
11.1

 
 

$433.8

 

$310.1

 

$11.1

 

$755.0

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$7.6

 

$—

 

$—

 

$7.6



58

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Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Mississippi
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$77.6

 

$—

 

$—

 

$77.6

Escrow accounts
 
41.8

 

 

 
41.8

FTRs
 

 

 
0.9

 
0.9

 
 

$119.4

 

$—

 

$0.9

 

$120.3

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$3.4

 

$—

 

$—

 

$3.4


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

$60.4

 

$—

 

$—

 

$60.4

Escrow accounts
 
41.8

 

 

 
41.8

FTRs
 

 

 
3.4

 
3.4

 
 

$102.2

 

$—

 

$3.4

 

$105.6

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$2.8

 

$—

 

$—

 

$2.8


Entergy New Orleans
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$21.0

 

$—

 

$—

 

$21.0

Escrow accounts
 
19.8

 

 

 
19.8

FTRs
 

 

 
1.4

 
1.4

 
 

$40.8

 

$—

 

$1.4

 

$42.2


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

$41.4

 

$—

 

$—

 

$41.4

Escrow accounts
 
18.0

 

 

 
18.0

FTRs
 

 

 
4.1

 
4.1

 
 

$59.4

 

$—

 

$4.1

 

$63.5

 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.9

 

$—

 

$—

 

$0.9



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Entergy Corporation and Subsidiaries
Notes to Financial Statements

Entergy Texas
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$13.6

 

$—

 

$—

 

$13.6

Securitization recovery trust account
 
28.1

 

 

 
28.1

FTRs
 

 

 
3.4

 
3.4

 
 

$41.7

 

$—

 

$3.4

 

$45.1


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

$28.7

 

$—

 

$—

 

$28.7

Securitization recovery trust account
 
37.2

 

 

 
37.2

FTRs
 

 

 
12.3

 
12.3

 
 

$65.9

 

$—

 

$12.3

 

$78.2


System Energy
2015
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$171.5

 

$—

 

$—

 

$171.5

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
2.1

 
429.8

(b)

 
431.9

Debt securities
 
200.7

 
63.6

 

 
264.3

 
 

$374.3

 

$493.4

 

$—

 

$867.7


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

$222.4

 

$—

 

$—

 

$222.4

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
2.0

 
422.5

(b)

 
424.5

Debt securities
 
194.2

 
61.1

 

 
255.3

 
 

$418.6

 

$483.6

 

$—

 

$902.2


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


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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2015.

Entergy
Arkansas

Entergy
Gulf States
Louisiana

Entergy
Louisiana

Entergy
Mississippi

Entergy
New
Orleans

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

$0.7



$14.4



$11.1



$3.4



$4.1



$12.3

Unrealized gains (losses) included as a regulatory liability/asset
15.0


(2.0
)

(0.2
)

0.8


(1.1
)

(10.3
)
Settlements
(15.1
)

(7.4
)

(7.1
)

(3.3
)

(1.6
)

1.4

Balance as of March 31,

$0.6



$5.0



$3.8



$0.9



$1.4



$3.4


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, 2014.
 
Entergy
Arkansas
 
Entergy
Gulf States
Louisiana
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 
(In Millions)
Balance as of January 1,

$—

 

$6.7

 

$5.7

 

$1.0

 

$2.0

 

$18.4

Unrealized gains included as a regulatory liability/asset
7.8

 
7.7

 
5.3

 
11.6

 
2.0

 
1.8

Settlements
(5.1
)
 
(9.0
)
 
(8.0
)
 
(7.8
)
 
(3.0
)
 
(12.8
)
Balance as of March 31,

$2.7

 

$5.4

 

$3.0

 

$4.8

 

$1.0

 

$7.4



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

Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick).  The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.

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

61

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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The securities held as of March 31, 2015 and December 31, 2014 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2015
 
 
 
 
 
 
Equity Securities
 

$3,327

 

$1,525

 

$1

Debt Securities
 
2,126

 
88

 
4

Total
 

$5,453

 

$1,613

 

$5

 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2014
 
 
 
 
 
 
Equity Securities
 

$3,286

 

$1,513

 

$1

Debt Securities
 
2,085

 
76

 
6

Total
 

$5,371

 

$1,589

 

$7


Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $400 million and $396 million as of March 31, 2015 and December 31, 2014, respectively.  The amortized cost of debt securities was $2,054 million as of March 31, 2015 and $2,019 million as of December 31, 2014.  As of March 31, 2015, the debt securities have an average coupon rate of approximately 3.33%, an average duration of approximately 5.7 years, and an average maturity of approximately 8.75 years.  The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2015:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$13

 

$1

 

$213

 

$2

More than 12 months

 

 
80

 
2

Total

$13

 

$1

 

$293

 

$4



62

Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$9

 

$1

 

$277

 

$2

More than 12 months

 

 
163

 
4

Total

$9

 

$1

 

$440

 

$6


The fair value of debt securities, summarized by contractual maturities, as of March 31, 2015 and December 31, 2014 are as follows:
 
2015
 
2014
 
(In Millions)
less than 1 year

$70

 

$94

1 year - 5 years
801

 
783

5 years - 10 years
692

 
681

10 years - 15 years
176

 
173

15 years - 20 years
71

 
79

20 years+
316

 
275

Total

$2,126

 

$2,085


During the three months ended March 31, 2015 and 2014, proceeds from the dispositions of securities amounted to $493 million and $537 million, respectively.  During the three months ended March 31, 2015 and 2014, gross gains of $26 million and $6 million, respectively, and gross losses of $2 million and $2 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

Entergy Arkansas

Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2015 and December 31, 2014 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2015
 
 
 
 
 
 
Equity Securities
 

$486.5

 

$249.7

 

$—

Debt Securities
 
296.6

 
8.2

 
0.6

Total
 

$783.1

 

$257.9

 

$0.6

 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Equity Securities
 

$487.3

 

$248.9

 

$—

Debt Securities
 
282.6

 
6.2

 
1.1

Total
 

$769.9

 

$255.1

 

$1.1



63

Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The amortized cost of debt securities was $290 million as of March 31, 2015 and $277.4 million as of December 31, 2014.  As of March 31, 2015, the debt securities have an average coupon rate of approximately 2.43%, an average duration of approximately 4.9 years, and an average maturity of approximately 5.64 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2015:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$1.0

 

$—

 

$29.6

 

$0.3

More than 12 months

 

 
19.6

 
0.3

Total

$1.0

 

$—

 

$49.2

 

$0.6


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.1

 

$—

 

$56.5

 

$0.3

More than 12 months

 

 
34.8

 
0.8

Total

$0.1

 

$—

 

$91.3

 

$1.1


The fair value of debt securities, summarized by contractual maturities, as of March 31, 2015 and December 31, 2014 are as follows:
 
2015
 
2014
 
(In Millions)
less than 1 year

$16.7

 

$14.9

1 year - 5 years
128.0

 
127.3

5 years - 10 years
136.0

 
128.2

10 years - 15 years
3.1

 
1.7

15 years - 20 years
1.0

 
1.0

20 years+
11.8

 
9.5

Total

$296.6

 

$282.6


During the three months ended March 31, 2015 and 2014, proceeds from the dispositions of securities amounted to $81.9 million and $45.3 million, respectively.  During the three months ended March 31, 2015 and 2014, gross gains of $5.1 million and $0.1 million, respectively, and gross losses of $1.3 thousand and $0.2 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.

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Notes to Financial Statements

Entergy Gulf States Louisiana

Entergy Gulf States Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2015 and December 31, 2014 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2015
 
 
 
 
 
 
Equity Securities
 

$407.3

 

$180.6

 

$—

Debt Securities
 
241.4

 
11.9

 
0.2

Total
 

$648.7

 

$192.5

 

$0.2

 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Equity Securities
 

$395.9

 

$177.6

 

$—

Debt Securities
 
241.8

 
11.9

 
0.3

Total
 

$637.7

 

$189.5

 

$0.3


The amortized cost of debt securities was $232.8 million as of March 31, 2015 and $231.5 million as of December 31, 2014.  As of March 31, 2015, the debt securities have an average coupon rate of approximately 4.40%, an average duration of approximately 5.72 years, and an average maturity of approximately 11.1 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2015:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$1.7

 

$—

 

$18.1

 

$0.2

More than 12 months

 

 
2.1

 

Total

$1.7

 

$—

 

$20.2

 

$0.2


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.1

 

$—

 

$14.0

 

$0.1

More than 12 months

 

 
15.0

 
0.2

Total

$0.1

 

$—

 

$29.0

 

$0.3


65

Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value of debt securities, summarized by contractual maturities, as of March 31, 2015 and December 31, 2014 are as follows:
 
2015
 
2014
 
(In Millions)
less than 1 year

$7.2

 

$6.4

1 year - 5 years
62.1

 
59.8

5 years - 10 years
63.1

 
68.3

10 years - 15 years
43.2

 
43.6

15 years - 20 years
14.0

 
14.8

20 years+
51.8

 
48.9

Total

$241.4

 

$241.8


During the three months ended March 31, 2015 and 2014, proceeds from the dispositions of securities amounted to $21.7 million and $30.3 million, respectively.  During the three months ended March 31, 2015 and 2014, gross gains of $1.3 million and $0.2 million, respectively, and gross losses of $0.7 thousand and $0.2 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Louisiana

Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2015 and December 31, 2014 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2015
 
 
 
 
 
 
Equity Securities
 

$245.3

 

$119.1

 

$—

Debt Securities
 
146.5

 
8.2

 
0.2

Total
 

$391.8

 

$127.3

 

$0.2

 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Equity Securities
 

$239.6

 

$116.7

 

$—

Debt Securities
 
144.0

 
6.9

 
0.4

Total
 

$383.6

 

$123.6

 

$0.4


The amortized cost of debt securities was $138.5 million as of March 31, 2015 and $137.9 million as of December 31, 2014.  As of March 31, 2015, the debt securities have an average coupon rate of approximately 2.96%, an average duration of approximately 5.31 years, and an average maturity of approximately 8.21 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2015:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.6

 

$—

 

$10.5

 

$0.1

More than 12 months

 

 
4.2

 
0.1

Total

$0.6

 

$—

 

$14.7

 

$0.2


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.1

 

$—

 

$19.1

 

$0.1

More than 12 months

 

 
12.1

 
0.3

Total

$0.1

 

$—

 

$31.2

 

$0.4


The fair value of debt securities, summarized by contractual maturities, as of March 31, 2015 and December 31, 2014 are as follows:
 
2015
 
2014
 
(In Millions)
less than 1 year

$4.3

 

$5.6

1 year - 5 years
60.2

 
58.2

5 years - 10 years
45.1

 
44.2

10 years - 15 years
7.5

 
7.3

15 years - 20 years
10.0

 
9.4

20 years+
19.4

 
19.3

Total

$146.5

 

$144.0


During the three months ended March 31, 2015 and 2014, proceeds from the dispositions of securities amounted to $3.9 million and $18.1 million, respectively.  During the three months ended March 31, 2015 and 2014, gross gains of $16.8 thousand and $0.2 million, respectively, and gross losses of $4.9 thousand and $3.9 thousand, respectively, were reclassified out of other regulatory liabilities/assets into earnings.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

System Energy

System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of March 31, 2015 and December 31, 2014 are summarized as follows:
 
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
 
(In Millions)
2015
 
 
 
 
 
 
Equity Securities
 

$431.9

 

$192.3

 

$—

Debt Securities
 
264.3

 
8.1

 
0.1

Total
 

$696.2

 

$200.4

 

$0.1

 
 
 
 
 
 
 
2014
 
 
 
 
 
 
Equity Securities
 

$424.5

 

$188.0

 

$—

Debt Securities
 
255.3

 
5.9

 
0.3

Total
 

$679.8

 

$193.9

 

$0.3


The amortized cost of debt securities was $256.6 million as of March 31, 2015 and $251 million as of December 31, 2014.  As of March 31, 2015, the debt securities have an average coupon rate of approximately 2.25%, an average duration of approximately 4.54 years, and an average maturity of approximately 6.12 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2015:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$1.0

 

$—

 

$20.5

 

$—

More than 12 months

 

 
2.6

 
0.1

Total

$1.0

 

$—

 

$23.1

 

$0.1


The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2014:
 
Equity Securities
 
Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(In Millions)
Less than 12 months

$0.1

 

$—

 

$51.6

 

$0.2

More than 12 months

 

 
6.5

 
0.1

Total

$0.1

 

$—

 

$58.1

 

$0.3



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Entergy Corporation and Subsidiaries
Notes to Financial Statements

The fair value of debt securities, summarized by contractual maturities, as of March 31, 2015 and December 31, 2014 are as follows:
 
2015
 
2014
 
(In Millions)
less than 1 year

$12.9

 

$33.5

1 year - 5 years
163.8

 
139.7

5 years - 10 years
54.5

 
53.5

10 years - 15 years
3.8

 
3.4

15 years - 20 years
1.7

 
3.2

20 years+
27.6

 
22.0

Total

$264.3

 

$255.3


During the three months ended March 31, 2015 and 2014, proceeds from the dispositions of securities amounted to $78.4 million and $130.3 million, respectively.  During the three months ended March 31, 2015 and 2014, gross gains of $0.4 million and $1.0 million, respectively, and gross losses of $0.1 million and $0.3 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

Other-than-temporary impairments and unrealized gains and losses

Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy evaluate unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three months ended March 31, 2015 and 2014.  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time.  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Entergy did not record material charges to other income in the three months ended March 31, 2015 and 2014, respectively, resulting from the recognition of the other-than-temporary impairment of certain equity securities held in its decommissioning trust funds.


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

See “Income Tax Litigation”, “Income Tax Audits”, and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax proceedings, income tax audits, and other income tax matters involving Entergy. Following is an update to that disclosure.

The IRS finalized tax and interest computations from the 2006-2007 audit in the first quarter 2015 that resulted in a reduction in Entergy's income tax expense of approximately $20 million, including decreases in income tax expense of approximately $4 million for Entergy Arkansas, $5 million for Entergy Gulf States Louisiana, $6 million for Entergy Louisiana, and $1 million for System Energy.



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Entergy Corporation and Subsidiaries
Notes to Financial Statements

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

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at March 31, 2015 are $147 million for Entergy, $31.5 million for Entergy Arkansas, $26.9 million for Entergy Gulf States Louisiana, $17 million for Entergy Louisiana, $8.3 million for Entergy Mississippi, $0.1 million for Entergy New Orleans, $9.1 million for Entergy Texas, and $10.3 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2014 are $209 million for Entergy, $37.3 million for Entergy Arkansas, $23.4 million for Entergy Gulf States Louisiana, $48 million for Entergy Louisiana, $7.8 million for Entergy Mississippi, $0.9 million for Entergy New Orleans, $24.1 million for Entergy Texas, and $7.7 million for System Energy.


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

See Note 18 to the financial statements in the Form 10-K for a discussion of variable interest entities.  See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facilities and commercial paper borrowings and long-term debt.

Entergy Louisiana and System Energy are each considered to hold a variable interest in the lessors from which they lease, respectively, undivided interests representing approximately 9.3% of the Waterford 3 and 11.5% of the Grand Gulf nuclear plants.  Entergy Louisiana and System Energy are the lessees under these arrangements, which are described in more detail in Note 10 to the financial statements in the Form 10-K. Entergy Louisiana made payments on its lease, including interest, of $21 million and $22.7 million in the three months ended March 31, 2015 and 2014, respectively. System Energy made payments on its lease, including interest, of $37.6 million and $51.6 million in the three months ended March 31, 2015 and 2014, respectively.

__________________________________

In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments necessary for a fair statement of the results for the interim periods presented.  Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters.  The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.



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Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of March 31, 2015, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended March 31, 2015 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income decreased $10.5 million primarily due to higher other operation and maintenance expenses, higher taxes other than income taxes, higher nuclear refueling outage expenses, higher interest expense, and higher depreciation and amortization expenses, partially offset by higher other income, a lower effective income tax rate, and higher net revenue.

Net Revenue
 
 
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$304.4

Retail electric price
7.4

Asset retirement obligation
(4.9
)
Other
0.5

2015 net revenue

$307.4


The retail electric price variance is primarily due to an increase in the energy efficiency rider, as approved by the APSC, effective July 2014. Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have a minimal effect on net income.

The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory debit or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the first quarter 2015 compared to the first quarter 2014 is primarily caused by a decrease in the regulatory credits because of higher realized gains on the decommissioning trust fund investments.

Other Income Statement Variances

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

Other operation and maintenance expenses increased primarily due to:

an increase of $10.3 million in energy efficiency costs, including the effects of true-ups to the energy efficiency filings. Energy efficiency costs are recovered through the energy efficiency rider and have a minimal effect on net income;
an increase of $5.2 million in fossil-fueled generation expenses due to an overall higher scope of work done during plant outages as compared to the prior year; and
an increase of $3.1 million in nuclear generation expenses primarily due to higher contract labor costs.


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

Taxes other than income taxes increased primarily due to an increase in payroll taxes and an increase in local franchise taxes resulting from higher residential and commercial revenues in 2015 as compared to 2014. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.

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

Other income increased primarily due to higher realized gains in the first quarter 2015 compared to the first quarter 2014 on the decommissioning trust fund investments. There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges.

Interest expense increased primarily due to the issuance of $250 million of 4.95% Series first mortgage bonds in December 2014 and the issuance of $375 million of 3.7% Series first mortgage bonds in March 2014. The increase was partially offset by the repayment of $115 million of 5.0% Series first mortgage bonds in April 2014.

Income Taxes

The effective income tax rate was 27.3% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS and book and tax differences related to the allowance for equity funds used during construction, partially offset by certain book and tax differences related to utility plant items and state income taxes. See Note 10 to the financial statements for a discussion of the finalized tax and interest computations for the 2006-2007 audit.

The effective income tax rate was 42.8% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items.

ANO Damage, Outage, and NRC Reviews

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews.

As discussed in the Form 10-K, in January 2015 the NRC issued its final risk significance determination for the flood barrier violation originally cited in the September 2014 report. The NRC’s final risk significance determination was classified as “yellow with substantial safety significance.” In March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. Placement into this column will require significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. The additional NRC inspection activities at the site are expected to increase ANO’s operating costs. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur NRC inspection costs of approximately $35 million in 2015 and approximately $15 million in 2016.


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

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$218,505

 

$127,022

 
 
 
 
Cash flow provided by (used in):


 
 

Operating activities
68,919

 
80,524

Investing activities
(138,537
)
 
(169,864
)
Financing activities
(29,397
)
 
182,835

Net increase (decrease) in cash and cash equivalents
(99,015
)
 
93,495

 
 
 
 
Cash and cash equivalents at end of period

$119,490

 

$220,517


Operating Activities

Net cash flow provided by operating activities decreased $11.6 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

an increase of $18.9 million in spending on nuclear refueling outages in 2015 as compared to the same period in 2014;
an increase of $16 million in income tax payments. Entergy Arkansas made income tax payments of $17.6 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax payments made in 2015 resulted primarily from final settlement of amounts outstanding associated with the 2006-2007 IRS audit;
$8.8 million in insurance proceeds received in the first quarter 2014 for property damages related to the generator stator incident at ANO. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident; and
an increase of $5.4 million in pension contributions in 2015. 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.

The decrease was partially offset by:

an increase in the recovery of fuel and purchased power costs including System Agreement bandwidth remedy collections from customers of $13.2 million received in the first quarter 2015 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the System Agreement proceedings; and
a decrease of $4.2 million in interest paid in 2015 as compared to the same period in the prior year.


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

Investing Activities

Net cash flow used in investing activities decreased $31.3 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
a decrease in distribution construction expenditures primarily due to storm restoration spending in 2014; and
money pool activity.

The decrease was partially offset by:

an increase in nuclear construction expenditures due to compliance with NRC post-Fukushima requirements and a higher scope of work on various nuclear projects in 2015; and
$24.2 million in insurance proceeds received in the first quarter 2014 for property damages related to the generator stator incident at ANO. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident .

Increases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increased by $13 million for the three months ended March 31, 2015 compared to increasing by $29.9 million for the three months ended March 31, 2014.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Arkansas’s financing activities used $29.4 million of cash for the three months ended March 31, 2015 compared to providing $182.8 million of cash for the three months ended March 31, 2014 primarily due to the following activity:

the issuance of $375 million of 3.7% Series first mortgage bonds in March 2014;
net repayments of $28.5 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in the first quarter 2015 compared to net borrowings of $62.5 million in the first quarter 2014; and
the repayment, prior to maturity, of a $250 million term loan in March 2014.

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

Capital Structure

Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.  
 
March 31, 2015
 
December 31,
2014
Debt to capital
57.9
%
 
58.4
%
Effect of excluding the securitization bonds
(0.7
%)
 
(0.7
%)
Debt to capital, excluding securitization bonds (a)
57.2
%
 
57.7
%
Effect of subtracting cash
(1.2
%)
 
(2.2
%)
Net debt to net capital, excluding securitization bonds (a)
56.0
%
 
55.5
%

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

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

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

Uses and Sources of Capital

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

Entergy Arkansas’s receivables from the money pool were as follows:
March 31, 2015
 
December 31,
2014
 
March 31, 2014
 
December 31,
2013
(In Thousands)
$15,219
 
$2,218
 
$47,407
 
$17,531

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

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in March 2019. In April 2015, Entergy Arkansas renewed its $20 million credit facility through April 2016. The $150 million credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of March 31, 2015, there were no cash borrowings and no letters of credit outstanding under the credit facilities.  In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of March 31, 2015, a $2 million letter of credit was outstanding under Entergy Arkansas’s letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $85 million scheduled to expire in June 2016.  As of March 31, 2015, $19.5 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Arkansas nuclear fuel company variable interest entity.  See Note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facility.
    
Union Power Station Purchase Agreement

As discussed in the Form 10-K, in December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station. The purchase of the Union Power Station is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).  In December 2014, Entergy Texas filed its application with the PUCT seeking one of the two necessary PUCT approvals of the acquisition.  In April 2015 the Office of Public Utility Counsel filed testimony recommending that the Union Power Station transaction be determined not to be consistent with the public interest, and Texas Industrial Energy Consumers filed testimony concluding that serious concerns exist as to whether Entergy Texas needs the capacity of Union Power Station and whether Union Power Station is the most economical alternative. Also in April 2015, East

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Management's Financial Discussion and Analysis

Texas Electric Cooperative filed testimony raising certain transmission-related issues with respect to the proposed acquisition. In May 2015, PUCT staff filed testimony concluding that Entergy Texas had not adequately supported its demonstration of need for the facility or the extent of its due diligence in considering alternatives to the acquisition of Union Power Station. The PUCT staff further concluded that (i) Entergy Texas’ financial condition would remain adequate should it acquire the facility regardless of whether it was also allowed to recover its requested acquisition adjustment and (ii) Entergy Texas had not provided sufficient information for PUCT staff to determine the reasonable value of the facility. The PUCT has indicated that it will convene the hearing on the merits of the initial requested approval in June 2015.  Entergy Texas intends to file a rate application to seek cost recovery in the second quarter of 2015.  In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery.  The LPSC established a procedural schedule providing for a hearing on the merits in August 2015. The APSC established a procedural schedule providing for a hearing on the merits in September 2015. In February 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed a notification and report form pursuant to the HSR Act with the United States Department of Justice (DOJ) and Federal Trade Commission with respect to their planned acquisition of the Union Power Station.  Union Power Partners, L.P. (UPP), the seller, also filed a notification and report form in February 2015. In March 2015 the DOJ requested additional information and documentary material from each of the purchasing companies and UPP, which will have the effect of extending the DOJ review period. In March 2015, UPP, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed an application with the FERC requesting authorization for the transaction.  In April 2015, Entergy Texas and Entergy Gulf States Louisiana made a filing with the FERC to request authorization to recover their portions of the expected positive acquisition adjustment associated with the acquisition of the Union Power Station.  Also in April 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas made a filing with the FERC for approval of their proposed accounting treatment of the amortization expenses relating to the acquisition adjustment.  Closing is targeted to occur in late-2015.

State and Local Rate Regulation and Fuel-Cost Recovery

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

In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notifies the APSC of Entergy Arkansas’s intent to implement a formula rate review mechanism pursuant to Arkansas legislation passed in 2015, and requests a retail rate increase of $268.4 million, with a net increase in revenue of $167 million. The filing requests a 10.2% return on common equity.

Federal Regulation

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

Nuclear Matters

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

Environmental Risks

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


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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$511,253

 

$514,981

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
104,872

 
92,153

Purchased power
 
99,814

 
118,848

Nuclear refueling outage expenses
 
12,063

 
8,677

Other operation and maintenance
 
160,545

 
138,545

Decommissioning
 
12,304

 
11,186

Taxes other than income taxes
 
25,704

 
21,908

Depreciation and amortization
 
60,102

 
57,721

Other regulatory credits - net
 
(807
)
 
(417
)
TOTAL
 
474,597

 
448,621

 
 
 
 
 
OPERATING INCOME
 
36,656

 
66,360

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
2,374

 
1,753

Interest and investment income
 
10,952

 
4,017

Miscellaneous - net
 
(167
)
 
(364
)
TOTAL
 
13,159

 
5,406

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
26,487

 
22,833

Allowance for borrowed funds used during construction
 
(1,231
)
 
(638
)
TOTAL
 
25,256

 
22,195

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
24,559

 
49,571

 
 
 
 
 
Income taxes
 
6,694

 
21,201

 
 
 
 
 
NET INCOME
 
17,865

 
28,370

 
 
 
 
 
Preferred dividend requirements
 
1,718

 
1,718

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$16,147

 

$26,652

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$17,865

 

$28,370

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
97,294

 
95,346

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
17,847

 
59,118

Changes in assets and liabilities:
 
 
 
 
Receivables
 
(8,086
)
 
(2,984
)
Fuel inventory
 
(8,232
)
 
9,648

Accounts payable
 
(24,651
)
 
(24,908
)
Prepaid taxes and taxes accrued
 
(18,923
)
 
(23,229
)
Interest accrued
 
4,338

 
(3,476
)
Deferred fuel costs
 
14,933

 
(19,638
)
Other working capital accounts
 
(27,858
)
 
(55,519
)
Provisions for estimated losses
 
46

 
(321
)
Other regulatory assets
 
29,585

 
(17,558
)
Pension and other postretirement liabilities
 
(19,074
)
 
(16,342
)
Other assets and liabilities
 
(6,165
)
 
52,017

Net cash flow provided by operating activities
 
68,919

 
80,524

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(128,399
)
 
(140,439
)
Allowance for equity funds used during construction
 
3,700

 
2,507

Nuclear fuel purchases
 
(21,392
)
 
(95,644
)
Proceeds from sale of nuclear fuel
 
28,296

 
76,808

Proceeds from nuclear decommissioning trust fund sales
 
81,852

 
45,317

Investment in nuclear decommissioning trust funds
 
(85,620
)
 
(47,603
)
Changes in money pool receivable - net
 
(13,001
)
 
(29,876
)
Changes in securitization account
 
(3,973
)
 
(4,290
)
Insurance proceeds
 

 
24,156

Other
 

 
(800
)
Net cash flow used in investing activities
 
(138,537
)
 
(169,864
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 

 
372,063

Retirement of long-term debt
 

 
(250,003
)
Changes in short-term borrowings - net
 
(28,462
)
 
62,493

Dividends paid:
 
 
 
 
Preferred stock
 
(1,718
)
 
(1,718
)
Other
 
783

 

Net cash flow provided by (used in) financing activities
 
(29,397
)
 
182,835

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
(99,015
)
 
93,495

Cash and cash equivalents at beginning of period
 
218,505

 
127,022

Cash and cash equivalents at end of period
 

$119,490

 

$220,517

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 

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

$20,761

 

$24,977

Income taxes
 

$17,587

 

$1,620

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$7,153

 

$10,526

Temporary cash investments
 
112,337

 
207,979

Total cash and cash equivalents
 
119,490

 
218,505

Securitization recovery trust account
 
8,069

 
4,096

Accounts receivable:
 
 
 
 
Customer
 
128,873

 
97,314

Allowance for doubtful accounts
 
(32,312
)
 
(32,247
)
Associated companies
 
54,127

 
32,187

Other
 
97,213

 
110,269

Accrued unbilled revenues
 
61,413

 
80,704

Total accounts receivable
 
309,314

 
288,227

Accumulated deferred income taxes
 
28,054

 
21,533

Deferred fuel costs
 
127,742

 
143,279

Fuel inventory - at average cost
 
59,130

 
50,898

Materials and supplies - at average cost
 
170,295

 
162,792

Deferred nuclear refueling outage costs
 
53,382

 
29,690

Prepayments and other
 
8,969

 
9,588

TOTAL
 
884,445

 
928,608

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
783,113

 
769,883

Other
 
12,844

 
14,170

TOTAL
 
795,957

 
784,053

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
9,256,116

 
9,139,181

Property under capital lease
 
933

 
961

Construction work in progress
 
272,789

 
284,322

Nuclear fuel
 
264,240

 
293,695

TOTAL UTILITY PLANT
 
9,794,078

 
9,718,159

Less - accumulated depreciation and amortization
 
4,235,279

 
4,191,959

UTILITY PLANT - NET
 
5,558,799

 
5,526,200

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
63,503

 
64,214

Other regulatory assets (includes securitization property of $64,027 as of March 31, 2015 and $67,877 as of December 31, 2014)
 
1,362,402

 
1,391,276

Deferred fuel costs
 
66,504

 
65,900

Other
 
51,895

 
47,674

TOTAL
 
1,544,304

 
1,569,064

 
 
 
 
 
TOTAL ASSETS
 

$8,783,505

 

$8,807,925

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Short-term borrowings
 

$19,506

 

$47,968

Accounts payable:
 
 
 
 
Associated companies
 
42,648

 
56,078

Other
 
159,510

 
174,998

Customer deposits
 
115,976

 
115,647

Taxes accrued
 
5,317

 
24,240

Accumulated deferred income taxes
 
12,178

 
15,009

Interest accrued
 
24,588

 
20,250

Other
 
30,276

 
27,872

TOTAL
 
409,999

 
482,062

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
2,024,986

 
1,997,983

Accumulated deferred investment tax credits
 
37,407

 
37,708

Other regulatory liabilities
 
266,358

 
254,036

Decommissioning
 
830,655

 
818,351

Accumulated provisions
 
5,735

 
5,689

Pension and other postretirement liabilities
 
552,784

 
571,870

Long-term debt (includes securitization bonds of $76,165 as of March 31, 2015 and $76,164 as of December 31, 2014)
 
2,671,406

 
2,671,343

Other
 
27,441

 
28,296

TOTAL
 
6,416,772

 
6,385,276

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Preferred stock without sinking fund
 
116,350

 
116,350

 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2015 and 2014
 
470

 
470

Paid-in capital
 
588,471

 
588,471

Retained earnings
 
1,251,443

 
1,235,296

TOTAL
 
1,840,384

 
1,824,237

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$8,783,505

 

$8,807,925

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
Common Equity
 
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013
 

$470

 

$588,471

 

$1,130,777

 

$1,719,718

 
 
 
 
 
 
 
 
 
Net income
 

 

 
28,370

 
28,370

Preferred stock dividends
 

 

 
(1,718
)
 
(1,718
)
 
 
 
 
 
 
 
 
 
Balance at March 31, 2014
 

$470

 

$588,471

 

$1,157,429

 

$1,746,370

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
 

$470

 

$588,471

 

$1,235,296

 

$1,824,237

 
 
 
 
 
 
 
 
 
Net income
 

 

 
17,865

 
17,865

Preferred stock dividends
 

 

 
(1,718
)
 
(1,718
)
 
 
 
 
 
 
 
 
 
Balance at March 31, 2015
 

$470

 

$588,471

 

$1,251,443

 

$1,840,384

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Increase/
 
 
Description
 
2015
 
2014
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
Residential
 

$222

 

$206

 

$16

 
8

Commercial
 
111

 
102

 
9

 
9

Industrial
 
98

 
84

 
14

 
17

Governmental
 
4

 
4

 

 

Total retail
 
435

 
396

 
39

 
10

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
29

 
31

 
(2
)
 
(6
)
Non-associated companies
 
40

 
73

 
(33
)
 
(45
)
Other
 
7

 
15

 
(8
)
 
(53
)
Total
 

$511

 

$515

 

($4
)
 
(1
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,485

 
2,581

 
(96
)
 
(4
)
Commercial
 
1,415

 
1,433

 
(18
)
 
(1
)
Industrial
 
1,611

 
1,523

 
88

 
6

Governmental
 
56

 
57

 
(1
)
 
(2
)
Total retail
 
5,567

 
5,594

 
(27
)
 

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
510

 
462

 
48

 
10

Non-associated companies
 
1,469

 
1,752

 
(283
)
 
(16
)
Total
 
7,546

 
7,808

 
(262
)
 
(3
)

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ENTERGY GULF STATES LOUISIANA, L.L.C.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” in the Form 10-K.

As discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC in September 2014 seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. In the proceedings with the LPSC, Entergy Louisiana and Entergy Gulf States Louisiana estimate that the business combination could produce up to $128 million in customer benefits including proposed guaranteed savings of $97 million in the first ten years.  In April 2015 the LPSC staff and intervenors filed testimony in the LPSC business combination proceeding. The testimony recommends an extensive set of conditions that would be required in order to recommend that the LPSC find that the business combination is in the public interest. The LPSC staff’s primary concern appears to be potential shifting in fuel costs between legacy Entergy Louisiana and Entergy Gulf States Louisiana customers. In May 2015, Entergy Louisiana and Entergy Gulf States Louisiana filed rebuttal testimony. The hearing in the LPSC proceeding is scheduled to take place in June 2015. Entergy Louisiana and Entergy Gulf States Louisiana have requested that the LPSC issue its decision regarding the business combination in August 2015.

Entergy Louisiana and Entergy Gulf States Louisiana filed applications with the FERC requesting authorization for the business combination and Entergy Louisiana and Entergy New Orleans filed applications with the FERC requesting authorization of the Algiers asset transfer. In April 2015 the FERC issued orders approving certain of those business combination and the Algiers asset transfer applications. Other FERC applications related to the business combination remain pending.

Results of Operations

Net Income

Net income increased $7.4 million primarily due to higher net revenue, higher other income, and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses and higher interest expense.

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$238.3

Net wholesale revenue
1.9

Retail electric price
1.1

Other
0.7

2015 net revenue

$242.0



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

The net wholesale revenue variance is primarily due to higher wholesale billings to affiliate companies due to higher expenses.

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

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

an increase of $2.1 million in nuclear generation expenses primarily due to higher labor costs, including contract labor, higher materials costs, and higher NRC fees;
an increase of $1.5 million as a result of spending related to the Entergy Louisiana and Entergy Gulf States Louisiana business combination. See “Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” above for discussion of the business combination; and
an increase of $1.2 million in transmission expenses primarily due to an increase in costs related to the participation in the MISO RTO. The net income effect is partially offset due to deferrals of some of these costs.  See Note 2 to the financial statements in the Form 10-K for further information on the deferrals.

Other income increased primarily due to:

higher realized gains and higher earnings in 2015 on the River Bend decommissioning trust fund investments. There is no effect on net income as these investment gains are offset by a corresponding amount of regulatory charges;
an increase of $1.8 million as a result of income collected from contracts with independent power producers; and
an increase of $1.2 million due to distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing. See Note 2 to the financial statements in the Form 10-K for a discussion of the Act 55 storm cost financing.

Interest expense increased primarily due to the issuance of $110 million of 3.78% Series first mortgage bonds in July 2014.

Income Taxes

The effective income tax rate was 26.9% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS and book and tax differences related to the non-taxable income distributions earned on preferred membership interests. See Note 10 to the financial statements for a discussion of the finalized tax and interest computations for the 2006-2007 audit.

The effective income tax rate was 36.4% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to state income taxes and the provision for uncertain tax positions, partially offset by book and tax differences related to the non-taxable income distributions earned on preferred membership interests.


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


Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$162,963

 

$15,581

 
 
 
 
Cash flow provided by (used in):
 
 
 
    Operating activities
110,486

 
76,528

    Investing activities
(191,409
)
 
(28,782
)
    Financing activities
32,979

 
(48,168
)
Net decrease in cash and cash equivalents
(47,944
)
 
(422
)
 
 
 
 
Cash and cash equivalents at end of period

$115,019

 

$15,159


Operating Activities

Net cash flow provided by operating activities increased $34 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to increased recovery of fuel costs compared to prior year, partially offset by an increase of $15.4 million in spending on nuclear refueling outages in 2015 as compared to the same period in 2014 and income tax payments of $5.5 million in 2015. Entergy Gulf States Louisiana made income tax payments of $5.5 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax payments in 2015 resulted primarily from final settlement of amounts outstanding associated with the 2006-2007 IRS audit.

Investing Activities

Net cash flow used in investing activities increased $162.6 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
an increase in nuclear construction expenditures at the River Bend plant as a result of an increased scope of work performed in 2015; and
money pool activity.

Increases in Entergy Gulf States Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Gulf States Louisiana’s receivable from the money pool increased by $14.3 million for the three months ended March 31, 2015 compared to increasing by $1.3 million for the three months ended March 31, 2014. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Gulf States Louisiana’s financing activities provided $33 million of cash for the three months ended March 31, 2015 compared to using $48.2 million of cash for the three months ended March 31, 2014 primarily due to
an increase of $41 million in credit borrowings against the nuclear fuel company variable interest entity credit facility in 2015 compared to payments of $14.5 million on credit borrowings in 2014 and common equity distributions of $33.3 million in 2014.

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

Capital Structure

Entergy Gulf States Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.
 
March 31, 2015
 
December 31,
2014
Debt to capital
52.8
%
 
53.1
%
Effect of subtracting cash
(1.7
%)
 
(2.6
%)
Net debt to net capital
51.1
%
 
50.5
%

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

Uses and Sources of Capital

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

Entergy Gulf States Louisiana’s receivables from the money pool were as follows:
March 31,
2015
 
December 31,
2014
 
March 31,
2014
 
December 31,
2013
(In Thousands)
$15,469
 
$1,166
 
$3,265
 
$1,925

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

Entergy Gulf States Louisiana has a credit facility in the amount of $150 million scheduled to expire in March 2019.  The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of March 31, 2015, there were no cash borrowings and no letters of credit outstanding under the credit facility.  In addition, Entergy Gulf States Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of March 31, 2015, a $26 million letter of credit was outstanding under Entergy Gulf States Louisiana’s letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Gulf States Louisiana nuclear fuel company variable interest entity has a credit facility in the amount of $100 million scheduled to expire in June 2016.  As of March 31, 2015, $41 million was outstanding under the variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

Union Power Station Purchase Agreement

As discussed in the Form 10-K, in December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station. The purchase of the Union

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


Power Station is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).  In December 2014, Entergy Texas filed its application with the PUCT seeking one of the two necessary PUCT approvals of the acquisition.  In April 2015 the Office of Public Utility Counsel filed testimony recommending that the Union Power Station transaction be determined not to be consistent with the public interest, and Texas Industrial Energy Consumers filed testimony concluding that serious concerns exist as to whether Entergy Texas needs the capacity of Union Power Station and whether Union Power Station is the most economical alternative. Also in April 2015, East Texas Electric Cooperative filed testimony raising certain transmission-related issues with respect to the proposed acquisition. In May 2015, PUCT staff filed testimony concluding that Entergy Texas had not adequately supported its demonstration of need for the facility or the extent of its due diligence in considering alternatives to the acquisition of Union Power Station. The PUCT staff further concluded that (i) Entergy Texas’ financial condition would remain adequate should it acquire the facility regardless of whether it was also allowed to recover its requested acquisition adjustment and (ii) Entergy Texas had not provided sufficient information for PUCT staff to determine the reasonable value of the facility. The PUCT has indicated that it will convene the hearing on the merits of the initial requested approval in June 2015.  Entergy Texas intends to file a rate application to seek cost recovery in the second quarter of 2015.  In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery.  The LPSC established a procedural schedule providing for a hearing on the merits in August 2015. The APSC established a procedural schedule providing for a hearing on the merits in September 2015. In February 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed a notification and report form pursuant to the HSR Act with the United States Department of Justice (DOJ) and Federal Trade Commission with respect to their planned acquisition of the Union Power Station.  Union Power Partners, L.P. (UPP), the seller, also filed a notification and report form in February 2015. In March 2015 the DOJ requested additional information and documentary material from each of the purchasing companies and UPP, which will have the effect of extending the DOJ review period. In March 2015, UPP, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed an application with the FERC requesting authorization for the transaction.  In April 2015, Entergy Texas and Entergy Gulf States Louisiana made a filing with the FERC to request authorization to recover their portions of the expected positive acquisition adjustment associated with the acquisition of the Union Power Station.  Also in April 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas made a filing with the FERC for approval of their proposed accounting treatment of the amortization expenses relating to the acquisition adjustment.  Closing is targeted to occur in late-2015.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Retail Rates - Gas

In January 2015, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2014.  The filing showed an earned return on common equity of 7.20%, which results in a $706 thousand rate increase.  In April 2015 the LPSC issued findings recommending two adjustments to Entergy Gulf States Louisiana’s as-filed results, and an additional recommendation that does not affect current year results. The LPSC staff’s recommended adjustments increase the earned return on equity for the test year to 7.24%. Entergy Gulf States Louisiana accepted the LPSC staff’s recommendations and a revenue increase of $688 thousand will be required as opposed to the $706 thousand requested by Entergy Gulf States Louisiana. The resulting change will be implemented with the first billing cycle of May 2015.


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

Industrial and Commercial Customers

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

Federal Regulation

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

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Gulf States Louisiana’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.

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Management's Financial Discussion and Analysis


























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ENTERGY GULF STATES LOUISIANA, L.L.C.
INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$462,396

 

$481,422

Natural gas
 
24,381

 
31,873

TOTAL
 
486,777

 
513,295

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
76,714

 
59,205

Purchased power
 
165,881

 
219,708

Nuclear refueling outage expenses
 
4,705

 
5,273

Other operation and maintenance
 
91,947

 
87,097

Decommissioning
 
4,286

 
4,121

Taxes other than income taxes
 
22,869

 
21,009

Depreciation and amortization
 
38,790

 
38,242

Other regulatory charges (credits) - net
 
2,196

 
(3,936
)
TOTAL
 
407,388

 
430,719

 
 
 
 
 
OPERATING INCOME
 
79,389

 
82,576

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
2,043

 
1,646

Interest and investment income
 
13,611

 
10,057

Miscellaneous - net
 
(737
)
 
(1,718
)
TOTAL
 
14,917

 
9,985

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
21,940

 
20,278

Allowance for borrowed funds used during construction
 
(1,267
)
 
(761
)
TOTAL
 
20,673

 
19,517

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
73,633

 
73,044

 
 
 
 
 
Income taxes
 
19,788

 
26,572

 
 
 
 
 
NET INCOME
 
53,845

 
46,472

 
 
 
 
 
Preferred distribution requirements and other
 
206

 
206

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$53,639

 

$46,266

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY GULF STATES LOUISIANA, L.L.C.
STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
2015
 
2014
 
(In Thousands)
 
 
 
 
Net Income

$53,845

 

$46,472

Other comprehensive income
 
 
 
Pension and other postretirement liabilities
 
 
 
(net of tax expense of $289 and $101)
422

 
122

Other comprehensive income
422

 
122

Comprehensive Income

$54,267

 

$46,594

 
 
 
 
See Notes to Financial Statements.
 
 
 






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ENTERGY GULF STATES LOUISIANA, L.L.C.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$53,845

 

$46,472

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
51,500

 
58,109

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(16,470
)
 
28,882

Changes in working capital:
 
 
 
 
Receivables
 
(31,990
)
 
(53,949
)
Fuel inventory
 
(4,482
)
 
(831
)
Accounts payable
 
28,454

 
2,019

Prepaid taxes and taxes accrued
 
44,889

 
16,865

Interest accrued
 
4,440

 
3,552

Deferred fuel costs
 
9,063

 
(27,051
)
Other working capital accounts
 
(30,143
)
 
33,674

Changes in provisions for estimated losses
 
2,228

 
(601
)
Changes in other regulatory assets
 
9,390

 
856

Changes in pension and other postretirement liabilities
 
(3,253
)
 
(2,197
)
Other
 
(6,985
)
 
(29,272
)
Net cash flow provided by operating activities
 
110,486

 
76,528

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(77,850
)
 
(61,683
)
Allowance for equity funds used during construction
 
2,043

 
1,646

Nuclear fuel purchases
 
(95,014
)
 
(17,553
)
Proceeds from the sale of nuclear fuel
 

 
55,147

Payment to storm reserve escrow account
 
(19
)
 
(3
)
Proceeds from nuclear decommissioning trust fund sales
 
21,699

 
30,268

Investment in nuclear decommissioning trust funds
 
(27,965
)
 
(35,264
)
Changes in money pool receivable - net
 
(14,303
)
 
(1,340
)
Net cash flow used in investing activities
 
(191,409
)
 
(28,782
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Changes in credit borrowings - net
 
41,000

 
(14,500
)
Distributions paid:
 
 
 
 
Common equity
 

 
(33,317
)
Preferred membership interests
 
(206
)
 
(206
)
Other
 
(7,815
)
 
(145
)
Net cash flow provided by (used in) financing activities
 
32,979

 
(48,168
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(47,944
)
 
(422
)
Cash and cash equivalents at beginning of period
 
162,963

 
15,581

Cash and cash equivalents at end of period
 

$115,019

 

$15,159

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

$16,774

 

$16,011

Income taxes
 

$5,537

 

$—

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY GULF STATES LOUISIANA, L.L.C.
BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$173

 

$53,394

Temporary cash investments
 
114,846

 
109,569

Total cash and cash equivalents
 
115,019

 
162,963

Accounts receivable:
 
 
 
 
Customer
 
74,005

 
67,006

Allowance for doubtful accounts
 
(764
)
 
(625
)
Associated companies
 
114,918

 
86,966

Other
 
28,319

 
18,379

Accrued unbilled revenues
 
55,620

 
54,079

Total accounts receivable
 
272,098

 
225,805

Fuel inventory - at average cost
 
20,689

 
16,207

Materials and supplies - at average cost
 
117,957

 
121,237

Deferred nuclear refueling outage costs
 
42,441

 
7,416

Prepaid taxes
 

 
24,058

Prepayments and other
 
11,832

 
21,064

TOTAL
 
580,036

 
578,750

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

 
355,906

Decommissioning trust funds
 
648,743

 
637,744

Non-utility property - at cost (less accumulated depreciation)
 
199,677

 
193,407

Storm reserve escrow account
 
90,080

 
90,061

Other
 
15,463

 
14,887

TOTAL
 
1,309,869

 
1,292,005

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
7,663,441

 
7,600,730

Natural gas
 
150,065

 
148,586

Construction work in progress
 
119,094

 
127,436

Nuclear fuel
 
220,657

 
131,901

TOTAL UTILITY PLANT
 
8,153,257

 
8,008,653

Less - accumulated depreciation and amortization
 
4,204,827

 
4,176,242

UTILITY PLANT - NET
 
3,948,430

 
3,832,411

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
161,553

 
161,714

Other regulatory assets
 
417,152

 
426,381

Deferred fuel costs
 
100,124

 
100,124

Other
 
15,704

 
12,438

TOTAL
 
694,533

 
700,657

 
 
 
 
 
TOTAL ASSETS
 

$6,532,868

 

$6,403,823

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY GULF STATES LOUISIANA, L.L.C.
BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$31,955

 

$31,955

Accounts payable:
 
 
 
 
Associated companies
 
96,857

 
102,933

Other
 
138,658

 
108,874

Customer deposits
 
57,633

 
56,749

Taxes accrued
 
20,831

 

Accumulated deferred income taxes
 
37,931

 
21,095

Interest accrued
 
31,515

 
27,075

Deferred fuel costs
 
19,643

 
10,580

Other
 
36,081

 
44,517

TOTAL
 
471,104

 
403,778

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,568,844

 
1,601,032

Accumulated deferred investment tax credits
 
71,569

 
72,277

Other regulatory liabilities
 
178,734

 
176,305

Decommissioning and asset retirement cost liabilities
 
452,733

 
446,619

Accumulated provisions
 
109,213

 
106,985

Pension and other postretirement liabilities
 
397,813

 
401,144

Long-term debt
 
1,631,924

 
1,590,862

Long-term payables - associated companies
 
25,753

 
26,156

Other
 
140,565

 
148,102

TOTAL
 
4,577,148

 
4,569,482

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

 
10,000

Member's equity
 
1,527,541

 
1,473,910

Accumulated other comprehensive loss
 
(52,925
)
 
(53,347
)
TOTAL
 
1,484,616

 
1,430,563

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$6,532,868

 

$6,403,823

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY GULF STATES LOUISIANA, L.L.C.
STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
Preferred Membership Interests
 
Member's
Equity
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$10,000

 

$1,479,179

 

($28,202
)
 

$1,460,977

 
 
 
 
 
 
 
 
Net income

 
46,472

 

 
46,472

Other comprehensive income

 

 
122

 
122

Distributions declared on common equity

 
(33,317
)
 

 
(33,317
)
Distributions declared on preferred membership interests

 
(206
)
 

 
(206
)
Other

 
(10
)
 

 
(10
)
 
 
 
 
 
 
 
 
Balance at March 31, 2014

$10,000

 

$1,492,118

 

($28,080
)
 

$1,474,038

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$10,000

 

$1,473,910

 

($53,347
)
 

$1,430,563

 
 
 
 
 
 
 
 
Net income

 
53,845

 

 
53,845

Other comprehensive income

 

 
422

 
422

Distributions declared on preferred membership interests

 
(206
)
 

 
(206
)
Other

 
(8
)
 

 
(8
)
 
 
 
 
 
 
 
 
Balance at March 31, 2015

$10,000

 

$1,527,541

 

($52,925
)
 

$1,484,616

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY GULF STATES LOUISIANA, L.L.C.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2015
 
2014
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$114

 

$125

 

($11
)
 
(9
)
Commercial
 
101

 
104

 
(3
)
 
(3
)
Industrial
 
131

 
124

 
7

 
6

Governmental
 
6

 
6

 

 

Total retail
 
352

 
359

 
(7
)
 
(2
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
81

 
92

 
(11
)
 
(12
)
Non-associated companies
 
10

 
21

 
(11
)
 
(52
)
Other
 
19

 
9

 
10

 
111

Total
 

$462

 

$481

 

($19
)
 
(4
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,260

 
1,382

 
(122
)
 
(9
)
Commercial
 
1,233

 
1,256

 
(23
)
 
(2
)
Industrial
 
2,385

 
2,193

 
192

 
9

Governmental
 
61

 
58

 
3

 
5

Total retail
 
4,939

 
4,889

 
50

 
1

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,238

 
1,691

 
(453
)
 
(27
)
Non-associated companies
 
168

 
221

 
(53
)
 
(24
)
Total
 
6,345

 
6,801

 
(456
)
 
(7
)

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” in the Form 10-K.

As discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC in September 2014 seeking authorization to undertake the transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. In the proceedings with the LPSC, Entergy Louisiana and Entergy Gulf States Louisiana estimate that the business combination could produce up to $128 million in customer benefits including proposed guaranteed savings of $97 million in the first ten years.  In April 2015 the LPSC staff and intervenors filed testimony in the LPSC business combination proceeding. The testimony recommends an extensive set of conditions that would be required in order to recommend that the LPSC find that the business combination is in the public interest. The LPSC staff’s primary concern appears to be potential shifting in fuel costs between legacy Entergy Louisiana and Entergy Gulf States Louisiana customers. In May 2015, Entergy Louisiana and Entergy Gulf States Louisiana filed rebuttal testimony. The hearing in the LPSC proceeding is scheduled to take place in June 2015. Entergy Louisiana and Entergy Gulf States Louisiana have requested that the LPSC issue its decision regarding the business combination in August 2015.

Entergy Louisiana and Entergy Gulf States Louisiana filed applications with the FERC requesting authorization for the business combination and Entergy Louisiana and Entergy New Orleans filed applications with the FERC requesting authorization of the Algiers asset transfer. In April 2015 the FERC issued orders approving certain of those business combination and the Algiers asset transfer applications. Other FERC applications related to the business combination remain pending.

Results of Operations

Net Income

Net income increased $13.9 million primarily due to higher net revenue, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expense.

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits.  Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$291.2

Retail electric price
33.5

Net wholesale revenue
10.5

Other
1.9

2015 net revenue

$337.1



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Management's Financial Discussion and Analysis

The retail electric price variance is primarily due to formula rate plan increases, as approved by the LPSC, effective December 2014 and January 2015. Entergy Louisiana’s formula rate plan increase is discussed in Note 2 to the financial statements in the Form 10-K.

The net wholesale revenue variance is primarily due to the sale of generation from the Ninemile plant of 25% to Entergy Gulf States Louisiana and 20% to Entergy New Orleans, pursuant to a long-term power purchase agreement.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

an increase of $5.8 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done during plant outages as compared to prior year;
an increase resulting from losses of $1.2 million on the sale of surplus diesel inventory in 2015 compared to gains of $3.8 million on the sale of surplus oil inventory in 2014; and
an increase of $4.9 million in nuclear generation expenses primarily due to increased costs related to an NRC inspection in first quarter 2015.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Ninemile Unit 6 project which was placed in service in December 2014.

Other income increased primarily due to an increase of $4.3 million due to distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received in August 2014 from the Act 55 storm cost financing. The increase was substantially offset by a decrease in allowance for equity funds used during construction due to a higher construction work in progress balance in 2014, which included the Ninemile Unit 6 project. See Note 2 to the financial statements in the Form 10-K for a discussion of the Act 55 storm cost financing.

Interest expense increased primarily due to:

the issuance of $250 million of 4.95% Series first mortgage bonds in November 2014;
the issuance of $190 million of 3.78% Series first mortgage bonds in July 2014; and
the decrease in the allowance for borrowed funds used during construction due to a higher construction work in progress balance in 2014, including the Ninemile Unit 6 project which was placed in service in December 2014.

The increase was partially offset by the retirement, at maturity, of $250 million of 1.875% Series first mortgage bonds in December 2014.

Income Taxes

The effective income tax rate was 24.2% for the first quarter 2015.  The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS, partially offset by state income taxes. See Note 10 to the financial statements for a discussion of the finalized tax and interest computations for the 2006-2007 audit.

The effective income tax rate was 25.8% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes.


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Management's Financial Discussion and Analysis

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$157,553

 

$124,007

 
 
 
 
Cash flow provided by (used in):
 
 
 
    Operating activities
171,251

 
100,930

    Investing activities
(124,760
)
 
(158,927
)
    Financing activities
(36,477
)
 
6,366

Net increase (decrease) in cash and cash equivalents
10,014

 
(51,631
)
 
 
 
 
Cash and cash equivalents at end of period

$167,567

 

$72,376


Operating Activities

Net cash flow provided by operating activities increased $70.3 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to increased recovery of fuel costs compared to prior year and income tax refunds of $9.6 million received in 2015. Entergy Louisiana received income tax refunds of $9.6 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax refunds in 2015 resulted primarily from an Entergy Louisiana overpayment associated with the final settlement of amounts understanding from the 2006-2007 IRS audit.

Investing Activities

Net cash flow used in investing activities decreased $34.2 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

a decrease in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
a decrease in fossil-fueled generation construction expenditures primarily due to a decrease in spending on the Ninemile Unit 6 project.

The decrease was partially offset by money pool activity.

Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana’s receivable from the money pool increased by $20.7 million for the three months ended March 31, 2015 compared to decreasing by $1.8 million for the three months ended March 31, 2014.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Louisiana’s financing activities used $36.5 million of cash for the three months ended March 31, 2015 compared to providing $6.4 million of cash for the three months ended March 31, 2014 primarily due to the repayment of borrowings of $18.7 million on the nuclear fuel company variable interest entity’s credit facility in 2015 compared to an increase in borrowings $28.8 million in 2014 and the issuance of $40 million of 3.92% Series H Notes by the nuclear fuel company variable interest entity in February 2014, partially offset by a common equity distribution of

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Management's Financial Discussion and Analysis

$43.4 million in 2014. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for details of long-term debt activity.

Capital Structure

Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.
 
 
March 31,
2015
 
December 31,
2014
Debt to capital
53.0
%
 
53.8
%
Effect of excluding securitization bonds
(1.1
%)
 
(1.0
%)
Debt to capital, excluding securitization bonds (a)
51.9
%
 
52.8
%
Effect of subtracting cash
(1.3
%)
 
(1.3
%)
Net debt to net capital, excluding securitization bonds (a)
50.6
%
 
51.5
%

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

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition. Entergy Louisiana uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents.

Uses and Sources of Capital

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

Entergy Louisiana’s receivables from the money pool were as follows:
March 31,
2015
 
December 31,
2014
 
March 31,
2014
 
December 31,
2013
(In Thousands)
$22,357
 
$1,649
 
$15,806
 
$17,648

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
    
Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in March 2019.  The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of March 31, 2015, there were no cash borrowings and no letters of credit outstanding under the credit facility.  In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of March 31, 2015, a $1.0 million letter of credit was outstanding under Entergy Louisiana’s letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Louisiana nuclear fuel company variable interest entity has a credit facility in the amount of $90 million scheduled to expire in June 2016.  As of March 31, 2015, $27.3 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Louisiana nuclear fuel

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Management's Financial Discussion and Analysis

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Algiers Asset Transfer

As discussed in the Form 10-K, in October 2014 Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently serve Entergy Louisiana’s customers in Algiers. In March 2015 the City Council’s Utility advisors filed direct testimony recommending that the Algiers asset transfer be approved subject to certain conditions that Entergy Louisiana and Entergy New Orleans believe they will be able to satisfy. If the necessary approvals are obtained from the City Council, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015. In April 2015 the FERC issued an order approving the Algiers asset transfer.

Industrial and Commercial Customers

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

Federal Regulation

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

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana’s accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$640,094

 

$623,494

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
142,944

 
90,787

Purchased power
 
162,997

 
249,119

Nuclear refueling outage expenses
 
6,425

 
8,878

Other operation and maintenance
 
128,854

 
109,122

Decommissioning
 
6,359

 
6,046

Taxes other than income taxes
 
21,021

 
19,745

Depreciation and amortization
 
68,078

 
62,375

Other regulatory credits - net
 
(2,971
)
 
(7,635
)
TOTAL
 
533,707

 
538,437

 
 
 
 
 
OPERATING INCOME
 
106,387

 
85,057

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
3,429

 
8,877

Interest and investment income
 
26,405

 
21,178

Miscellaneous - net
 
537

 
(169
)
TOTAL
 
30,371

 
29,886

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
43,341

 
40,689

Allowance for borrowed funds used during construction
 
(1,861
)
 
(4,463
)
TOTAL
 
41,480

 
36,226

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
95,278

 
78,717

 
 
 
 
 
Income taxes
 
23,014

 
20,339

 
 
 
 
 
NET INCOME
 
72,264

 
58,378

 
 
 
 
 
Preferred dividend requirements and other
 
1,738

 
1,738

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$70,526

 

$56,640

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
2015
 
2014
 
(In Thousands)
 
 
 
 
Net Income

$72,264

 

$58,378

Other comprehensive loss
 
 
 
Pension and other postretirement liabilities
 
 
 
(net of tax benefit of $1 and $164)
(42
)
 
(302
)
Other comprehensive loss
(42
)
 
(302
)
Comprehensive Income

$72,222

 

$58,076

 
 
 
 
See Notes to Financial Statements.
 
 
 







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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$72,264

 

$58,378

Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
93,569

 
88,186

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
77,354

 
81,091

Changes in working capital:
 
 
 
 
Receivables
 
(17,221
)
 
41,296

Fuel inventory
 
1,329

 
4,531

Accounts payable
 
(20,568
)
 
(21,861
)
Prepaid taxes and taxes accrued
 
(30,426
)
 
(41,033
)
Interest accrued
 
(3,723
)
 
(5,899
)
Deferred fuel costs
 
5,570

 
(63,587
)
Other working capital accounts
 
4,857

 
5,648

Changes in provisions for estimated losses
 
101

 
(237
)
Changes in other regulatory assets
 
13,027

 
(3,935
)
Changes in other regulatory liabilities
 
(1,194
)
 
2,629

Changes in pension and other postretirement liabilities
 
(7,467
)
 
(5,153
)
Other
 
(16,221
)
 
(39,124
)
Net cash flow provided by operating activities
 
171,251

 
100,930

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(102,784
)
 
(118,854
)
Allowance for equity funds used during construction
 
3,429

 
8,877

Nuclear fuel purchases
 
(13,599
)
 
(89,474
)
Proceeds from the sale of nuclear fuel
 
18,123

 
46,646

Changes to securitization account
 
(5,433
)
 
(5,709
)
Proceeds from nuclear decommissioning trust fund sales
 
3,867

 
18,140

Investment in nuclear decommissioning trust funds
 
(7,614
)
 
(20,395
)
Changes in money pool receivable - net
 
(20,708
)
 
1,842

Other
 
(41
)
 

Net cash flow used in investing activities
 
(124,760
)
 
(158,927
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 

 
39,782

Retirement of long-term debt
 
(16,083
)
 
(17,018
)
Changes in credit borrowings - net
 
(18,740
)
 
28,774

Distributions paid:
 
 
 
 
Common equity
 

 
(43,434
)
Preferred membership interests
 
(1,738
)
 
(1,738
)
Other
 
84

 

Net cash flow provided by (used in) financing activities
 
(36,477
)
 
6,366

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
10,014

 
(51,631
)
Cash and cash equivalents at beginning of period
 
157,553

 
124,007

Cash and cash equivalents at end of period
 

$167,567

 

$72,376

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

$45,881

 

$45,156

Income taxes
 

($9,593
)
 

$—

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$87

 

$431

Temporary cash investments
 
167,480

 
157,122

Total cash and cash equivalents
 
167,567

 
157,553

Accounts receivable:
 
 
 
 
Customer
 
128,211

 
124,125

Allowance for doubtful accounts
 
(1,146
)
 
(984
)
Associated companies
 
81,403

 
48,474

Other
 
14,904

 
9,150

Accrued unbilled revenues
 
83,995

 
88,673

Total accounts receivable
 
307,367

 
269,438

Accumulated deferred income taxes
 
31,523

 
74,558

Fuel inventory
 
29,622

 
30,951

Materials and supplies - at average cost
 
160,722

 
154,295

Deferred nuclear refueling outage costs
 
15,721

 
23,067

Prepaid taxes
 
29,566

 

Prepayments and other
 
23,047

 
24,962

TOTAL
 
765,135

 
734,824

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliate preferred membership interests
 
1,034,696

 
1,034,696

Decommissioning trust funds
 
391,822

 
383,615

Storm reserve escrow account
 
200,093

 
200,053

Non-utility property - at cost (less accumulated depreciation)
 
169

 
214

TOTAL
 
1,626,780

 
1,618,578

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
9,731,402

 
9,627,495

Property under capital lease
 
334,716

 
334,716

Construction work in progress
 
201,091

 
241,923

Nuclear fuel
 
139,644

 
162,721

TOTAL UTILITY PLANT
 
10,406,853

 
10,366,855

Less - accumulated depreciation and amortization
 
3,998,742

 
3,942,916

UTILITY PLANT - NET
 
6,408,111

 
6,423,939

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
323,722

 
324,555

Other regulatory assets (includes securitization property of $130,773 as of March 31, 2015 and $135,538 as of December 31, 2014)
 
902,035

 
914,229

Deferred fuel costs
 
67,998

 
67,998

Other
 
49,746

 
45,182

TOTAL
 
1,343,501

 
1,351,964

 
 
 
 
 
TOTAL ASSETS
 

$10,143,527

 

$10,129,305

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$28,431

 

$19,525

Short-term borrowings
 
27,293

 
46,033

Accounts payable:
 
 
 
 
Associated companies
 
59,810

 
74,692

Other
 
128,598

 
164,329

Customer deposits
 
93,729

 
93,010

Taxes accrued
 

 
860

Interest accrued
 
40,649

 
44,372

Deferred fuel costs
 
56,002

 
50,432

Other
 
44,153

 
48,250

TOTAL
 
478,665

 
541,503

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
1,441,003

 
1,406,507

Accumulated deferred investment tax credits
 
64,165

 
64,771

Other regulatory liabilities
 
544,890

 
546,084

Decommissioning
 
510,093

 
503,734

Accumulated provisions
 
212,344

 
212,243

Pension and other postretirement liabilities
 
523,345

 
530,844

Long-term debt (includes securitization bonds of $143,039 as of March 31, 2015 and $143,039 as of December 31, 2014)
 
3,312,154

 
3,337,054

Other
 
69,960

 
70,141

TOTAL
 
6,677,954

 
6,671,378

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Preferred membership interests without sinking fund
 
100,000

 
100,000

Member's equity
 
2,912,826

 
2,842,300

Accumulated other comprehensive loss
 
(25,918
)
 
(25,876
)
TOTAL
 
2,986,908

 
2,916,424

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$10,143,527

 

$10,129,305

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
Preferred
Membership
Interests
 
Member’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 
Total
 
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$100,000

 

$2,885,287

 

($9,635
)
 

$2,975,652

 
 
 
 
 
 
 
 
Net income

 
58,378

 

 
58,378

Other comprehensive loss

 

 
(302
)
 
(302
)
Distributions declared on common equity

 
(43,434
)
 

 
(43,434
)
Distributions declared on preferred membership interests

 
(1,738
)
 

 
(1,738
)
 
 
 
 
 
 
 
 
Balance at March 31, 2014

$100,000

 

$2,898,493

 

($9,937
)
 

$2,988,556

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$100,000

 

$2,842,300

 

($25,876
)
 

$2,916,424

 
 
 
 
 
 
 
 
Net income

 
72,264

 

 
72,264

Other comprehensive loss

 

 
(42
)
 
(42
)
Distributions declared on preferred membership interests

 
(1,738
)
 

 
(1,738
)
 
 
 
 
 
 
 
 
Balance at March 31, 2015

$100,000

 

$2,912,826

 

($25,918
)
 

$2,986,908

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2015
 
2014
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$193

 

$200

 

($7
)
 
(4
)
Commercial
 
131

 
130

 
1

 
1

Industrial
 
211

 
206

 
5

 
2

Governmental
 
11

 
11

 

 

Total retail
 
546

 
547

 
(1
)
 

Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
72

 
70

 
2

 
3

Non-associated companies
 
2

 
6

 
(4
)
 
(67
)
Other
 
20

 

 
20

 

Total
 

$640

 

$623

 

$17

 
3

 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
2,247

 
2,413

 
(166
)
 
(7
)
Commercial
 
1,440

 
1,465

 
(25
)
 
(2
)
Industrial
 
4,182

 
4,041

 
141

 
3

Governmental
 
129

 
128

 
1

 
1

Total retail
 
7,998

 
8,047

 
(49
)
 
(1
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,774

 
1,218

 
556

 
46

Non-associated companies
 
39

 
80

 
(41
)
 
(51
)
Total
 
9,811

 
9,345

 
466

 
5


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ENTERGY MISSISSIPPI, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income decreased slightly, by $0.9 million, primarily due to higher other operation and maintenance expenses, higher taxes other than income taxes, and higher depreciation and amortization expenses, substantially offset by higher net revenue.

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$162.9

Retail electric price
12.4

Other
0.5

2015 net revenue

$175.8


The retail electric price variance is primarily due to a $16 million net annual increase in revenues, effective February 2015, as a result of the MPSC order in the June 2014 rate case. The rate case included the realignment of certain costs from collection in riders to base rates. See Note 2 to the financial statements in the Form 10-K for a discussion of the rate case.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to an increase of $8.7 million in fossil-fueled generation expenses primarily due to a higher scope of work done during plant outages in 2015 as compared to the same period in 2014.
    
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service and higher depreciation rates in 2015, as approved by the MPSC.

Income Taxes

The effective income tax rate was 39.2% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items.

The effective income tax rate was 39.7% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items.


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

Baxter Wilson Plant Event

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Baxter Wilson Plant Event in the Form 10-K for a discussion of the Baxter Wilson plant event. During the first quarter 2015, Entergy Mississippi received $27.8 million of previously accrued insurance proceeds with $12.7 million allocated to capital spending and $15.1 million allocated to operation and maintenance expenses.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$61,633

 

$31

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
65,167

 
26,181

Investing activities
(42,340
)
 
(49,870
)
Financing activities
(749
)
 
94,994

Net increase in cash and cash equivalents
22,078

 
71,305

 
 
 
 
Cash and cash equivalents at end of period

$83,711

 

$71,336


Operating Activities

Net cash flow provided by operating activities increased $39 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

increased recovery of fuel costs compared to prior year;
$15.1 million in insurance proceeds received in the first quarter 2015 related to the Baxter Wilson plant event. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Baxter Wilson Plant Event in the Form 10-K for a discussion of the Baxter Wilson plant event; and
timing of collections from customers.

The increase was partially offset by income tax payments of $0.6 million in the three months ended March 31, 2015 compared to income tax refunds of $9.4 million in the three months ended March 31, 2014. Entergy Mississippi had income tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax payments in 2015 resulted primarily from final settlement of amounts outstanding associated with the 2006-2007 IRS audit. The 2014 income tax refunds were received in accordance with intercompany state income tax sharing arrangements.


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

Investing Activities

Net cash flow used in investing activities decreased $7.5 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

$12.7 million of insurance proceeds received in the first quarter 2015 related to the Baxter Wilson Plant Event. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Baxter Wilson Plant Event in the Form 10-K for a discussion of the Baxter Wilson plant event; and
money pool activity.

The decrease was partially offset by an increase in fossil-fueled generation construction expenditures primarily due to a higher scope of work done during plant outages in the first quarter 2015 compared to the same period in 2014.

Increases in Entergy Mississippi’s receivable from the money pool are a use of cash flow, and Entergy Mississippi’s receivable from the money pool increased by $9.9 million for the three months ended March 31, 2015 compared to increasing by $15.4 million for the three months ended March 31, 2014.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Mississippi’s financing activities used $0.7 million of cash for the three months ended March 31, 2015 compared to providing $95 million of cash for the three months ended March 31, 2014 primarily due to the issuance of $100 million of 3.75% Series first mortgage bonds in March 2014.

Capital Structure

Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
 
March 31, 2015
 
December 31, 2014
Debt to capital
50.6
%
 
51.2%
Effect of subtracting cash
(2.0
%)
 
(1.5%)
Net debt to net capital
48.6
%
 
49.7%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, capital lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition.  Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

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


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

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
March 31, 2015
 
December 31,
2014
 
March 31, 2014
 
December 31,
2013
(In Thousands)
$10,522
 
$644
 
$15,427
 
($3,536)

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

Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire in May 2015. Entergy Mississippi expects to renew all of its credit facilities prior to expiration. No borrowings were outstanding under the credit facilities as of March 31, 2015.  In addition, Entergy Mississippi is a party to uncommitted letter of credit facilities as a means to post collateral to support its obligations under MISO. As of March 31, 2015, a $9.5 million letter of credit was outstanding under one of Entergy Mississippi’s letter of credit facilities. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Fuel and purchased power recovery

Mississippi Attorney General Complaint

The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution.  The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand.  Entergy believes the complaint is unfounded.  In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S. District Court in Jackson, Mississippi.  The Mississippi attorney general moved to remand the matter to state court.  In August 2012 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.

The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act.  In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the Attorney General’s complaint.  In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings.  

In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not considered “mass actions” under the Class Action Fairness Act, so as to establish federal subject matter jurisdiction. One day later the Attorney General renewed his motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies responded to that motion reiterating the additional grounds asserted for federal question jurisdiction, and the District Court held oral argument on the renewed motion to remand in February 2014. In April 2015 the District Court entered an order denying the renewed motion to remand, holding that the District Court has federal question subject matter jurisdiction. The District Court has not yet ruled on the defendant Entergy companies’ motion for judgment on the pleadings, which if granted would dismiss the case.


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

Federal Regulation

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

Nuclear Matters

See “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for unbilled revenue and qualified pension and other postretirement benefits.




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ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$360,815

 

$348,196

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
90,611

 
57,315

Purchased power
 
92,158

 
128,052

Other operation and maintenance
 
65,072

 
55,358

Taxes other than income taxes
 
25,020

 
22,267

Depreciation and amortization
 
30,830

 
28,111

Other regulatory charges (credits) - net
 
2,285

 
(39
)
TOTAL
 
305,976

 
291,064

 
 
 
 
 
OPERATING INCOME
 
54,839

 
57,132

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
771

 
435

Interest and investment income
 
28

 
338

Miscellaneous - net
 
(802
)
 
(839
)
TOTAL
 
(3
)
 
(66
)
 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
14,246

 
14,428

Allowance for borrowed funds used during construction
 
(417
)
 
(228
)
TOTAL
 
13,829

 
14,200

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
41,007

 
42,866

 
 
 
 
 
Income taxes
 
16,072

 
17,027

 
 
 
 
 
NET INCOME
 
24,935

 
25,839

 
 
 
 
 
Preferred dividend requirements and other
 
707

 
707

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$24,228

 

$25,132

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$24,935

 

$25,839

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
30,830

 
28,111

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(51,789
)
 
(5,525
)
Changes in assets and liabilities:
 
 
 
 
Receivables
 
20,385

 
(12,663
)
Fuel inventory
 
(4,628
)
 
1,536

Accounts payable
 
(12,413
)
 
13,498

Taxes accrued
 
21,501

 
(11,595
)
Interest accrued
 
(6,218
)
 
136

Deferred fuel costs
 
40,244

 
(22,302
)
Other working capital accounts
 
(997
)
 
4,401

Provisions for estimated losses
 
(157
)
 
1,391

Other regulatory assets
 
15,065

 
4,842

Pension and other postretirement liabilities
 
(4,153
)
 
(3,188
)
Other assets and liabilities
 
(7,438
)
 
1,700

Net cash flow provided by operating activities
 
65,167

 
26,181

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(45,976
)
 
(34,877
)
Allowance for equity funds used during construction
 
771

 
435

Insurance proceeds
 
12,745

 

Changes in money pool receivable - net
 
(9,878
)
 
(15,427
)
Other
 
(2
)
 
(1
)
Net cash flow used in investing activities
 
(42,340
)
 
(49,870
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of long-term debt
 
(42
)
 
99,237

Change in money pool payable - net
 

 
(3,536
)
Dividends paid:
 
 
 
 
Preferred stock
 
(707
)
 
(707
)
Net cash flow provided by (used in) financing activities
 
(749
)
 
94,994

 
 
 
 
 
Net increase in cash and cash equivalents
 
22,078

 
71,305

Cash and cash equivalents at beginning of period
 
61,633

 
31

Cash and cash equivalents at end of period
 

$83,711

 

$71,336

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

$19,813

 

$13,616

Income taxes
 

$597

 

($9,440
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$6,077

 

$1,223

Temporary cash investments
 
77,634

 
60,410

Total cash and cash equivalents
 
83,711

 
61,633

Accounts receivable:
 
 

 
 

Customer
 
88,854

 
78,593

Allowance for doubtful accounts
 
(913
)
 
(873
)
Associated companies
 
21,913

 
21,233

Other
 
7,441

 
42,009

Accrued unbilled revenues
 
43,791

 
43,374

Total accounts receivable
 
161,086

 
184,336

Accumulated deferred income taxes
 
2,356

 
5,198

Fuel inventory - at average cost
 
47,364

 
42,736

Materials and supplies - at average cost
 
38,717

 
37,741

Prepayments and other
 
6,286

 
7,315

TOTAL
 
339,520

 
338,959

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Non-utility property - at cost (less accumulated depreciation)
 
4,637

 
4,642

Escrow accounts
 
41,754

 
41,752

TOTAL
 
46,391

 
46,394

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
3,955,077

 
3,999,918

Property under capital lease
 
3,883

 
4,185

Construction work in progress
 
85,035

 
67,514

TOTAL UTILITY PLANT
 
4,043,995

 
4,071,617

Less - accumulated depreciation and amortization
 
1,471,931

 
1,516,540

UTILITY PLANT - NET
 
2,572,064

 
2,555,077

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
43,959

 
49,306

Other regulatory assets
 
355,029

 
364,747

Other
 
21,282

 
19,121

TOTAL
 
420,270

 
433,174

 
 
 
 
 
TOTAL ASSETS
 

$3,378,245

 

$3,373,604

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 

 
 

Accounts payable:
 
 

 
 

Associated companies
 

$43,889

 

$49,832

Other
 
57,323

 
63,300

Customer deposits
 
79,549

 
77,753

Taxes accrued
 
75,066

 
53,565

Accumulated deferred income taxes
 
195

 

Interest accrued
 
16,954

 
23,172

Deferred fuel costs
 
42,438

 
2,194

Other
 
14,715

 
17,533

TOTAL
 
330,129

 
287,349

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
738,678

 
800,374

Accumulated deferred investment tax credits
 
10,523

 
6,370

Asset retirement cost liabilities
 
6,885

 
6,786

Accumulated provisions
 
49,985

 
50,142

Pension and other postretirement liabilities
 
131,003

 
135,156

Long-term debt
 
1,058,869

 
1,058,838

Other
 
15,394

 
16,038

TOTAL
 
2,011,337

 
2,073,704

 
 
 
 
 
Commitments and Contingencies
 
 

 
 

 
 
 
 
 
Preferred stock without sinking fund
 
50,381

 
50,381

 
 
 
 
 
COMMON EQUITY
 
 

 
 

Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2015 and 2014
 
199,326

 
199,326

Capital stock expense and other
 
(690
)
 
(690
)
Retained earnings
 
787,762

 
763,534

TOTAL
 
986,398

 
962,170

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,378,245

 

$3,373,604

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Capital Stock
Expense and
Other
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$199,326

 

($690
)
 

$752,941

 

$951,577

 
 
 
 
 
 
 
 
Net income

 

 
25,839

 
25,839

Preferred stock dividends

 

 
(707
)
 
(707
)
 
 
 
 
 
 
 
 
Balance at March 31, 2014

$199,326

 

($690
)
 

$778,073

 

$976,709

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$199,326

 

($690
)
 

$763,534

 

$962,170

 
 
 
 
 
 
 
 
Net income

 

 
24,935

 
24,935

Preferred stock dividends

 

 
(707
)
 
(707
)
 
 
 
 
 
 
 
 
Balance at March 31, 2015

$199,326

 

($690
)
 

$787,762

 

$986,398

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY MISSISSIPPI, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Increase/
 
 
Description
 
2015
 
2014
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$154

 

$154

 

$—

 

Commercial
 
113

 
109

 
4

 
4

Industrial
 
40

 
38

 
2

 
5

Governmental
 
12

 
11

 
1

 
9

Total retail
 
319

 
312

 
7

 
2

Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
22

 
28

 
(6
)
 
(21
)
Non-associated companies
 
3

 
4

 
(1
)
 
(25
)
Other
 
17

 
4

 
13

 
325

Total
 

$361

 

$348

 

$13

 
4

 
 
 

 
 

 
 

 
 

Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
1,488

 
1,577

 
(89
)
 
(6
)
Commercial
 
1,110

 
1,129

 
(19
)
 
(2
)
Industrial
 
517

 
528

 
(11
)
 
(2
)
Governmental
 
98

 
99

 
(1
)
 
(1
)
Total retail
 
3,213

 
3,333

 
(120
)
 
(4
)
Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
474

 
355

 
119

 
34

Non-associated companies
 
38

 
35

 
3

 
9

Total
 
3,725

 
3,723

 
2

 



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ENTERGY NEW ORLEANS, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Algiers Asset Transfer

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Algiers Asset Transfer” in the Form 10-K.

As discussed in the Form 10-K, in October 2014 Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that currently serve Entergy Louisiana’s customers in Algiers. In March 2015 the City Council’s Utility advisors filed direct testimony recommending that the Algiers asset transfer be approved subject to certain conditions that Entergy Louisiana and Entergy New Orleans believe they will be able to satisfy. If the necessary approvals are obtained from the City Council, Entergy Louisiana expects to transfer the Algiers assets to Entergy New Orleans in the second half of 2015. In April 2015 the FERC issued an order approving the Algiers asset transfer.

Results of Operations

Net Income

Net income increased $2.8 million primarily due to lower other operation and maintenance expenses and lower taxes other than income taxes.

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the changes in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$66.0

Net gas revenue
(1.0
)
Miscellaneous items
1.0

2015 net revenue

$66.0


The net gas revenue variance is primarily due to the effect of less favorable weather, primarily in the residential and commercial sectors, in 2015 as compared to the same period in prior year.

Other Income Statement Variances

Other operation and maintenance expenses decreased primarily due to a decrease of $2.6 million in fossil- fueled generation expenses resulting primarily from increases in 2014 to loss reserves related to asbestos claims.

Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes resulting from lower electric and gas retail revenues as compared to the prior year and a decrease in ad valorem taxes. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.


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Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis

Income Taxes

The effective income tax rate was 34.5% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to flow-through tax accounting, partially offset by state income taxes and certain book and tax differences related to utility plant items.

The effective income tax rate was 31.6% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to flow-through tax accounting, partially offset by state income taxes and certain book and tax differences related to utility plant items.

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$42,389

 

$33,489

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
5,524

 
7,451

Investing activities
(18,297
)
 
(14,794
)
Financing activities
(7,566
)
 
(260
)
Net decrease in cash and cash equivalents
(20,339
)
 
(7,603
)
 
 
 
 
Cash and cash equivalents at end of period

$22,050

 

$25,886


Operating Activities

Net cash flow provided by operating activities decreased $1.9 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to the timing of payments to vendors and an increase of $3.2 million in payments related to settlements on asbestos claims, substantially offset by the timing of collection of receivables from customers.

Investing Activities

Net cash flow used in investing activities increased $3.5 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to higher construction expenditures as result of increased spending on information technology projects in 2015 and money pool activity.

Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’s receivable from the money pool increased $2.4 million for the three months ended March 31, 2015 compared to increasing $0.7 million for the three months ended March 31, 2014.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash used in financing activities increased $7.3 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to $7.3 million in common stock dividends paid in 2015.


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Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis

Capital Structure

Entergy New Orleans’s capitalization is balanced between equity and debt, as shown in the following table.
 
March 31,
 2015
 
December 31,
2014
Debt to capital
47.3
%
 
47.7
%
Effect of subtracting cash
(2.5
%)
 
(5.2
%)
Net debt to net capital
44.8
%
 
42.5
%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy New Orleans uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition.  Entergy New Orleans uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents.

Uses and Sources of Capital

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

Entergy New Orleans’s receivables from the money pool were as follows:
March 31,
2015
 
December 31,
2014
 
March 31,
2014
 
December 31,
2013
(In Thousands)
$2,849
 
$442
 
$5,430
 
$4,737

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

Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in November 2015.  No borrowings were outstanding under the facility as of March 31, 2015. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of March 31, 2015, an $8.5 million letter of credit was outstanding under Entergy New Orleans’s letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

State and Local Rate Regulation

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

Storm Cost Recovery

As discussed in the Form 10-K, in January 2015, Entergy New Orleans filed with the City Council an application requesting that the City Council grant a financing order authorizing the securitization of Entergy New Orleans’s storm costs, storm reserves, and issuance costs pursuant to Louisiana Act 64. In February 2015 the City Council approved a resolution establishing an expedited procedural schedule that provided for a hearing on the securitization application in late-April 2015, with a decision to be rendered no later than May 2015. In April 2015 the City Council’s Utility

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Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis

advisors filed direct testimony recommending that the proposed securitization be approved subject to certain limited modifications, and Entergy New Orleans filed rebuttal testimony later in April 2015. Also in April 2015, the parties’ joint motion to continue the hearing to facilitate settlement negotiations was granted.

Union Power Station Power Purchase Agreement

In February 2015, Entergy New Orleans filed an application with the City Council seeking authorization to enter into a power purchase agreement, subject to certain conditions, with Entergy Gulf States Louisiana to purchase on a life-of-unit basis 20% of the capacity and related energy of the two power blocks of the Union Power Station that Entergy Gulf States Louisiana is seeking to purchase. In the application, Entergy New Orleans also seeks authorization from the City Council for full and timely cost recovery in rates for all costs associated with the power purchase agreement. In April 2015 the City Council approved a procedural schedule for this proceeding that would provide for a City Council decision in July 2015.

Federal Regulation

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

Nuclear Matters

See “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for unbilled revenue and qualified pension and other postretirement benefits.

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ENTERGY NEW ORLEANS, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$111,769

 

$140,227

Natural gas
 
35,131

 
46,340

TOTAL
 
146,900

 
186,567

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
19,933

 
51,162

Purchased power
 
61,225

 
69,145

Other operation and maintenance
 
25,204

 
28,131

Taxes other than income taxes
 
11,390

 
13,135

Depreciation and amortization
 
9,793

 
9,465

Other regulatory charges (credits) - net
 
(213
)
 
248

TOTAL
 
127,332

 
171,286

 
 
 
 
 
OPERATING INCOME
 
19,568

 
15,281

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
247

 
355

Interest and investment income
 
25

 
17

Miscellaneous - net
 
352

 
(347
)
TOTAL
 
624

 
25

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
3,427

 
3,362

Allowance for borrowed funds used during construction
 
(110
)
 
(173
)
TOTAL
 
3,317

 
3,189

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
16,875

 
12,117

 
 
 
 
 
Income taxes
 
5,821

 
3,823

 
 
 
 
 
NET INCOME
 
11,054

 
8,294

 
 
 
 
 
Preferred dividend requirements and other
 
241

 
241

 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$10,813

 

$8,053

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$11,054

 

$8,294

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
9,793

 
9,465

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
4,884

 
5,931

Changes in assets and liabilities:
 
 
 
 
Receivables
 
4,416

 
(2,055
)
Fuel inventory
 
1,360

 
1,246

Accounts payable
 
(3,829
)
 
454

Interest accrued
 
(1,241
)
 
(1,357
)
Deferred fuel costs
 
(4,059
)
 
(1,710
)
Other working capital accounts
 
(8,600
)
 
(13,493
)
Provisions for estimated losses
 
(2,012
)
 
3,974

Other regulatory assets
 
(359
)
 
537

Pension and other postretirement liabilities
 
(3,013
)
 
(1,367
)
Other assets and liabilities
 
(2,870
)
 
(2,468
)
Net cash flow provided by operating activities
 
5,524

 
7,451

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(14,334
)
 
(12,563
)
Allowance for equity funds used during construction
 
247

 
355

Changes in money pool receivable - net
 
(2,407
)
 
(693
)
Receipts from storm reserve escrow account
 
3

 

Payments to storm reserve escrow account
 
(1,806
)
 
(1,893
)
Net cash flow used in investing activities
 
(18,297
)
 
(14,794
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Dividends paid:
 
 
 
 
Common stock
 
(7,250
)
 

Preferred stock
 
(241
)
 
(241
)
Other
 
(75
)
 
(19
)
Net cash flow used in financing activities
 
(7,566
)
 
(260
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(20,339
)
 
(7,603
)
Cash and cash equivalents at beginning of period
 
42,389

 
33,489

Cash and cash equivalents at end of period
 

$22,050

 

$25,886

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

$4,440

 

$4,491

Income taxes
 

$40

 

$—

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
 
 
 
Cash
 

$1,037

 

$1,006

Temporary cash investments
 
21,013

 
41,383

Total cash and cash equivalents
 
22,050

 
42,389

Accounts receivable:
 
 
 
 
Customer
 
39,174

 
35,663

Allowance for doubtful accounts
 
(250
)
 
(262
)
Associated companies
 
10,116

 
11,693

Other
 
2,619

 
3,223

Accrued unbilled revenues
 
13,114

 
16,465

Total accounts receivable
 
64,773

 
66,782

Accumulated deferred income taxes
 
6,200

 
8,562

Fuel inventory - at average cost
 
1,656

 
3,016

Materials and supplies - at average cost
 
12,723

 
12,650

Prepayments and other
 
13,633

 
6,887

TOTAL
 
121,035

 
140,286

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

 
1,016

Storm reserve escrow account
 
19,841

 
18,038

TOTAL
 
20,857

 
19,054

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
946,420

 
936,862

Natural gas
 
229,884

 
228,979

Construction work in progress
 
18,370

 
18,866

TOTAL UTILITY PLANT
 
1,194,674

 
1,184,707

Less - accumulated depreciation and amortization
 
603,108

 
594,945

UTILITY PLANT - NET
 
591,566

 
589,762

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

 
4,080

Other regulatory assets
 
175,955

 
175,596

Other
 
6,602

 
5,345

TOTAL
 
186,637

 
185,021

 
 
 
 
 
TOTAL ASSETS
 

$920,095

 

$934,123

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY NEW ORLEANS, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 
 
 
Associated companies
 

$31,345

 

$33,170

Other
 
19,624

 
22,435

Customer deposits
 
25,089

 
24,681

Interest accrued
 
2,297

 
3,538

Deferred fuel costs
 
24,338

 
28,397

Other
 
4,641

 
6,830

TOTAL CURRENT LIABILITIES
 
107,334

 
119,051

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
205,280

 
199,241

Accumulated deferred investment tax credits
 
828

 
864

Regulatory liability for income taxes - net
 
17,670

 
20,640

Asset retirement cost liabilities
 
2,554

 
2,511

Accumulated provisions
 
23,865

 
25,877

Pension and other postretirement liabilities
 
59,427

 
62,440

Long-term debt
 
225,875

 
225,866

Gas system rebuild insurance proceeds
 
20,776

 
23,218

Other
 
5,118

 
6,610

TOTAL NON-CURRENT LIABILITIES
 
561,393

 
567,267

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
Preferred stock without sinking fund
 
19,780

 
19,780

 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2015 and 2014
 
33,744

 
33,744

Paid-in capital
 
36,294

 
36,294

Retained earnings
 
161,550

 
157,987

TOTAL
 
231,588

 
228,025

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$920,095

 

$934,123

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY NEW ORLEANS, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$33,744

 

$36,294

 

$136,245

 

$206,283

 
 
 
 
 
 
 
 
Net income

 

 
8,294

 
8,294

Preferred stock dividends

 

 
(241
)
 
(241
)
 
 
 
 
 
 
 
 
Balance at March 31, 2014

$33,744

 

$36,294

 

$144,298

 

$214,336

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$33,744

 

$36,294

 

$157,987

 

$228,025

 
 
 
 
 
 
 
 
Net income

 

 
11,054

 
11,054

Common stock dividends

 

 
(7,250
)
 
(7,250
)
Preferred stock dividends

 

 
(241
)
 
(241
)
 
 
 
 
 
 
 
 
Balance at March 31, 2015

$33,744

 

$36,294

 

$161,550

 

$231,588

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY NEW ORLEANS, INC.
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Increase/
 
 

Description
 
2015
 
2014
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 

Electric Operating Revenues:
 
 
 
 

 
 

 
 

Residential
 

$43

 

$54

 

($11
)
 
(20
)
Commercial
 
38

 
43

 
(5
)
 
(12
)
Industrial
 
6

 
8

 
(2
)
 
(25
)
Governmental
 
13

 
15

 
(2
)
 
(13
)
Total retail
 
100

 
120

 
(20
)
 
(17
)
Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
9

 
18

 
(9
)
 
(50
)
  Non associated companies
 

 
3

 
(3
)
 
(100
)
Other
 
3

 
(1
)
 
4

 
(400
)
Total
 

$112

 

$140

 

($28
)
 
(20
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 

 
 

 
 

 
 

Residential
 
493

 
541

 
(48
)
 
(9
)
Commercial
 
475

 
472

 
3

 
1

Industrial
 
102

 
106

 
(4
)
 
(4
)
Governmental
 
182

 
175

 
7

 
4

Total retail
 
1,252

 
1,294

 
(42
)
 
(3
)
Sales for resale:
 
 

 
 

 
 

 
 

Associated companies
 
193

 
267

 
(74
)
 
(28
)
Non-associated companies
 
4

 
10

 
(6
)
 
(60
)
Total
 
1,449

 
1,571

 
(122
)
 
(8
)


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ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Net income increased $3.4 million primarily due to higher net revenue and lower interest expense, partially offset by higher other operation and maintenance expenses and higher taxes other than income taxes.

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the first quarter 2015 to the first quarter 2014:
 
Amount
 
(In Millions)
2014 net revenue

$135.3

Retail electric price
4.5

Net wholesale revenue
2.8

Fuel recovery
2.6

Volume/weather
2.3

Purchased power capacity
(2.1
)
Rent from electric property
(3.2
)
Other
1.5

2015 net revenue

$143.7

    
The retail electric price variance is primarily due to an annual base rate increase of $18.5 million, effective April 2014, as a result of the PUCT’s order in the September 2013 rate case. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case.

The net wholesale revenue variance is primarily due to higher capacity revenue resulting from the purchased power agreements between Entergy Gulf States Louisiana and Entergy Texas.

The fuel recovery variance is primarily due to an increase in recoverable fuel expenses as a result of a change in the application of the fuel factor. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the PUCT fuel cost proceedings.

The volume/weather variance is primarily due to an increase in unbilled sales volume, partially offset by a decrease of 188 GWh, or 4%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales and decreased industrial usage in various industries as compared to the same period in prior year. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Unbilled Revenue in the Form 10-K for further discussion of the accounting for unbilled revenues.

The purchased power capacity variance is primarily due to increased expenses due to contract changes and price changes for ongoing purchased power capacity.

The rent from electric property variance is primarily due to a decrease in right-of-way revenues in the first quarter 2015 as compared to the first quarter 2014.

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Management's Financial Discussion and Analysis

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:

an increase of $3.4 million in fossil-fueled generation expenses resulting from an overall higher scope of work done compared to prior year; and
an increase of $2.3 million in transmission expenses primarily due to an increase in costs related to the participation in the MISO RTO.

The increase was partially offset by a decrease of $1.5 million in compensation and benefits costs primarily due to a decrease in the accrual for incentive-based compensation, partially offset by an increase in net periodic pension and other postretirement benefit costs as a result of lower discount rates and changes in retirement and mortality assumptions.  See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates – Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting from an increase in the annual city franchise tax amortization and increases in ad valorem taxes and payroll taxes. Franchise taxes have no effect on net income as these taxes are recovered through the franchise tax rider.

Interest expense decreased primarily due to the retirement, prior to maturity, of $150 million of 7.875% Series first mortgage bonds in June 2014, partially offset by the issuance of $135 million of 5.625% Series first mortgage bonds in May 2014.

Income Taxes

The effective income tax rate was 33.3% for the first quarter 2015. The difference in the effective income tax rate for the first quarter 2015 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by the provision for uncertain tax positions and certain book and tax differences related to utility plant items.

The effective income tax rate was 39.2% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items and state income taxes. 

Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$30,441

 

$46,488

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
66,325

 
(1,319
)
Investing activities
(57,511
)
 
(19,764
)
Financing activities
(23,743
)
 
(23,481
)
Net decrease in cash and cash equivalents
(14,929
)
 
(44,564
)
 
 
 
 
Cash and cash equivalents at end of period

$15,512

 

$1,924



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

Operating Activities

Entergy Texas’s operating activities provided $66.3 million of cash for the three months ended March 31, 2015 compared to using $1.3 million of cash for the three months ended March 31, 2014 primarily due to increased recovery of fuel costs compared to prior year and the timing of collections from customers.

Investing Activities

Net cash flow used in investing activities increased $37.7 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to:

an increase in transmission construction expenditures due to a greater scope of projects in 2015;
an increase in fossil-fueled generation construction expenditures primarily due to a greater scope of work during plant outages in 2015; and
money pool activity.

Increases in Entergy Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas’s receivable from the money pool increased by $1.5 million for the three months ended March 31, 2015 compared to decreasing by $6.3 million for the three months ended March 31, 2014.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow used in financing activities increased $0.3 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to money pool activity, substantially offset by $40 million in common stock dividends paid in 2014.

Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $39.2 million for the three months ended March 31, 2014.

Capital Structure

Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table.
 
March 31, 2015
 
December 31,
2014
Debt to capital
61.6
%
 
62.4
%
Effect of excluding the securitization bonds
(11.5
%)
 
(11.8
%)
Debt to capital, excluding securitization bonds (a)
50.1
%
 
50.6
%
Effect of subtracting cash
(0.4
%)
 
(0.9
%)
Net debt to net capital, excluding securitization bonds (a)
49.7
%
 
49.7
%

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

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

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Management's Financial Discussion and Analysis

creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

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

Entergy Texas’s receivables from the money pool were as follows:

March 31,
2015
 
December 31,
2014
 
March 31,
2014
 
December 31,
2013
(In Thousands)
$1,838
 
$306
 
($39,155)
 
$6,287

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

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in March 2019.  The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As of March 31, 2015, there were no cash borrowings and $1.3 million of letters of credit outstanding under the credit facility.  In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations under MISO. As of March 31, 2015, an $11 million letter of credit was outstanding under Entergy Texas’s letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Union Power Station Purchase Agreement

As discussed in the Form 10-K, in December 2014, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas entered into an asset purchase agreement to acquire the Union Power Station. The purchase of the Union Power Station is contingent upon, among other things, obtaining necessary approvals, including cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC, LPSC, PUCT, and FERC, as well as clearance under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act).  In December 2014, Entergy Texas filed its application with the PUCT seeking one of the two necessary PUCT approvals of the acquisition.  In April 2015 the Office of Public Utility Counsel filed testimony recommending that the Union Power Station transaction be determined not to be consistent with the public interest, and Texas Industrial Energy Consumers filed testimony concluding that serious concerns exist as to whether Entergy Texas needs the capacity of Union Power Station and whether Union Power Station is the most economical alternative. Also in April 2015, East Texas Electric Cooperative filed testimony raising certain transmission-related issues with respect to the proposed acquisition. In May 2015, PUCT staff filed testimony concluding that Entergy Texas had not adequately supported its demonstration of need for the facility or the extent of its due diligence in considering alternatives to the acquisition of Union Power Station. The PUCT staff further concluded that (i) Entergy Texas’ financial condition would remain adequate should it acquire the facility regardless of whether it was also allowed to recover its requested acquisition adjustment and (ii) Entergy Texas had not provided sufficient information for PUCT staff to determine the reasonable value of the facility. The PUCT has indicated that it will convene the hearing on the merits of the initial requested approval in June 2015.  Entergy Texas intends to file a rate application to seek cost recovery in the second quarter of 2015.  In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC and Entergy Arkansas filed its application with the APSC, each for approval of the acquisition and cost recovery.  The LPSC established a procedural schedule providing for a hearing on the merits in August 2015. The APSC established a procedural schedule providing for a hearing on the merits in September 2015. In February 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed a notification and report form pursuant to the HSR Act with the United States Department of Justice (DOJ) and Federal Trade Commission with respect to their planned acquisition of the Union Power Station. 

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Management's Financial Discussion and Analysis

Union Power Partners, L.P. (UPP), the seller, also filed a notification and report form in February 2015. In March 2015 the DOJ requested additional information and documentary material from each of the purchasing companies and UPP, which will have the effect of extending the DOJ review period. In March 2015, UPP, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas filed an application with the FERC requesting authorization for the transaction.  In April 2015, Entergy Texas and Entergy Gulf States Louisiana made a filing with the FERC to request authorization to recover their portions of the expected positive acquisition adjustment associated with the acquisition of the Union Power Station.  Also in April 2015, Entergy Arkansas, Entergy Gulf States Louisiana, and Entergy Texas made a filing with the FERC for approval of their proposed accounting treatment of the amortization expenses relating to the acquisition adjustment.  Closing is targeted to occur in late-2015.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

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

Industrial and Commercial Customers

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

Nuclear Matters

See “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of nuclear matters.

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of unbilled revenue and qualified pension and other postretirement benefits.

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$411,211

 

$440,256

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
73,807

 
50,968

Purchased power
 
174,205

 
234,826

Other operation and maintenance
 
56,525

 
51,210

Taxes other than income taxes
 
18,270

 
16,498

Depreciation and amortization
 
24,847

 
24,515

Other regulatory charges - net
 
19,544

 
19,183

TOTAL
 
367,198

 
397,200

 
 
 
 
 
OPERATING INCOME
 
44,013

 
43,056

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
1,224

 
845

Interest and investment income (loss)
 
(213
)
 
303

Miscellaneous - net
 
64

 
(464
)
TOTAL
 
1,075

 
684

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
20,996

 
22,661

Allowance for borrowed funds used during construction
 
(794
)
 
(589
)
TOTAL
 
20,202

 
22,072

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
24,886

 
21,668

 
 
 
 
 
Income taxes
 
8,295

 
8,503

 
 
 
 
 
NET INCOME
 

$16,591

 

$13,165

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$16,591

 

$13,165

Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
24,847

 
24,515

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(75,378
)
 
(49,904
)
Changes in assets and liabilities:
 
 
 
 
Receivables
 
22,233

 
(38,870
)
Fuel inventory
 
(3,976
)
 
79

Accounts payable
 
(14,776
)
 
(15,089
)
Prepaid taxes
 
66,279

 
43,701

Interest accrued
 
(8,952
)
 
(8,948
)
Deferred fuel costs
 
15,517

 
(26,901
)
Other working capital accounts
 
4,686

 
32,814

Provisions for estimated losses
 
1,252

 
54

Other regulatory assets
 
26,065

 
25,034

Pension and other postretirement liabilities
 
(4,387
)
 
(3,135
)
Other assets and liabilities
 
(3,676
)
 
2,166

Net cash flow provided by (used in) operating activities
 
66,325

 
(1,319
)
 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(66,371
)
 
(34,677
)
Allowance for equity funds used during construction
 
1,237

 
845

Changes in money pool receivable - net
 
(1,532
)
 
6,287

Changes in securitization account
 
9,155

 
7,781

Net cash flow used in investing activities
 
(57,511
)
 
(19,764
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Retirement of long-term debt
 
(22,769
)
 
(22,519
)
Change in money pool payable - net
 

 
39,155

Dividends paid:
 
 
 
 
Common stock
 

 
(40,000
)
Other
 
(974
)
 
(117
)
Net cash flow used in financing activities
 
(23,743
)
 
(23,481
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(14,929
)
 
(44,564
)
Cash and cash equivalents at beginning of period
 
30,441

 
46,488

Cash and cash equivalents at end of period
 

$15,512

 

$1,924

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

$29,004

 

$30,646

Income taxes
 

($933
)
 

($928
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$1,926

 

$1,733

Temporary cash investments
 
13,586

 
28,708

Total cash and cash equivalents
 
15,512

 
30,441

Securitization recovery trust account
 
28,065

 
37,219

Accounts receivable:
 
 
 
 
Customer
 
67,565

 
70,993

Allowance for doubtful accounts
 
(499
)
 
(672
)
Associated companies
 
45,435

 
57,004

Other
 
10,363

 
10,985

Accrued unbilled revenues
 
33,108

 
38,363

Total accounts receivable
 
155,972

 
176,673

Deferred fuel costs
 

 
11,861

Accumulated deferred income taxes
 
5,369

 
669

Fuel inventory - at average cost
 
53,878

 
49,902

Materials and supplies - at average cost
 
34,811

 
33,892

Prepayments and other
 
14,761

 
29,211

TOTAL
 
308,368

 
369,868

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investments in affiliates - at equity
 
647

 
655

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

 
376

Other
 
19,674

 
19,085

TOTAL
 
20,697

 
20,116

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
3,820,069

 
3,761,847

Construction work in progress
 
108,637

 
125,425

TOTAL UTILITY PLANT
 
3,928,706

 
3,887,272

Less - accumulated depreciation and amortization
 
1,469,690

 
1,454,701

UTILITY PLANT - NET
 
2,459,016

 
2,432,571

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
122,787

 
123,407

Other regulatory assets (includes securitization property of $504,964 as of March 31, 2015 and $521,424 as of December 31, 2014)
 
896,642

 
922,087

Long-term receivables - associated companies
 
25,753

 
26,156

Other
 
16,031

 
13,880

TOTAL
 
1,061,213

 
1,085,530

 
 
 
 
 
TOTAL ASSETS
 

$3,849,294

 

$3,908,085

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$200,000

 

$200,000

Accounts payable:
 
 
 
 
Associated companies
 
84,166

 
91,481

Other
 
65,411

 
87,910

Customer deposits
 
43,202

 
44,308

Taxes accrued
 
68,128

 
1,849

Interest accrued
 
20,805

 
29,757

Deferred fuel costs
 
3,656

 

Other
 
10,477

 
18,238

TOTAL
 
495,845

 
473,543

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
975,718

 
1,046,618

Accumulated deferred investment tax credits
 
14,510

 
14,735

Other regulatory liabilities
 
5,334

 
5,125

Asset retirement cost liabilities
 
4,677

 
4,610

Accumulated provisions
 
13,470

 
12,218

Pension and other postretirement liabilities
 
106,645

 
111,011

Long-term debt (includes securitization bonds of $542,897 as of March 31, 2015 and $565,659 as of December 31, 2014)
 
1,256,274

 
1,278,931

Other
 
68,399

 
69,463

TOTAL
 
2,445,027

 
2,542,711

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2015 and 2014
 
49,452

 
49,452

Paid-in capital
 
481,994

 
481,994

Retained earnings
 
376,976

 
360,385

TOTAL
 
908,422

 
891,831

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,849,294

 

$3,908,085

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2013

$49,452

 

$481,994

 

$355,581

 

$887,027

 
 
 
 
 
 
 
 
Net income

 

 
13,165

 
13,165

Common stock dividends

 

 
(40,000
)
 
(40,000
)
 
 
 
 
 
 
 
 
Balance at March 31, 2014

$49,452

 

$481,994

 

$328,746

 

$860,192

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$49,452

 

$481,994

 

$360,385

 

$891,831

 
 
 
 
 
 
 
 
Net income

 

 
16,591

 
16,591

 
 
 
 
 
 
 
 
Balance at March 31, 2015

$49,452

 

$481,994

 

$376,976

 

$908,422

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 
 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Increase/
 
 
Description
 
2015
 
2014
 
(Decrease)
 
%
 
 
(Dollars In Millions)
 
 
Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$156

 

$165

 

($9
)
 
(5
)
Commercial
 
90

 
88

 
2

 
2

Industrial
 
91

 
95

 
(4
)
 
(4
)
Governmental
 
6

 
6

 

 

Total retail
 
343

 
354

 
(11
)
 
(3
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
58

 
75

 
(17
)
 
(23
)
Non-associated companies
 
7

 
12

 
(5
)
 
(42
)
Other
 
3

 
(1
)
 
4

 
(400
)
Total
 

$411

 

$440

 

($29
)
 
(7
)
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
1,459

 
1,533

 
(74
)
 
(5
)
Commercial
 
1,047

 
1,046

 
1

 

Industrial
 
1,609

 
1,722

 
(113
)
 
(7
)
Governmental
 
66

 
68

 
(2
)
 
(3
)
Total retail
 
4,181

 
4,369

 
(188
)
 
(4
)
Sales for resale:
 
 
 
 
 
 
 
 
Associated companies
 
1,188

 
1,030

 
158

 
15

Non-associated companies
 
93

 
136

 
(43
)
 
(32
)
Total
 
5,462

 
5,535

 
(73
)
 
(1
)

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SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf.  The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.  System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement.  Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.

Net income remained relatively flat, increasing by $0.9 million, for the first quarter 2015 compared to the first quarter 2014.
    
Liquidity and Capital Resources

Cash Flow

Cash flows for the three months ended March 31, 2015 and 2014 were as follows:
 
2015
 
2014
 
(In Thousands)
Cash and cash equivalents at beginning of period

$223,179

 

$127,142

 
 
 
 
Cash flow provided by (used in):
 
 
 
Operating activities
39,719

 
85,670

Investing activities
(35,153
)
 
(119,532
)
Financing activities
(51,837
)
 
(9,075
)
Net decrease in cash and cash equivalents
(47,271
)
 
(42,937
)
 
 
 
 
Cash and cash equivalents at end of period

$175,908

 

$84,205


Operating Activities

Net cash flow provided by operating activities decreased $46 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to higher interest paid on the Grand Gulf sale-leaseback obligation as a result of the renewal in December 2013 and an increase of $19.7 million in income tax payments in 2015. System Energy had income tax payments of $25.3 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax payments in 2015 resulted primarily from final settlement of amounts outstanding associated with the 2006-2007 IRS audit. The decrease in cash provided was partially offset by a decrease in spending on nuclear refueling outages in 2015 as compared to the same period in 2014. See Note 10 to the financial statements in the Form 10-K for details on the Grand Gulf sale-leaseback obligation.

Investing Activities

Net cash flow used in investing activities decreased $84.4 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and

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

services deliveries, and the timing of cash payments during the nuclear fuel cycle, partially offset by money pool activity.

Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased by $20.9 million for the three months ended March 31, 2015 compared to increasing by $9 million for the three months ended March 31, 2014.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow used by financing activities increased $42.8 million for the three months ended March 31, 2015 compared to the three months ended March 31, 2014 primarily due to repayments of $20.4 million on the nuclear fuel company variable interest entity’s credit facility in 2015 compared to borrowings of $52.7 million on the nuclear fuel company variable interest entity’s credit facility in 2014. The increase was partially offset by a decrease of $35.3 million in principal payments on the Grand Gulf sale-leaseback obligation in 2015 compared to 2014. See Note 10 to the financial statements in the Form 10-K for details on the Grand Gulf sale-leaseback obligation.

Capital Structure

System Energy’s capitalization is balanced between equity and debt, as shown in the following table.  
 
March 31, 2015
 
December 31, 2014
Debt to capital
44.4
%
 
45.7
%
Effect of subtracting cash
(7.0
%)
 
(8.8
%)
Net debt to net capital
37.4
%
 
36.9
%

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

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. Following are additional updates to the information provided in the Form 10-K.
    
System Energy’s receivables from the money pool were as follows:
March 31, 2015
 
December 31,
2014
 
March 31, 2014
 
December 31,
2013
(In Thousands)
$23,246
 
$2,373
 
$18,244
 
$9,223

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


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

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $125 million scheduled to expire in June 2016.  As of March 31, 2015, no letters of credit were outstanding under the credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

In April 2015 the System Energy nuclear fuel company variable interest entity redeemed, at maturity, its $60 million of 5.33% Series G Notes.

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs and qualified pension and other postretirement benefits.






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SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING REVENUES
 
 
 
 
Electric
 

$156,039

 

$157,667

 
 
 
 
 
OPERATING EXPENSES
 
 
 
 
Operation and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
20,473

 
14,148

Nuclear refueling outage expenses
 
5,682

 
6,182

Other operation and maintenance
 
35,706

 
34,678

Decommissioning
 
11,703

 
10,192

Taxes other than income taxes
 
7,208

 
6,522

Depreciation and amortization
 
37,060

 
37,326

Other regulatory credits - net
 
(9,577
)
 
(3,410
)
TOTAL
 
108,255

 
105,638

 
 
 
 
 
OPERATING INCOME
 
47,784

 
52,029

 
 
 
 
 
OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
1,651

 
1,218

Interest and investment income
 
4,213

 
4,415

Miscellaneous - net
 
(221
)
 
(105
)
TOTAL
 
5,643

 
5,528

 
 
 
 
 
INTEREST EXPENSE
 
 
 
 
Interest expense
 
13,013

 
14,247

Allowance for borrowed funds used during construction
 
(436
)
 
(167
)
TOTAL
 
12,577

 
14,080

 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
40,850

 
43,477

 
 
 
 
 
Income taxes
 
15,317

 
18,858

 
 
 
 
 
NET INCOME
 

$25,533

 

$24,619

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Net income
 

$25,533

 

$24,619

Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
66,660

 
57,987

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
(10,618
)
 
28,873

Changes in assets and liabilities:
 
 
 
 
Receivables
 
2,952

 
47,002

Accounts payable
 
(6,919
)
 
21,210

Prepaid taxes and taxes accrued
 
(14,444
)
 
(26,542
)
Interest accrued
 
(14,282
)
 
7,477

Other working capital accounts
 
600

 
(46,388
)
Other regulatory assets
 
(2,493
)
 
2,890

Pension and other postretirement liabilities
 
(3,188
)
 
(1,981
)
Other assets and liabilities
 
(4,082
)
 
(29,477
)
Net cash flow provided by operating activities
 
39,719

 
85,670

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction expenditures
 
(13,324
)
 
(19,056
)
Allowance for equity funds used during construction
 
1,651

 
1,218

Nuclear fuel purchases
 
(16,699
)
 
(128,204
)
Proceeds from the sale of nuclear fuel
 
22,563

 
43,992

Proceeds from nuclear decommissioning trust fund sales
 
78,361

 
130,315

Investment in nuclear decommissioning trust funds
 
(86,832
)
 
(138,776
)
Changes in money pool receivable - net
 
(20,873
)
 
(9,021
)
Net cash flow used in investing activities
 
(35,153
)
 
(119,532
)
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
Retirement of long-term debt
 
(11,405
)
 
(46,743
)
Changes in credit borrowings - net
 
(20,404
)
 
52,684

Dividends paid:
 
 
 
 
Common stock
 
(20,000
)
 
(15,000
)
Other
 
(28
)
 
(16
)
Net cash flow used in financing activities
 
(51,837
)
 
(9,075
)
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(47,271
)
 
(42,937
)
Cash and cash equivalents at beginning of period
 
223,179

 
127,142

Cash and cash equivalents at end of period
 

$175,908

 

$84,205

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

$26,208

 

$4,894

Income taxes
 

$25,304

 

$5,564

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$4,424

 

$789

Temporary cash investments
 
171,484

 
222,390

Total cash and cash equivalents
 
175,908

 
223,179

Accounts receivable:
 
 
 
 
Associated companies
 
80,135

 
60,907

Other
 
4,410

 
5,717

Total accounts receivable
 
84,545

 
66,624

Materials and supplies - at average cost
 
80,975

 
80,049

Deferred nuclear refueling outage costs
 
20,937

 
26,580

Prepayments and other
 
6,429

 
2,312

TOTAL
 
368,794

 
398,744

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Decommissioning trust funds
 
696,223

 
679,840

TOTAL
 
696,223

 
679,840

 
 
 
 
 
UTILITY PLANT
 
 
 
 
Electric
 
4,246,650

 
4,244,902

Property under capital lease
 
573,784

 
573,784

Construction work in progress
 
56,391

 
50,382

Nuclear fuel
 
226,937

 
251,376

TOTAL UTILITY PLANT
 
5,103,762

 
5,120,444

Less - accumulated depreciation and amortization
 
2,854,193

 
2,819,688

UTILITY PLANT - NET
 
2,249,569

 
2,300,756

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
105,891

 
105,882

Other regulatory assets
 
338,097

 
335,613

Other
 
8,624

 
9,251

TOTAL
 
452,612

 
450,746

 
 
 
 
 
TOTAL ASSETS
 

$3,767,198

 

$3,830,086

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2015 and December 31, 2014
(Unaudited)
 
 
2015
 
2014
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$64,906

 

$76,310

Short-term borrowings
 

 
20,404

Accounts payable:
 
 
 
 
Associated companies
 
2,642

 
6,252

Other
 
28,111

 
33,096

Taxes accrued
 
8,823

 
23,267

Accumulated deferred income taxes
 
12,005

 
14,175

Interest accrued
 
18,914

 
33,196

Other
 
2,366

 
2,365

TOTAL
 
137,767

 
209,065

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
800,309

 
808,171

Accumulated deferred investment tax credits
 
51,163

 
49,313

Other regulatory liabilities
 
371,806

 
371,110

Decommissioning
 
769,620

 
757,918

Pension and other postretirement liabilities
 
125,964

 
129,152

Long-term debt
 
634,523

 
634,496

Other
 
2

 
350

TOTAL
 
2,753,387

 
2,750,510

 
 
 
 
 
Commitments and Contingencies
 
 
 
 
 
 
 
 
 
COMMON EQUITY
 
 
 
 
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2015 and 2014
 
789,350

 
789,350

Retained earnings
 
86,694

 
81,161

TOTAL
 
876,044

 
870,511

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,767,198

 

$3,830,086

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2015 and 2014
(Unaudited)
 
 
 
 
 
Common Equity
 
 
 
Common
Stock
 
Retained
Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
Balance at December 31, 2013

$789,350

 

$86,757

 

$876,107

 
 
 
 
 
 
Net income

 
24,619

 
24,619

Common stock dividends

 
(15,000
)
 
(15,000
)
 
 
 
 
 
 
Balance at March 31, 2014

$789,350

 

$96,376

 

$885,726

 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$789,350

 

$81,161

 

$870,511

 
 
 
 
 
 
Net income

 
25,533

 
25,533

Common stock dividends

 
(20,000
)
 
(20,000
)
 
 
 
 
 
 
Balance at March 31, 2015

$789,350

 

$86,694

 

$876,044

 
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 
 



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ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy.  Following are updates to that discussion. Also see “Item 5, Other Information, Environmental Regulation” below, for updates regarding environmental proceedings and regulation.

Texas Power Price Lawsuit

See Note 2 to the financial statements for a discussion of this proceeding.

Mississippi Attorney General Complaint

See Note 2 to the financial statements for a discussion of this proceeding.

Item 1A.  Risk Factors

There have been no material changes to the risk factors discussed in “PART I, Item 1A, Risk Factors” in the Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (a)
Period
 
Total Number of
Shares Purchased
 
Average Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan
 
Maximum $
Amount
of Shares that May
Yet be Purchased
Under a Plan (b)
 
 
 
 
 
 
 
 
 
1/01/2015-1/31/2015
 

 

$—

 

 

$350,052,918

2/01/2015-2/28/2015
 

 

$—

 

 

$350,052,918

3/01/2015-3/31/2015
 
325,400

 

$77.07

 
325,400

 

$350,052,918

Total
 
325,400

 

$—

 
325,400

 
 

In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock.  According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market.  Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.  In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities.  In addition, in the first quarter 2015, Entergy withheld 35,473 shares of its common stock at $88.83 per share, 40,050 shares of its common stock at $88.15 per share, 42,706 shares of its common stock at $87.51 per share, and 36,721 shares of its common stock at $88.67 per share to pay income taxes due upon vesting of restricted stock granted and performance unit payout as part of its long-term incentive program.

(a)
See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.

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(b)
Maximum amount of shares that may yet be repurchased relates only to the $500 million plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.

Item 5.  Other Information

Regulation of the Nuclear Power Industry

Nuclear Waste Policy Act of 1982

Spent Nuclear Fuel

See the discussion in Part I, Item 1 in the Form 10-K for information regarding litigation against the DOE related to the DOE’s breach of its obligation to remove spent fuel from nuclear sites. Following is an update to that discussion. In April 2015 the U.S. Court of Federal Claims issued a judgment in favor of Entergy Arkansas and against the DOE in the second round ANO damages case in the amount of $29.4 million. Also in April 2015 the U.S. Court of Federal Claims issued a judgment in favor of System Energy and against the DOE in the second round Grand Gulf damages case in the amount of $44.4 million. These decisions may be appealed by either party. Management cannot predict the timing or amount of receipt of funds pursuant to these judgments.

Nuclear Plant Decommissioning

See the discussion in Part I, Item 1 in the Form 10-K for information regarding decommissioning funding for the nuclear plants.  Following is an update to that discussion.  In March 2015, filings with the NRC were made for all Entergy subsidiaries’ nuclear plants reporting on decommissioning funding.  Those reports all showed that decommissioning funding for those nuclear plants met the NRC’s financial assurance requirements.

Environmental Regulation

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

Clean Air Act and Subsequent Amendments

Potential SO2 Nonattainment

The EPA issued a final rule in June 2010 adopting an SO2 1-hour national ambient air quality standard of 75 parts per billion.  The EPA designations for counties in attainment and nonattainment were originally due in June 2012, but the EPA initially has indicated that it will delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violations of the new standard. In July 2013 EPA issued final designations for these areas. In Entergy’s utility service territory, only St. Bernard Parish in Louisiana is designated as non-attainment for the SO2 1-hour national ambient air quality standard of 75 parts per billion. Entergy does not have a generation asset in that parish. Pursuant to a court order issued in Sierra Club v. McCarthy, No. 13-3953 (N.D. Cal.), the EPA will finalize another round of designations by July 2, 2016, for areas with newly monitored violations of the 2010 standard and those with stationary sources that emit over a threshold amount of SO2. Counties and parishes in which Entergy owns and operates fossil generating facilities that are expected to be assessed in this round of designations include Independence County and Jefferson County, Arkansas and Calcasieu Parish, Louisiana. In other areas, analysis is required once the EPA issues additional final regulations and guidance. Additional capital projects or operational changes may be required for Entergy facilities in areas eventually designated as in non-attainment of the standard or as contributing to non-attainment areas.


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Regional Haze

In June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that could potentially result in a requirement to install SO2 and NOx pollution control technology as Best Available Retrofit Control Technology (BART) on certain of Entergy’s fossil generation units.  The rule leaves certain CAVR determinations to the states.  The Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations under the CAVR.   In October 2011 the EPA released a proposed rule addressing the Arkansas Regional Haze SIP.  In the proposal the EPA disapproved a large portion of the Arkansas Regional Haze SIP, including the emission limits for NOx and SO2 at White Bluff.  The final rule was published, mostly unchanged, in March 2012 and became final in April 2012.  This triggered a two-year timeframe in which the EPA was required to either approve a revised SIP issued by Arkansas or issue a Federal Implementation Plan (FIP).  This two-year time frame expired in April 2014. Pursuant to a consent decree between the Sierra Club and the EPA, the agency is to issue a final FIP for Arkansas Regional Haze by no later than December 15, 2015. In April 2015 the EPA published a proposed FIP for Arkansas, taking comment on requiring installation of scrubbers and low NOx burners on both units at the White Bluff plant and both units at the Independence plant and NOx controls at the Lake Catherine plant. Entergy is reviewing the proposed FIP and expects to comment by the deadline. These decisions could impact the timing and level of control installation at Entergy's coal units in Arkansas.

Coal Combustion Residuals

In June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contained two primary regulatory options: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called “special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes under Subtitle D of RCRA.  Under both options, CCRs that are beneficially reused in certain processes would remain excluded from hazardous waste regulation. In April 2015 the EPA published the final CCR rule with the material being regulated under the second scenario presented above - as non-hazardous wastes regulated under RCRA Subtitle D.

The final regulations create new compliance requirements including modified storage, new notification and reporting practices, product disposal considerations, and CCR unit closure criteria.  Entergy believes that on-site disposal options will be available at its facilities, to the extent needed for CCR that cannot be transferred for beneficial reuse. Entergy expects to record asset retirement obligations in the second quarter 2015 at Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Mississippi, and Entergy Texas, the effects of which are not expected to affect materially the results of operations, financial position, or cash flows.

Other Environmental Matters

Entergy Arkansas

In April 2014 an EF4 tornado impacted two substation transformers in Entergy Arkansas’s Mayflower EHV substation. The tornado caused a release of approximately 25,000 gallons of non-PCB transformer oils, which subsequently flowed into a creek on Entergy Arkansas property. A report was made to the National Response Center, and several environmental agencies responded. Entergy initiated spill response activities within hours of the release with eventual oversight of the EPA and Arkansas Department of Environmental Quality personnel. At the direction of the agencies, Entergy Arkansas has installed several temporary monitoring and recovery wells throughout the site and has regularly pumped and sampled the wells to determine the site meets regulatory screening limits. Recovery and sampling operations will continue at the site until these limits are achieved; it is anticipated that this process could take up to two years to complete. Entergy Arkansas believes that its remaining liability at the site will not materially exceed the existing clean-up provision of $0.5 million.


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Earnings Ratios (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

The Registrant Subsidiaries have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:
 
 
Ratios of Earnings to Fixed Charges
 
 
Twelve Months Ended
 
 
December 31,
 
March 31,
 
 
2010
 
2011
 
2012
 
2013
 
2014
 
2015
Entergy Arkansas
 
3.91
 
4.31
 
3.79

 
3.62

 
3.08

 
2.76
Entergy Gulf States Louisiana
 
3.58
 
4.36
 
3.48

 
3.63

 
3.84

 
3.79
Entergy Louisiana
 
3.41
 
1.86
 
2.08

 
3.13

 
3.23

 
3.29
Entergy Mississippi
 
3.35
 
3.55
 
2.79

 
3.19

 
3.23

 
3.21
Entergy New Orleans
 
4.43
 
5.37
 
3.02

 
1.93

 
3.96

 
4.29
Entergy Texas
 
2.10
 
2.34
 
1.76

 
1.94

 
2.39

 
2.45
System Energy
 
3.64
 
3.85
 
5.12

 
5.66

 
4.04

 
4.05
 
 
Ratios of Earnings to Combined Fixed Charges
and Preferred Dividends/Distributions
 
 
Twelve Months Ended
 
 
December 31,
 
March 31,
 
 
2010
 
2011
 
2012
 
2013
 
2014
 
2015
Entergy Arkansas
 
3.60
 
3.83
 
3.36

 
3.25

 
2.76

 
2.49
Entergy Gulf States Louisiana
 
3.54
 
4.30
 
3.43

 
3.57

 
3.78

 
3.74
Entergy Louisiana
 
3.19
 
1.70
 
1.93

 
2.92

 
3.03

 
3.09
Entergy Mississippi
 
3.16
 
3.27
 
2.59

 
2.97

 
3.00

 
2.97
Entergy New Orleans
 
4.08
 
4.74
 
2.67

 
1.74

 
3.56

 
3.85

The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.

Item 6.  Exhibits *
 
12(a) -
Entergy Arkansas’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
 
 
 
 
12(b) -
Entergy Gulf States Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
 
 
 
 
12(c) -
Entergy Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined.
 
 
 
 
12(d) -
Entergy Mississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
 
 
 
 
12(e) -
Entergy New Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined.
 
 
 
 
12(f) -
Entergy Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined.
 
 
 
 
12(g) -
System Energy’s Computation of Ratios of Earnings to Fixed Charges, as defined.
 
 
 
 
31(a) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.
 
 
 
 
31(b) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.

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31(c) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.
 
 
 
 
31(d) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.
 
 
 
 
31(e) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana.
 
 
 
 
31(f) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana.
 
 
 
 
31(g) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
 
 
 
 
31(h) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
 
 
 
 
31(i) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
 
 
 
 
31(j) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
 
 
 
 
31(k) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
 
 
 
 
31(l) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
 
 
 
 
31(m) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
 
 
 
 
31(n) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
 
 
 
 
31(o) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
 
 
 
 
31(p) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
 
 
 
 
32(a) -
Section 1350 Certification for Entergy Corporation.
 
 
 
 
32(b) -
Section 1350 Certification for Entergy Corporation.
 
 
 
 
32(c) -
Section 1350 Certification for Entergy Arkansas.
 
 
 
 
32(d) -
Section 1350 Certification for Entergy Arkansas.
 
 
 
 
32(e) -
Section 1350 Certification for Entergy Gulf States Louisiana.
 
 
 
 
32(f) -
Section 1350 Certification for Entergy Gulf States Louisiana.
 
 
 
 
32(g) -
Section 1350 Certification for Entergy Louisiana.
 
 
 
 
32(h) -
Section 1350 Certification for Entergy Louisiana.
 
 
 
 
32(i) -
Section 1350 Certification for Entergy Mississippi.
 
 
 
 
32(j) -
Section 1350 Certification for Entergy Mississippi.
 
 
 
 
32(k) -
Section 1350 Certification for Entergy New Orleans.
 
 
 
 
32(l) -
Section 1350 Certification for Entergy New Orleans.
 
 
 
 
32(m) -
Section 1350 Certification for Entergy Texas.
 
 
 
 
32(n) -
Section 1350 Certification for Entergy Texas.
 
 
 
 
32(o) -
Section 1350 Certification for System Energy.
 
 
 
 
32(p) -
Section 1350 Certification for System Energy.
 
 
 
 
101 INS -
XBRL Instance Document.
 
 
 
 
101 SCH -
XBRL Taxonomy Extension Schema Document.
 
 
 
 
101 PRE -
XBRL Taxonomy Presentation Linkbase Document.
 
 
 
 
101 LAB -
XBRL Taxonomy Label Linkbase Document.
 
 
 
 
101 CAL -
XBRL Taxonomy Calculation Linkbase Document.

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101 DEF -
XBRL Definition Linkbase Document.
___________________________

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.

*
Incorporated herein by reference as indicated.


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY GULF STATES LOUISIANA, L.L.C.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
 
 
/s/ Alyson M. Mount
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)


Date:    May 7, 2015


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