Companies: 10,652     total market cap: $140.237 T
โ‚ฌEUR๐Ÿ‡ช๐Ÿ‡บโ‚นINR๐Ÿ‡ฎ๐Ÿ‡ณยฃGBP๐Ÿ‡ฌ๐Ÿ‡ง$CAD๐Ÿ‡จ๐Ÿ‡ฆ$AUD๐Ÿ‡ฆ๐Ÿ‡บ$NZD๐Ÿ‡ณ๐Ÿ‡ฟ$HKD๐Ÿ‡ญ๐Ÿ‡ฐ$SGD๐Ÿ‡ธ๐Ÿ‡ฌ
Entergy
ETR
#558
Rank
$43.39 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$97.16
Share price
1.75%
Change (1 day)
20.97%
Change (1 year)
๐Ÿ”‹ Electricity๐Ÿšฐ Utility companies โšก Energy
Categories
  1. Entergy
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2020 Q2

Entergy - 10-Q quarterly report FY2020 Q2


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

FORM 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________

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

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





Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of ClassTrading
Symbol		Name of Each Exchange
on Which Registered
Entergy Corporation
Common Stock, $0.01 Par Value
ETR
New York Stock Exchange
Common Stock, $0.01 Par Value
ETR
NYSE Chicago, Inc.
 
 
 
Entergy Arkansas, LLC
Mortgage Bonds, 4.90% Series due December 2052
EAB
New York Stock Exchange
 
Mortgage Bonds, 4.75% Series due June 2063
EAE
New York Stock Exchange
Mortgage Bonds, 4.875% Series due September 2066
EAI
New York Stock Exchange
 
 
 
Entergy Louisiana, LLC
Mortgage Bonds, 5.25% Series due July 2052
ELJ
New York Stock Exchange
 
Mortgage Bonds, 4.70% Series due June 2063
ELU
New York Stock Exchange
Mortgage Bonds, 4.875% Series due September 2066
ELC
New York Stock Exchange
 
 
 
Entergy Mississippi, LLC
Mortgage Bonds, 4.90% Series due October 2066
EMP
New York Stock Exchange
 
 
 
Entergy New Orleans, LLC
Mortgage Bonds, 5.0% Series due December 2052
ENJ
New York Stock Exchange
Mortgage Bonds, 5.50% Series due April 2066
ENO
New York Stock Exchange
 
 
 
Entergy Texas, Inc.
Mortgage Bonds, 5.625% Series due June 2064
EZT
New York Stock Exchange
5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share)
ETI/PR
New York Stock Exchange

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

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

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

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

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
Common Stock OutstandingOutstanding at July 31, 2020
Entergy Corporation($0.01 par value)200,211,323

Entergy Corporation, Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2019 and the Quarterly Report for Form 10-Q for the quarter ended March 31, 2020, filed by the individual registrants with the SEC, and should be read in conjunction therewith.


TABLE OF CONTENTS
Page Number
iii
vi
Part I. Financial Information
Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis
1
Consolidated Income Statements
21
Consolidated Statements of Comprehensive Income
23
Consolidated Statements of Cash Flows
24
Consolidated Balance Sheets
26
Consolidated Statements of Changes in Equity
28
Selected Operating Results
30
Notes to Financial Statements
Note 1. Commitments and Contingencies
31
Note 2. Rate and Regulatory Matters
32
Note 3. Equity
43
Note 4. Revolving Credit Facilities, Lines of Credit, Short-term Borrowings, and Long-term Debt
49
Note 5. Stock-based Compensation
54
Note 6. Retirement and Other Postretirement Benefits
56
Note 7. Business Segment Information
62
Note 8. Risk Management and Fair Values
65
Note 9. Decommissioning Trust Funds
85
Note 10. Income Taxes
92
Note 11. Property, Plant, and Equipment
93
Note 12. Variable Interest Entities
94
Note 13. Revenue
94
99
99
Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
100
Consolidated Income Statements
109
Consolidated Statements of Cash Flows
111
Consolidated Balance Sheets
112
Consolidated Statements of Changes in Member’s Equity
114
Selected Operating Results
115
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
116
Consolidated Income Statements
126
i
TABLE OF CONTENTS
Page Number
Consolidated Statements of Comprehensive Income
127
Consolidated Statements of Cash Flows
129
Consolidated Balance Sheets
130
Consolidated Statements of Changes in Equity
132
Selected Operating Results
133
Entergy Mississippi, LLC
Management’s Financial Discussion and Analysis
134
Income Statements
142
Statements of Cash Flows
143
Balance Sheets
144
Statements of Changes in Member’s Equity
146
Selected Operating Results
147
Entergy New Orleans, LLC and Subsidiaries
Management’s Financial Discussion and Analysis
148
Consolidated Income Statements
157
Consolidated Statements of Cash Flows
159
Consolidated Balance Sheets
160
Consolidated Statements of Changes in Member’s Equity
162
Selected Operating Results
163
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
164
Consolidated Income Statements
172
Consolidated Statements of Cash Flows
173
Consolidated Balance Sheets
174
Consolidated Statements of Changes in Equity
176
Selected Operating Results
177
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
178
Income Statements
185
Statements of Cash Flows
187
Balance Sheets
188
Statements of Changes in Common Equity
190
Part II. Other Information
191
191
192
192
194
196
ii
FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance.  Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements involve a number of risks and uncertainties.  There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K and in this report, (b) Management’s Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):

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

iii

FORWARD-LOOKING INFORMATION (Continued)

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

FORWARD-LOOKING INFORMATION (Concluded)

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

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or AcronymTerm
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
Cajun
Cajun Electric Power Cooperative, Inc.
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council
Council of the City of New Orleans, Louisiana
COVID-19
The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020
D.C. Circuit
U.S. Court of Appeals for the District of Columbia Circuit
DOE
United States Department of Energy
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana
Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy Texas
Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale Commodities
Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPA
United States Environmental Protection Agency
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2019 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
vi
DEFINITIONS (Continued)
Abbreviation or AcronymTerm
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2020
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
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)
Nelson Unit 6
Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy Louisiana (57.5%) and Entergy Texas (42.5%) and 10.9% of which is owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Net debt to net capital 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
Palisades
Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & Other
The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
Pilgrim
Pilgrim Nuclear Power Station (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in May 2019 and was sold in August 2019
PPA
Purchased power agreement or power purchase agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Louisiana
SEC
Securities and Exchange Commission
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
vii
DEFINITIONS (Concluded)
Abbreviation or AcronymTerm
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 and was disposed of in January 2019
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather
White Bluff
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas
viii
ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

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

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

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

The COVID-19 Pandemic

The COVID-19 pandemic and the measures to control it have adversely affected economic activity and conditions worldwide and have affected the demand for the products and services of many businesses in Entergy’s service area. Entergy expects a decline in sales volume in 2020 due to the COVID-19 pandemic, especially in the commercial and industrial sectors. In addition, Entergy has experienced negative changes to its customers’ payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. These negative changes are likely to include an increase in uncollectible accounts in 2020.

Entergy provides critical services to its customers and has implemented its comprehensive incident response plan, which contemplates major events such as storms or pandemics. Entergy’s focus during the pandemic has been on the safety and wellness of its employees; providing safe, reliable service for its customers; analyzing and addressing the financial effects of the COVID-19 pandemic; and continuing its plans for the future. Entergy implemented precautionary measures for safety on and off the job for employees working at plants and in the field and implemented telecommuting practices for employees who can work from home. Entergy temporarily suspended service disconnections for customers and is working with regulators to address routine and non-routine matters and allow continuation of capital spending plans. The Utility operating companies have received accounting orders to defer costs associated with COVID-19. To date, Entergy has not had material effects to its major projects or capital spending plans. Entergy is working with suppliers and contractors for continued availability of resources, equipment, and supplies to keep operations and major projects going forward and on schedule. Entergy is implementing expense-related spending reductions in 2020, which it does not expect to affect safety or service reliability, in order to offset some of the financial effects of the COVID-19 pandemic. Despite the negative effects of the pandemic on financial markets, beginning in March 2020 the Utility operating companies issued a total of $1.235 billion of long-term mortgage bonds, Entergy Corporation issued $1.2 billion of senior notes, and Entergy Arkansas and Entergy Mississippi renewed their short-term credit facilities. In addition to cash on hand, Entergy’s sources of liquidity are outlined in “Capital Structure and Resources” and in Note 4 to the financial statements herein.

Despite Entergy’s actions in response to the COVID-19 pandemic, uncertainty exists regarding the full depth and length of the effects of COVID-19 on Entergy’s sales volume, revenue, collections and cash flows, expenses, liquidity, and capital needs. Entergy will continue to monitor actively the COVID-19 pandemic and related developments affecting its workforce, customers, suppliers, operations, and financial condition.

1
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Results of Operations

Second Quarter 2020 Compared to Second Quarter 2019

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the second quarter 2020 to the second quarter 2019 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)
2019 Net Income (Loss) Attributable to Entergy Corporation
$331,190  ($25,929) ($68,837) $236,424  
Operating revenues
(163,376) (90,074) 29  (253,421) 
Fuel, fuel-related expenses, and gas purchased for resale
(117,633) (8,697) 12  (126,318) 
Purchased power
(128,599) (5,289) (12) (133,900) 
Other regulatory charges (credits)
1,285  —  —  1,285  
Other operation and maintenance(61,489) (47,410) 3,290  (105,609) 
Asset write-offs, impairments, and related charges—  (9,644) —  (9,644) 
Taxes other than income taxes1,216  (5,866) (112) (4,762) 
Depreciation and amortization52,920  (12,652) 5  40,273  
Other income (deductions)(4,018) 129,959  6,115  132,056  
Interest expense20,764  (2,160) 1,751  20,355  
Other expenses(2,568) (12,714) —  (15,282) 
Income taxes52,560  33,757  1,340  87,657  
Preferred dividend requirements of subsidiaries471  —  —  471  
2020 Net Income (Loss) Attributable to Entergy Corporation
$344,869  $84,631  ($68,967) $360,533  

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

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

Results of operations for the second quarter 2020 include gains of $225 million (pre-tax) on Entergy Wholesale Commodities’ nuclear decommissioning trust fund investments reflecting the equity market rebound from the March 2020 decline associated with the COVID-19 pandemic. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

2
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Revenues

Utility

Following is an analysis of the change in operating revenues comparing the second quarter 2020 to the second quarter 2019:
Amount
(In Millions)
2019 operating revenues$2,376  
Fuel, rider, and other revenues that do not significantly affect net income
(223) 
Volume/weather(54) 
Return of unprotected excess accumulated deferred income taxes to customers
47  
Retail electric price
67  
2020 operating revenues$2,213  

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

The volume/weather variance is primarily due to decreased commercial and small industrial usage as a result of the COVID-19 pandemic, the effect of less favorable weather on residential sales, and decreased usage during the unbilled sales period, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. The decrease in industrial usage, resulting from the COVID-19 pandemic, is partially offset by increased demand from co-generation customers. Entergy continues to expect a decline in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In second quarter 2020, $13 million was returned to customers through reductions in operating revenues as compared to $60 million in second quarter 2019. There is no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.  

The retail electric price variance is primarily due to:

•interim increases in Entergy Louisiana’s formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station, each as approved by the LPSC;
•increases in Entergy Mississippi’s formula rate plan rates effective with the first billing cycles of July 2019 and April 2020 and an interim capacity rate adjustment to the formula rate plan to recover non-fuel related costs of acquiring and operating the Choctaw Generating Station, each as approved by the MPSC;
•an increase in Entergy Arkansas’s formula rate plan rates effective with the first billing cycle of January 2020, as approved by the APSC; and
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•an increase in Entergy Texas’s transmission cost recovery factor rider in January 2020, as approved by the PUCT.

The increase was partially offset by the effects of Entergy New Orleans’s rate reduction implemented with April 2020 bills that was effective August 2019 in accordance with the City Council resolution and related agreement in principle reached in the 2018 base rate case.

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

Entergy Wholesale Commodities

Operating revenues for Entergy Wholesale Commodities decreased from $290 million for the second quarter 2019 to $200 million for the second quarter 2020 primarily due to the shutdown of Indian Point 2 in April 2020 and the shutdown of Pilgrim in May 2019.

Following are key performance measures for Entergy Wholesale Commodities for the second quarters 2020 and 2019:
20202019
Owned capacity (MW) (a)2,2463,274
GWh billed4,9587,258
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor96%92%
GWh billed4,5806,703
Average energy price ($/MWh)$35.48$32.17
Average capacity price ($/kW-month)$2.33$5.24
Refueling outage days:
Indian Point 3—8

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

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $651 million for the second quarter 2019 to $589 million for the second quarter 2020 primarily due to:

•a decrease of $25 million in non-nuclear generation expenses due to a lower scope of work performed during plant outages in 2020 as compared to 2019, including a delay in planned outages in 2020 as a result of the COVID-19 pandemic;
•a decrease of $22 million in nuclear generation expenses primarily due to a lower scope of work performed in 2020 as compared to 2019 and lower nuclear labor costs, including contract labor;
•a decrease of $12 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services; and
•the effects of recording in second quarter 2020 final judgments to resolve claims in the Waterford 3 damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $8 million of spent nuclear fuel storage costs previously recorded as
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other operation and maintenance expense. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station), the Lake Charles Power Station, and the Choctaw Generating Station, and new depreciation rates at Entergy Mississippi, as approved by the MPSC.

Interest expense increased primarily due to the issuances by Entergy Louisiana of $350 million of 2.90% Series mortgage bonds and $300 million of 4.20% Series mortgage bonds, each in March 2020, and the issuance by Entergy Texas of $175 million of 3.55% Series mortgage bonds in March 2020.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $188 million for the second quarter 2019 to $140 million for the second quarter 2020 primarily due to a decrease of $43 million resulting from the absence of expenses from the Pilgrim plant after it was shut down in May 2019 and the Indian Point 2 plant after it was shut down in April 2020.

Asset write-offs, impairments, and related charges for the second quarter 2020 include impairment charges of $7 million ($5 million net-of-tax) as a result of expenditures for capital assets. Asset write-offs, impairments, and related charges for the second quarter 2019 include impairment charges of $16 million ($13 million net-of-tax) as a result of nuclear refueling outage spending and expenditures for capital assets, partially offset by the gain on the sale of the Pilgrim switchyard. These costs were charged to expense as incurred as a result of the impaired fair value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to shut down and sell all of the remaining plants in the Entergy Wholesale Commodities merchant nuclear fleet. See Note 14 to the financial statements in the Form 10-K for a discussion of impairment of long-lived assets.

Other income increased primarily due to higher gains on decommissioning trust fund investments. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses decreased primarily due to the absence of decommissioning expense from the Pilgrim plant, after it was sold in August 2019. See Note 14 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant.

Income Taxes

The effective income tax rate was 19.6% for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 0.6% for the second quarter 2019. The difference in the effective income tax rate for the second quarter 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 2020 to the six months ended June 30, 2019 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)
2019 Net Income (Loss) Attributable to Entergy Corporation
$561,775  $70,603  ($141,417) $490,961  
Operating revenues
(244,729) (191,136) 40  (435,825) 
Fuel, fuel-related expenses, and gas purchased for resale
(193,596) (13,661) 12  (207,245) 
Purchased power
(246,410) (10,371) (12) (256,793) 
Other regulatory charges (credits)
10,553  —  —  10,553  
Other operation and maintenance(81,139) (105,058) (379) (186,576) 
Asset write-offs, impairments, and related charges—  (78,527) —  (78,527) 
Taxes other than income taxes5,683  1,476  (202) 6,957  
Depreciation and amortization98,404  (15,778) 82  82,708  
Other income (deductions)(11,986) (222,284) 7,106  (227,164) 
Interest expense32,749  (5,907) 114  26,956  
Other expenses2,015  (25,955) —  (23,940) 
Income taxes11,175  (62,691) 25,208  (26,308) 
Preferred dividend requirements of subsidiaries941  (1) —  940  
2020 Net Income (Loss) Attributable to Entergy Corporation
$664,685  ($26,344) ($159,094) $479,247  

(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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Operating Revenues

Utility

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2020 to the six months ended June 30, 2019:
Amount
(In Millions)
2019 operating revenues$4,552  
Fuel, rider, and other revenues that do not significantly affect net income
(387) 
Volume/weather(64) 
Return of unprotected excess accumulated deferred income taxes to customers
81  
Retail electric price
126  
2020 operating revenues$4,308  

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

The volume/weather variance is primarily due to decreased commercial usage as a result of the COVID-19 pandemic and the effect of less favorable weather on residential sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. Entergy continues to expect declines in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In the six months ended June 30, 2020, $40 million was returned to customers through reductions in operating revenues as compared to $121 million in the six months ended June 30, 2019. There is no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.  

The retail electric price variance is primarily due to:

•interim increases in Entergy Louisiana’s formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station, each as approved by the LPSC;
•increases in Entergy Mississippi’s formula rate plan rates effective with the first billing cycles of July 2019 and April 2020 and an interim capacity rate adjustment to the formula rate plan to recover non-fuel related costs of acquiring and operating the Choctaw Generating Station, each as approved by the MPSC;
•an increase in Entergy Arkansas’s formula rate plan rates effective with the first billing cycle of January 2020, as approved by the APSC; and
•an increase in Entergy Texas’s transmission cost recovery factor rider in January 2020, as approved by the PUCT.
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The increase was partially offset by the effects of Entergy New Orleans’s rate reduction implemented with April 2020 bills that was effective August 2019 in accordance with the City Council resolution and related agreement in principle reached in the 2018 base rate case.

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

Entergy Wholesale Commodities

Operating revenues for Entergy Wholesale Commodities decreased from $723 million for the six months ended June 30, 2019 to $532 million for the six months ended June 30, 2020 primarily due to the shutdown of Pilgrim in May 2019, the shutdown of Indian Point 2 in April 2020, and lower realized wholesale energy and capacity prices. The decrease was partially offset by higher volume in the remaining Entergy Wholesale Commodities nuclear fleet resulting from fewer outage days in the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Following are key performance measures for Entergy Wholesale Commodities for the six months ended June 30, 2020 and 2019:
20202019
Owned capacity (MW) (a) 2,2463,274
GWh billed11,71414,461
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor98%89%
GWh billed10,83913,392
Average energy price ($/MWh)$42.37$42.50
Average capacity price ($/kW-month)$1.58$4.96
Refueling outage days:
Indian Point 3—29

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

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $1,236 million for the six months ended June 30, 2019 to $1,155 million for the six months ended June 30, 2020 primarily due to:

•a decrease of $40 million in non-nuclear generation expenses due to a lower scope of work performed during plant outages in 2020 as compared to 2019, including a delay in planned outages in 2020 as a result of the COVID-19 pandemic;
•a decrease of $34 million in nuclear generation expenses primarily due to a lower scope of work performed in 2020 as compared to 2019 and lower nuclear labor costs, including contract labor;
•higher nuclear insurance refunds of $18 million;
•a decrease of $13 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services; and
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•the effects of recording in second quarter 2020 final judgments to resolve claims in the Waterford 3 damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $8 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.

The decrease was partially offset by an increase of $14 million in compensation and benefits costs primarily due to an increase in net periodic pension and other postretirement benefits costs as a result of a decrease in the discount rate used to value the benefit liabilities and an increase in employee health benefits costs. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station), the Lake Charles Power Station, and the Choctaw Generating Station, and new depreciation rates at Entergy Mississippi, as approved by the MPSC.

Interest expense increased primarily due to:

•the issuances by Entergy Texas of $300 million in September 2019 and $175 million in March 2020 of 3.55% Series mortgage bonds;
•the issuances by Entergy Louisiana of $300 million of 4.20% Series mortgage bonds and $350 million of 2.90% Series mortgage bonds, each in March 2020, and $525 million of 4.20% Series mortgage bonds in March 2019; and
•the issuance by Entergy Arkansas of $350 million of 4.20% Series mortgage bonds in March 2019.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $376 million for the six months ended June 30, 2019 to $271 million for the six months ended June 30, 2020 primarily due to:

•a decrease of $85 million resulting from the absence of expenses from the Pilgrim plant after it was shut down in May 2019 and the Indian Point 2 plant after it was shut down in April 2020; and
•a decrease of $20 million in severance and retention expenses. Severance and retention expenses were incurred in 2020 and 2019 due to management’s strategy to exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to shut down and sell all of the remaining plants in the Entergy Wholesale Commodities merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses resulting from management’s strategy to shut down and sell all of the remaining plants in the Entergy Wholesale Commodities merchant nuclear fleet.

Asset write-offs, impairments, and related charges for the six months ended June 30, 2020 include impairment charges of $12 million ($9 million net-of-tax) as a result of expenditures for capital assets. Asset write-offs, impairments, and related charges for the six months ended June 30, 2019 include impairment charges of $90 million ($71 million net-of-tax) as a result of nuclear refueling outage spending and expenditures for capital assets. These costs were charged to expense as incurred as a result of the impaired fair value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to shut down and sell all of the remaining plants in the Entergy Wholesale
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Commodities merchant nuclear fleet. See Note 14 to the financial statements in the Form 10-K for a discussion of impairment of long-lived assets.

Other income decreased primarily due to lower gains on decommissioning trust fund investments in the six months ended June 30, 2020 compared to the six months ended June 30, 2019. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses decreased primarily due to the absence of decommissioning expense from the Pilgrim plant, after it was sold in August 2019. See Note 14 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant.

Income Taxes

The effective income tax rate was 3.5% for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to the settlement with the IRS on the treatment of funds received in conjunction with the Act 55 financing of Hurricane Isaac storm costs, permanent differences related to income tax deductions for stock-based compensation, amortization of excess accumulated deferred income taxes, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein for discussion of the IRS settlement and the income tax deductions for stock-based compensation. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 8.1% for the six months ended June 30, 2019. The difference in the effective income tax rate for the six months ended June 30, 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, partially offset by the tax effects of the disposition of Vermont Yankee. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for a discussion of the tax effects of the Vermont Yankee disposition.

Income Tax Legislation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017.  Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Entergy Wholesale Commodities Exit from the Merchant Power Business

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

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Shutdown and Sale of Pilgrim

As discussed in the Form 10-K, Pilgrim ceased operations in May 2019. In August 2019 the NRC approved the transfer of Pilgrim’s facility licenses to Holtec International. At that time, hearing requests filed by the Commonwealth of Massachusetts and Pilgrim Watch challenging Holtec’s financial qualifications and the sufficiency of the NRC’s review of the associated environmental impacts of the license transfer were pending with the NRC Commissioners. The NRC approval order included a condition acknowledging the NRC’s longstanding authority to modify, condition, or rescind the license transfer order as a result of any hearing that may be conducted. On August 26, 2019, as permitted by the August 22 order, Entergy and Holtec closed the transaction. On September 25, 2019, Massachusetts filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit, asking the court to vacate the NRC’s August 22 license transfer approval order and related approvals. On November 22, 2019, Entergy and Holtec filed a motion to dismiss Massachusetts’s petition; the NRC also filed a motion to dismiss on the same date. On January 22, 2020, Massachusetts filed a second petition with the D.C. Circuit asking the court to review the NRC’s December 17 order denying its stay motion. On June 16, 2020, Holtec and Massachusetts reached a settlement to resolve issues related to the Pilgrim transaction. Pursuant to the settlement agreement, Massachusetts withdrew its hearing request pending before the NRC and withdrew both of its petitions for review before the D.C. Circuit, thereby terminating Massachusetts’s pending legal challenges to the Pilgrim transfer.

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

As discussed in the Form 10-K, in April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 has been shut down and defueled, to a Holtec subsidiary for decommissioning. The sale will include the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for the three units. Subject to the conditions discussed in the Form 10-K, the transaction is targeted to close in May 2021, following the defueling of Indian Point 3. As consideration for the transfer to Holtec of its interest in Indian Point, Entergy will receive nominal cash consideration. The terms of the transaction do not require a minimum level of funding in the nuclear decommissioning trusts as a condition to closing. The Indian Point transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of any agreed adjustments. As of June 30, 2020, Entergy’s adjusted net investment in the Indian Point units was $175 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing. Indian Point 2 ceased operations on April 30, 2020.

Planned Shutdown and Sale of Palisades

As discussed in the Form 10-K, in July 2018, Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in Entergy Nuclear Palisades, LLC, the owner of Palisades and the Big Rock Point Site, for $1,000 (subject to adjustment for net liabilities and other amounts). The sale of Entergy Nuclear Palisades will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. In February 2020 the parties signed an amendment to the purchase and sale agreement to remove the closing condition that the nuclear decommissioning trust fund must have a specified amount and Entergy agreed to contribute $20 million to the nuclear decommissioning trust fund at closing, among other amendments. Subject to the conditions discussed in the Form 10-K, the transaction is expected to close by the end of 2022. As of June 30, 2020, Entergy’s adjusted net investment in Palisades was $55 million. The primary variables in the ultimate loss or gain that Entergy will incur on the transaction are the values of the nuclear decommissioning trust and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.

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Costs Associated with Entergy Wholesale Commodities Strategic Transactions

Entergy expects to incur employee retention and severance expenses associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business of approximately $70 million in 2020, of which $38 million has been incurred as of June 30, 2020, and a total of approximately $60 million from 2021 through 2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $7 million for the three months ended June 30, 2020 and $12 million for the six months ended June 30, 2020. These costs were charged to expense as incurred as a result of the impaired value of certain of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge these costs to expense as incurred because Entergy expects the value of the plants to continue to be impaired.

Liquidity and Capital Resources

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

Entergy has experienced negative changes during 2020 to its customer payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic. Additional discussion of Entergy’s liquidity and capital resources follows.

Capital Structure and Resources

Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy as of June 30, 2020 is primarily due to the net issuance of debt in 2020.
June 30,
2020		December 31,
2019
Debt to capital66.8 %65.5 %
Effect of excluding securitization bonds(0.2 %)(0.4 %)
Debt to capital, excluding securitization bonds (a)66.6 %65.1 %
Effect of subtracting cash(1.0 %)(0.5 %)
Net debt to net capital, excluding securitization bonds (a)65.6 %64.6 %

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

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and commercial paper, finance lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents.  Entergy uses 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.
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Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2024.  The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the six months ended June 30, 2020 was 2.62% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2020:
Capacity BorrowingsLetters
of Credit		Capacity
Available
(In Millions)
$3,500$160$6$3,334
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets.  Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy or one of the Registrant Subsidiaries (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur.  See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of June 30, 2020, Entergy Corporation had approximately $1,946 million of commercial paper outstanding. The weighted-average interest rate for the six months ended June 30, 2020 was 2.01%.

Certain of the Utility operating companies have a total of $373 million in storm reserve escrow accounts at June 30, 2020.

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 2020 through 2022. Following are updates to that discussion.

Lake Charles Power Station

As discussed in the Form 10-K, the LPSC issued an order in July 2017 approving certification that the public necessity and convenience would be served by the construction of the Lake Charles Power Station. The plant commenced commercial operation in March 2020.

New Orleans Power Station

As discussed in the Form 10-K, in June 2019, a state court judge in New Orleans affirmed the City Council’s approval of the New Orleans Power Station and dismissed the petition for judicial review of that decision that had been filed in April 2018. The petitioners have filed an appeal of that ruling. Also in June 2019, with regard to the lawsuit challenging the City Council’s decision on the basis of a violation of the open meetings law, the same state court judge in New Orleans ruled that there was a violation of the open meetings law at the February 2018 meeting of the City Council’s Utility Committee at which that Committee considered the New Orleans Power
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Station approval, and further ruled that, although there was no violation of the open meetings law at the March 2018 City Council meeting at which the New Orleans Power Station was approved, both the approval of the Utility Committee and the approval of the City Council were void. The City Council and Entergy New Orleans each filed a suspensive appeal of the open meetings law ruling. A suspensive appeal suspends the effect of the judgment in the open meetings law proceeding while the appeal is being taken. The petitioners sought in the state appellate court, and then at the Louisiana Supreme Court, to terminate the suspension of the effect of the judgment, but both courts declined to do so. Oral argument in both cases was heard in January 2020. In February 2020 the state appellate court reversed the lower court’s ruling that the City Council’s approval of the New Orleans Power Station was void due to a violation of the open meetings law at the City Council’s Utility Committee meeting in February 2018.  The state appellate court ruled that there was no violation of the open meetings law at the City Council meeting in March 2018 and that the lower court erred in voiding the City Council resolution approving the New Orleans Power Station.  In March 2020 the appellees in that proceeding filed a writ application with the Louisiana Supreme Court seeking review of the appellate court’s decision and several New Orleans-based organizations filed an amicus brief in support of the appellees’ writ application. Entergy New Orleans and the City Council each filed an opposition to the writ application in June 2020, and the City Council also filed its own writ application seeking reversal of the appellate court’s holding that there was a violation of the open meetings law at the February 2018 City Council’s Utility Committee meeting. In its writ application the City Council requested that the Louisiana Supreme Court deny the appellees’ writ application, and grant the City Council’s writ application only if the Supreme Court grants the appellees’ writ application. In April 2020 the state appellate court affirmed the district court’s judicial review decision that affirmed the City Council’s approval of the New Orleans Power Station as in the public interest. In June 2020 appellants in that case filed a writ application with the Louisiana Supreme Court seeking review and reversal of that appellate court ruling. In July 2020 the City Council and Entergy New Orleans each filed an opposition to appellants’ writ application in the judicial review case. Commercial operation of the plant commenced in May 2020. In accordance with the City Council resolution issued in the 2018 base rate case proceeding, Entergy New Orleans is deferring the New Orleans Power Station non-fuel costs pending the conclusion of the appellate proceedings.

Sunflower Solar Facility

In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi.  The estimated base purchase price is approximately $138.4 million.  The estimated total investment, including the base purchase price and other related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  The project will be built by Sunflower County Solar Project, LLC, an indirect subsidiary of Recurrent Energy, LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met.  In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for Sunflower Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility.  Entergy Mississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the annual ownership costs of the Sunflower Solar Facility. In December 2019 the MPSC approved Entergy Mississippi’s proposed revisions to its formula rate plan to provide for an interim capacity rate adjustment mechanism. Recovery through the interim capacity rate adjustment requires MPSC approval for each new resource. In August 2019 consultants retained by the Mississippi Public Utilities Staff filed a report expressing concerns regarding the project economics. In March 2020, Entergy Mississippi filed supplemental testimony addressing questions and observations raised by the consultants retained by the Mississippi Public Utilities Staff and proposing an alternative structure for the transaction that would reduce its cost. A hearing before the MPSC was held in March 2020. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar Facility and its recovery through the interim capacity rate adjustment mechanism, subject to certain conditions including: (i) that Entergy Mississippi pursue a partnership structure through which the partnership
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would acquire and own the facility under the build-own-transfer agreement and (ii) that if Entergy Mississippi does not consummate the partnership structure under the terms of the order, there will be a cap of $136 million on the level of recoverable costs. Closing is targeted to occur by the end of 2021.

Searcy Solar Facility

As discussed in the Form 10-K, in May 2019, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the Searcy Solar Facility was in the public interest. In April 2020 the APSC issued an order approving Entergy Arkansas’s acquisition of the Searcy Solar facility as being in the public interest, but declined to approve Entergy Arkansas’s preferred cost recovery rider mechanism, finding instead, based on the particular facts and circumstances presented, that the formula rate plan rider was a sufficient recovery mechanism for this resource.

Dividends

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities.  At its July 2020 meeting, the Board declared a dividend of $0.93 per share, which is the same quarterly dividend per share that Entergy has paid since the third quarter 2019.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 2020 and 2019 were as follows:
20202019
(In Millions)
Cash and cash equivalents at beginning of period$426  $481  
Cash flow provided by (used in):  
Operating activities1,448  1,053  
Investing activities(2,198) (2,025) 
Financing activities1,259  1,127  
Net increase in cash and cash equivalents509  155  
Cash and cash equivalents at end of period$935  $636  

Operating Activities

Net cash flow provided by operating activities increased $395 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•an increase due to the timing of recovery of fuel and purchased power costs;
•the decrease in the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statements in the Form 10-K for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act;
•a decrease of $74 million in spending on nuclear refueling outages;
•$53 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation;
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•a decrease of $40 million in severance and retention payments in 2020 as compared to prior year. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business; and
•an increase of $25 million of nuclear insurance refunds.

The increase was partially offset by:

•an increase of $46 million in pension contributions in 2020 as compared to the same period in 2019. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding;
•the timing of collections of receivables from customers, in part due to the COVID-19 pandemic;
•the effect of less favorable weather on billed Utility sales in 2020; and
•an increase of $32 million in incentive-based compensation payments in 2020.

Investing Activities

Net cash flow used in investing activities increased $173 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•an increase of $121 million in construction expenditures in the Utility business, as discussed below;
•an increase of $59 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
•an increase of $49 million primarily due to changes in collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants; and
•$25 million in plant upgrades for the Choctaw Generating Station in March 2020. See Note 14 to the financial statements in the Form 10-K for further discussion of the Choctaw Generating Station purchase.

The increase was partially offset by:

•$67 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
•an increase of $43 million in net receipts from storm reserve escrow accounts.

The increase in construction expenditures in the Utility business is primarily due to an increase of $128 million in storm spending in 2020 and an increase of $97 million largely resulting from investment in the infrastructure of the distribution system, including increased spending on advanced metering infrastructure. The increase was partially offset by a decrease of $118 million in construction expenditures due to higher spending in 2019 on the Lake Charles Power Station and J. Wayne Leonard Power Station (formerly St. Charles Power Station) projects.

Financing Activities

Net cash flow provided by financing activities increased $133 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•long-term debt activity providing approximately $1,608 million of cash in 2020 compared to providing approximately $1,177 million of cash in 2019;
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•net repayments of $1 million of commercial paper in 2020 compared to net repayments of $307 million in 2019; and
•the repurchase in first quarter 2019 of $50 million of Class A mandatorily redeemable preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, that were held by a third party.

The increase was partially offset by proceeds of $608 million from the issuance of common stock in May 2019 as a result of the settlement of equity forwards. See Note 7 to the financial statements in the Form 10-K for discussion of the equity forward sale agreements.

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

Rate, Cost-recovery, and Other Regulation

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

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

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets.  Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of June 30, 2020 (2020 represents the remainder of the year):

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Entergy Wholesale Commodities Nuclear Portfolio
202020212022
Energy
Percent of planned generation under contract (a):
Unit-contingent (b)
97%98%99%
Planned generation (TWh) (c) (d)
7.29.62.8
Average revenue per MWh on contracted volumes:
Expected based on market prices as of June 30, 2020
$39.7$54.5$47.1
Capacity
Percent of capacity sold forward (e):
Bundled capacity and energy contracts (f)
43%68%97%
Capacity contracts (g)
38%—%—%
Total
81%68%97%
Planned net MW in operation (average) (d)
1,8521,158338
Average revenue under contract per kW per month (applies to capacity contracts only)
$3.6$—$—
Total Energy and Capacity Revenues (h)
Expected sold and market total revenue per MWh
$45.2$54.1$46.8
Sensitivity: -/+ $10 per MWh market price change
$45.1-$45.3$53.9-$54.3$46.7-$47.0

(a)Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty. Positions that are not classified as hedges are netted in the planned generation under contract.
(b)Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(c)Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operating characteristics and outage schedules.
(d)Assumes the planned shutdown of Indian Point 3 on April 30, 2021 and planned shutdown of Palisades on May 31, 2022. For a discussion regarding the planned shutdown of the Indian Point 3 and Palisades plants, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” above.
(e)Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(f)A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(g)A contract for the sale of an installed capacity product in a regional market.
(h)Includes assumptions on converting a portion of the portfolio to contracted with fixed price and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 2020 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of $1
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million for the remainder of 2020. As of June 30, 2019, a positive $10 per MW change would have had a corresponding effect on pre-tax income of $3 million for the remainder of 2019. A negative $10 per MWh change in the annual average energy price in the markets based on June 30, 2020 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($1) million for the remainder of 2020. As of June 30, 2019, a negative $10 per MW change would have had a corresponding effect on pre-tax income of ($3) million for the remainder of 2019.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.  Cash and letters of credit are also acceptable forms of credit support. At June 30, 2020, based on power prices at that time, Entergy had liquidity exposure of $72 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $12 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2020, Entergy would have been required to provide approximately $30 million of additional cash or letters of credit under some of the agreements. As of June 30, 2020, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $51 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.

As of June 30, 2020, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investment grade credit ratings.

Nuclear Matters

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

Critical Accounting Estimates

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

Qualified Pension and Other Postretirement Benefits

As discussed in the Form 10-K, Entergy sponsors qualified, defined benefit pension plans that cover substantially all employees, including cash balance plans and final average pay plans. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements in the Form 10-K, are affected by numerous factors. Key actuarial assumptions utilized in determining qualified pension and other postretirement health care and life insurance costs include the expected long-term rate of return on plan assets. For 2020, Entergy assumed a long-term rate of return on its qualified pension plan assets of 7.00%. Through June 30, 2020, Entergy experienced a 0.2% negative return on its qualified pension plan assets.
As described more fully in the Form 10-K, in accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of
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plan assets. The excess is amortized over the average remaining service period of active employees.
Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date, and Entergy’s expected contributions for 2020 are reported in Note 6 to the financial statements herein. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall that, under the Pension Protection Act, must be funded over a seven-year rolling period. The Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on calculated fair market values of assets divided by funding liabilities, does not meet specified thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets. The funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury which is generally subject to a corridor of the 25-year average of prior segment rates. Periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.

As described in Note 6 to the financial statements herein, in March 2020, Entergy announced changes to its other postretirement benefits. As a result, Entergy now expects 2020 other postretirement health care and life insurance benefit income, including amounts capitalized, of $17.2 million.

Taxation and Uncertain Tax Positions

As described more fully in the Form 10-K, management exercises significant judgment in evaluating the potential tax effects of Entergy’s operations, transactions, and other events. Entergy accounts for uncertain tax positions using a recognition model under a two-step approach with a more likely than not recognition threshold and a measurement approach based on the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income tax expense and tax positions recorded could be significantly affected by events such as additional transactions contemplated or consummated by Entergy as well as audits by taxing authorities. Included in the current IRS examination of Entergy’s 2015 tax returns is the tax effect of the October 2015 combination of two Entergy utility companies, Entergy Gulf States Louisiana and Entergy Louisiana. Entergy Louisiana maintained a carryover tax basis in the assets received and the tax consequences provided for an increase in tax basis as well. This resulted in recognition in 2015 of a $334 million permanent difference and income tax benefit, net of the uncertain tax position recorded on the transaction. As discussed in Note 3 to the financial statements in the Form 10-K, Entergy expects the IRS to complete its examination of the 2014 and 2015 tax years before the end of 2020, the result of which could affect the amount of the permanent difference and uncertain tax position.

In addition, as discussed in Note 3 to the financial statements in the Form 10-K, in 2015, System Energy adopted a new method of accounting for income tax return purposes in which its nuclear decommissioning costs are treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy in 2015. Entergy expects to concede this tax position with the IRS during the third quarter 2020, which will result in an approximate $400 million decrease in federal uncertain tax positions for Entergy and System Energy and a corresponding decrease in federal deferred tax assets for Entergy and an increase in taxes payable for System Energy.

New Accounting Pronouncements

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

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands, Except Share Data)
OPERATING REVENUES
Electric$2,190,557  $2,345,727  $4,241,196  $4,466,751  
Natural gas22,495  30,699  66,471  85,647  
Competitive businesses199,736  289,783  532,300  723,394  
TOTAL2,412,788  2,666,209  4,839,967  5,275,792  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale341,005  467,323  738,408  945,653  
Purchased power211,961  345,861  428,575  685,368  
Nuclear refueling outage expenses44,894  50,962  95,112  101,403  
Other operation and maintenance736,261  841,870  1,438,345  1,624,921  
Asset write-offs, impairments, and related charges6,775  16,419  11,870  90,397  
Decommissioning95,413  104,627  189,097  206,746  
Taxes other than income taxes158,646  163,408  328,940  321,983  
Depreciation and amortization403,769  363,496  803,478  720,770  
Other regulatory credits(25,247) (26,532) (32,925) (43,478) 
TOTAL1,973,477  2,327,434  4,000,900  4,653,763  
OPERATING INCOME 439,311  338,775  839,067  622,029  
OTHER INCOME
Allowance for equity funds used during construction28,370  37,169  64,324  75,385  
Interest and investment income 284,823  96,218  67,969  324,367  
Miscellaneous - net(93,620) (45,870) (70,232) (110,527) 
TOTAL219,573  87,517  62,061  289,225  
INTEREST EXPENSE
Interest expense216,799  201,112  422,388  402,105  
Allowance for borrowed funds used during construction(12,143) (16,811) (27,587) (34,260) 
TOTAL204,656  184,301  394,801  367,845  
INCOME BEFORE INCOME TAXES454,228  241,991  506,327  543,409  
Income taxes89,115  1,458  17,921  44,229  
CONSOLIDATED NET INCOME 365,113  240,533  488,406  499,180  
Preferred dividend requirements of subsidiaries4,580  4,109  9,159  8,219  
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
$360,533  $236,424  $479,247  $490,961  
Earnings per average common share:
Basic$1.80  $1.22  $2.40  $2.57  
Diluted$1.79  $1.22  $2.39  $2.54  
Basic average number of common shares outstanding200,178,010  193,019,269  199,984,013  191,306,742  
Diluted average number of common shares outstanding200,886,749  194,238,315  200,891,134  193,243,287  
See Notes to Financial Statements.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)
Net Income $365,113  $240,533  $488,406  $499,180  
Other comprehensive income
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of ($6,760), $25,242, ($12,537), and $19,890)
(25,406) 94,982  (47,116) 82,556  
Pension and other postretirement liabilities (net of tax expense of $4,713, $3,077, $19,789, and $6,326)
17,224  11,496  71,123  23,046  
Net unrealized investment gain (net of tax expense of $10,812, $8,096, $19,555, and $16,169)
18,565  14,270  34,309  27,973  
Other comprehensive income10,383  120,748  58,316  133,575  
Comprehensive Income 375,496  361,281  546,722  632,755  
Preferred dividend requirements of subsidiaries4,580  4,109  9,159  8,219  
Comprehensive Income Attributable to Entergy Corporation$370,916  $357,172  $537,563  $624,536  
See Notes to Financial Statements.
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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $488,406  $499,180  
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization1,131,212  1,068,807  
Deferred income taxes, investment tax credits, and non-current taxes accrued68,332  225,749  
Asset write-offs, impairments, and related charges11,735  26,684  
Changes in working capital:
Receivables(30,990) (127,259) 
Fuel inventory(19,897) (13,346) 
Accounts payable(39,054) (18,832) 
Taxes accrued44,469  (38,186) 
Interest accrued4,188  (144) 
Deferred fuel costs33,298  31,796  
Other working capital accounts(63,943) (51,782) 
Changes in provisions for estimated losses(37,968) 4,719  
Changes in other regulatory assets74,610  (135,936) 
Changes in other regulatory liabilities(164,158) 107,882  
Changes in pension and other postretirement liabilities(177,224) (66,033) 
Other125,291  (460,209) 
Net cash flow provided by operating activities1,448,307  1,053,090  
INVESTING ACTIVITIES
Construction/capital expenditures(2,185,294) (2,095,520) 
Allowance for equity funds used during construction64,324  75,607  
Nuclear fuel purchases(113,592) (54,523) 
Payment for purchase of assets(24,633) —  
Proceeds from sale of assets—  19,801  
Insurance proceeds received for property damages—  7,040  
Changes in securitization account12,525  12,034  
Payments to storm reserve escrow account(1,965) (4,623) 
Receipts from storm reserve escrow account40,589  —  
Decrease in other investments2,262  51,073  
Litigation proceeds for reimbursement of spent nuclear fuel storage costs67,252  —  
Proceeds from nuclear decommissioning trust fund sales1,249,548  2,487,915  
Investment in nuclear decommissioning trust funds(1,309,209) (2,523,805) 
Net cash flow used in investing activities(2,198,193) (2,025,001) 
See Notes to Financial Statements.
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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt5,201,010  5,391,547  
Treasury stock41,753  57,797  
Common stock—  607,650  
Retirement of long-term debt(3,592,919) (4,214,495) 
Repurchase of preferred membership units—  (50,000) 
Changes in credit borrowings and commercial paper - net(508) (306,877) 
Other(8,448) (5,106) 
Dividends paid:
Common stock(371,914) (345,452) 
Preferred stock(9,342) (8,219) 
Net cash flow provided by financing activities1,259,632  1,126,845  
Net increase in cash and cash equivalents509,746  154,934  
Cash and cash equivalents at beginning of period425,722  480,975  
Cash and cash equivalents at end of period$935,468  $635,909  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized$405,248  $388,566  
Income taxes($10,007) ($6,967) 
See Notes to Financial Statements.
25
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$55,510  $34,242  
Temporary cash investments879,958  391,480  
Total cash and cash equivalents935,468  425,722  
Accounts receivable:
Customer636,351  595,509  
Allowance for doubtful accounts(43,281) (7,404) 
Other119,703  219,870  
Accrued unbilled revenues464,647  400,617  
Total accounts receivable1,177,420  1,208,592  
Fuel inventory - at average cost165,373  145,476  
Materials and supplies - at average cost870,935  824,989  
Deferred nuclear refueling outage costs154,779  157,568  
Prepayments and other243,021  283,645  
TOTAL3,546,996  3,045,992  
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds6,486,595  6,404,030  
Non-utility property - at cost (less accumulated depreciation)337,849  332,864  
Other462,612  496,452  
TOTAL7,287,056  7,233,346  
PROPERTY, PLANT, AND EQUIPMENT
Electric56,494,877  54,271,467  
Natural gas559,217  547,110  
Construction work in progress2,143,909  2,823,291  
Nuclear fuel636,538  677,181  
TOTAL PROPERTY, PLANT, AND EQUIPMENT59,834,541  58,319,049  
Less - accumulated depreciation and amortization23,527,399  23,136,356  
PROPERTY, PLANT, AND EQUIPMENT - NET36,307,142  35,182,693  
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $183,566 as of June 30, 2020 and $239,219 as of December 31, 2019)
5,217,445  5,292,055  
Deferred fuel costs240,157  239,892  
Goodwill377,172  377,172  
Accumulated deferred income taxes76,855  64,461  
Other312,479  288,301  
TOTAL6,224,108  6,261,881  
TOTAL ASSETS$53,365,302  $51,723,912  
See Notes to Financial Statements.
26
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$1,205,015  $795,012  
Notes payable and commercial paper1,946,219  1,946,727  
Accounts payable1,509,355  1,499,861  
Customer deposits408,251  409,171  
Taxes accrued277,924  233,455  
Interest accrued198,317  194,129  
Deferred fuel costs231,250  197,687  
Pension and other postretirement liabilities60,538  66,184  
Current portion of unprotected excess accumulated deferred income taxes62,818  76,457  
Other216,214  201,780  
TOTAL6,115,901  5,620,463  
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued4,538,706  4,401,190  
Accumulated deferred investment tax credits202,981  207,113  
Regulatory liability for income taxes-net1,565,468  1,633,159  
Other regulatory liabilities1,878,177  1,961,005  
Decommissioning and asset retirement cost liabilities6,318,786  6,159,212  
Accumulated provisions496,060  534,028  
Pension and other postretirement liabilities2,626,687  2,798,265  
Long-term debt (includes securitization bonds of $231,870 as of June 30, 2020 and $297,981 as of December 31, 2019)
18,278,358  17,078,643  
Other663,780  852,749  
TOTAL36,569,003  35,625,364  
Commitments and Contingencies
Subsidiaries' preferred stock without sinking fund219,410  219,410  
EQUITY
Common stock, $.01 par value, authorized 500,000,000 shares; issued 270,035,180 shares in 2020 and 2019
2,700  2,700  
Paid-in capital6,524,330  6,564,436  
Retained earnings9,364,523  9,257,609  
Accumulated other comprehensive loss(388,604) (446,920) 
Less - treasury stock, at cost (69,824,801 shares in 2020 and 70,886,400 shares in 2019)
5,076,961  5,154,150  
Total common shareholders' equity10,425,988  10,223,675  
Subsidiaries' preferred stock without sinking fund35,000  35,000  
TOTAL10,460,988  10,258,675  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$53,365,302  $51,723,912  
See Notes to Financial Statements.
27
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2020
(Unaudited)
Common Shareholders’ Equity
Subsidiaries’ Preferred StockCommon
Stock		Treasury
Stock		Paid-in
Capital		Retained EarningsAccumulated Other Comprehensive LossTotal
(In Thousands)
Balance at December 31, 2019$35,000  $2,700  ($5,154,150) $6,564,436  $9,257,609  ($446,920) $10,258,675  
Implementation of accounting standards
—  —  —  —  (419) —  (419) 
Balance at January 1, 202035,000  2,700  (5,154,150) 6,564,436  9,257,190  (446,920) 10,258,256  
Consolidated net income (a)4,580  —  —  —  118,714  —  123,294  
Other comprehensive income—  —  —  —  —  47,933  47,933  
Common stock issuances related to stock plans
—  —  73,580  (53,753) —  —  19,827  
Common stock dividends declared—  —  —  —  (185,763) —  (185,763) 
Preferred dividend requirements of subsidiaries (a)
(4,580) —  —  —  —  —  (4,580) 
Balance at March 31, 2020$35,000  $2,700  ($5,080,570) $6,510,683  $9,190,141  ($398,987) $10,258,967  
Consolidated net income (a)4,580  —  —  —  360,533  —  365,113  
Other comprehensive income—  —  —  —  —  10,383  10,383  
Common stock issuances related to stock plans
—  —  3,609  13,647  —  —  17,256  
Common stock dividends declared—  —  —  —  (186,151) —  (186,151) 
Preferred dividend requirements of subsidiaries (a)
(4,580) —  —  —  —  —  (4,580) 
Balance at June 30, 2020$35,000  $2,700  ($5,076,961) $6,524,330  $9,364,523  ($388,604) $10,460,988  
See Notes to Financial Statements.
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2020 and second quarter 2020 each includes $4.1 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.
28
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2019
(Unaudited)
Common Shareholders’ Equity
Subsidiaries' Preferred StockCommon
Stock		Treasury
Stock		Paid-in
Capital		Retained EarningsAccumulated Other Comprehensive LossTotal
(In Thousands)
Balance at December 31, 2018$—  $2,616  ($5,273,719) $5,951,431  $8,721,150  ($557,173) $8,844,305  
Implementation of accounting standards
—  —  —  —  6,806  (6,806) —  
Balance at January 1, 2019—  2,616  (5,273,719) 5,951,431  8,727,956  (563,979) 8,844,305  
Consolidated net income (a)4,109  —  —  —  254,537  —  258,646  
Other comprehensive income—  —  —  —  —  12,827  12,827  
Common stock issuances related to stock plans
—  —  62,537  (31,248) —  —  31,289  
Common stock dividends declared—  —  —  —  (172,591) —  (172,591) 
Preferred dividend requirements of subsidiaries (a)
(4,109) —  —  —  —  —  (4,109) 
Balance at March 31, 2019$—  $2,616  ($5,211,182) $5,920,183  $8,809,902  ($551,152) $8,970,367  
Consolidated net income (a)4,109  —  —  —  236,424  —  240,533  
Other comprehensive income—  —  —  —  —  120,748  120,748  
Settlement of equity forwards through common stock issuance
—  84  —  607,566  —  —  607,650  
Common stock issuance costs—  —  —  (7) —  —  (7) 
Common stock issuances related to stock plans
—  —  23,391  11,791  —  —  35,182  
Common stock dividends declared—  —  —  —  (172,861) —  (172,861) 
Preferred dividend requirements of subsidiaries (a)
(4,109) —  —  —  —  —  (4,109) 
Balance at June 30, 2019$—  $2,700  ($5,187,791) $6,539,533  $8,873,465  ($430,404) $9,797,503  
See Notes to Financial Statements.
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2019 and second quarter 2019 each includes $4.1 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.
29
ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedIncrease/
20202019(Decrease)%
(Dollars in Millions)
Utility electric operating revenues:
Residential$791  $770  $21  3  
Commercial526  595  (69) (12) 
Industrial576  642  (66) (10) 
Governmental47  58  (11) (19) 
Total billed retail1,940  2,065  (125) (6) 
Sales for resale53  75  (22) (29) 
Other198  206  (8) (4) 
Total$2,191  $2,346  ($155) (7) 
Utility billed electric energy sales (GWh):
Residential7,759  7,652  107  1  
Commercial6,071  6,841  (770) (11) 
Industrial11,846  11,965  (119) (1) 
Governmental570  626  (56) (9) 
Total retail26,246  27,084  (838) (3) 
Sales for resale3,111  3,170  (59) (2) 
Total29,357  30,254  (897) (3) 
Entergy Wholesale Commodities:
Operating revenues$200  $290  ($90) (31) 
Billed electric energy sales (GWh)4,958  7,258  (2,300) (32) 
Six Months EndedIncrease/
20202019(Decrease)%
(Dollars in Millions)
Utility electric operating revenues:
Residential$1,589  $1,573  $16  1  
Commercial1,065  1,149  (84) (7) 
Industrial1,134  1,243  (109) (9) 
Governmental100  111  (11) (10) 
Total billed retail3,888  4,076  (188) (5) 
Sales for resale106  160  (54) (34) 
Other247  231  16  7  
Total$4,241  $4,467  ($226) (5) 
Utility billed electric energy sales (GWh):
Residential15,885  16,123  (238) (1) 
Commercial12,315  13,264  (949) (7) 
Industrial23,662  23,648  14  —  
Governmental1,165  1,227  (62) (5) 
Total retail53,027  54,262  (1,235) (2) 
Sales for resale6,228  6,984  (756) (11) 
Total59,255  61,246  (1,991) (3) 
Entergy Wholesale Commodities:
Operating revenues$532  $723  ($191) (26) 
Billed electric energy sales (GWh)11,714  14,461  (2,747) (19) 
30
ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

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

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

Vidalia Purchased Power Agreement

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

ANO Damage, Outage, and NRC Reviews

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

Spent Nuclear Fuel Litigation

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.
        
As discussed in the Form 10-K, in December 2019 the U.S. Court of Federal Claims issued a judgment in the amount of $80 million in favor of Entergy Arkansas to resolve claims in the third round ANO damages case and issued a judgment in the amount of $7 million in favor of Entergy FitzPatrick Properties (formerly Entergy Nuclear FitzPatrick) in the second round FitzPatrick damages case. Payment of both judgments was received from the U.S. Treasury in January 2020.

In April 2020 the U.S. Court of Federal Claims issued a final judgment in the amount of $33 million in favor of Entergy Louisiana against the DOE in the second round Waterford 3 damages case. Entergy Louisiana received payment from the U.S. Treasury in June 2020. The effects of recording the judgment were reductions to plant, nuclear fuel expense, and other operation and maintenance expense. The Waterford 3 damages awarded included $20 million related to costs previously recorded as nuclear fuel expense, $8 million related to costs previously recorded as other operation and maintenance expenses, and $5 million in costs previously capitalized.

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.

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
Non-Nuclear Property Insurance

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

Employment and Labor-related Proceedings

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

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

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

Grand Gulf-Related Agreements

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


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

Regulatory Assets and Regulatory Liabilities

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

Regulatory activity regarding the Tax Cuts and Jobs Act

System Energy

In a filing made with the FERC in March 2018, System Energy proposed revisions to the Unit Power Sales Agreement to reflect the effects of the Tax Act. In the filing System Energy proposed to return identified quantities of unprotected excess accumulated deferred income taxes to its customers by the end of 2018. In May 2018 the FERC accepted System Energy’s proposed tax revisions with an effective date of June 1, 2018, subject to refund and the outcome of settlement and hearing procedures.  Settlement discussions were terminated in April 2019, and the hearing was held in March 2020. The retail regulators of the Utility operating companies that are parties to the Unit Power Sales Agreement challenged the treatment and amount of excess accumulated deferred income tax liabilities associated with uncertain tax positions related to nuclear decommissioning. In July 2020 the presiding ALJ in the proceeding issued an initial decision finding that there is an additional $147 million in unprotected excess accumulated deferred income taxes related to System Energy’s uncertain decommissioning tax deduction. The initial decision determined that System Energy should have included the $147 million in its March 2018 filing. System Energy had not included credits related to the effect of the Tax Act on the uncertain decommissioning tax position because it is uncertain whether the IRS will allow the deduction. The initial decision rejected both System Energy’s alternative argument that any crediting should occur over a ten-year period and the retail regulators’ argument that any crediting should occur over a two-year period. Instead, the initial decision concluded that System Energy should credit the additional unprotected excess accumulated deferred income taxes in a single lump sum revenue requirement reduction following a FERC order addressing the initial decision.

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The ALJ initial decision is an interim step in the FERC litigation process. System Energy plans to file briefs on exceptions to the FERC, re-urging its positions and requesting the reversal of the ALJ’s initial decision. In addition, Entergy expects to concede System Energy’s nuclear decommissioning tax position with the IRS before the end of 2020, which should eliminate the basis of the ALJ’s initial decision regarding the uncertain tax position. Briefs on exceptions are scheduled for September 2020, and briefs opposing exceptions are scheduled for November 2020. The FERC will then review the case and issue an order in the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Credits, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

Fuel and purchased power cost recovery

Entergy Arkansas

Energy Cost Recovery Rider

In March 2020, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01462 per kWh to $0.01052 per kWh. The redetermined rate became effective with the first billing cycle in April 2020 through the normal operation of the tariff.

Entergy Louisiana

In March 2020 the LPSC staff provided notice of an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2016 through 2019. Discovery has not yet commenced.

Entergy Mississippi

In November 2019, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation included $39.6 million of prior over-recovery flowing back to customers beginning February 2020. Entergy Mississippi’s balance in its deferred fuel account did not decrease as expected after implementation of the new factor. In an effort to assist customers during the COVID-19 pandemic, in May 2020, Entergy Mississippi requested an interim adjustment to the energy cost recovery rider to credit approximately $50 million from the over-recovered balance in the deferred fuel account to customers over four consecutive billing months, June through September 2020. The MPSC approved this interim adjustment in May 2020 effective for June 2020 bills.

Entergy Texas

In September 2019, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period from April 2016 through March 2019. During the reconciliation period, Entergy Texas incurred approximately $1.6 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texas estimated an under-recovery balance of approximately $25.8 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2019. In March 2020 an intervenor filed testimony proposing that the PUCT disallow: (1) $2 million in replacement power costs associated with generation outages during the reconciliation period; and (2) $24.4 million associated with the operation of the Spindletop natural gas storage facility during the reconciliation period.  In April 2020, Entergy Texas filed rebuttal testimony refuting all points raised by the intervenor.  In June 2020 the parties filed a stipulation and settlement agreement, which included a $1.2 million disallowance not associated with any particular issue raised by any party. The settlement is currently pending before the PUCT.

33
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In July 2020, Entergy Texas filed an application with the PUCT to implement an interim fuel refund of $25.5 million, including interest. Entergy Texas proposes that the interim fuel refund be implemented beginning with the first August 2020 billing cycle over a three-month period for smaller customers and in a lump sum amount in the billing month of August 2020 for transmission-level customers. The interim fuel refund was approved in July 2020.

Retail Rate Proceedings

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

Filings with the APSC (Entergy Arkansas)

Retail Rates

2020 Formula Rate Plan Filing

In July 2020, Entergy Arkansas filed with the APSC its 2020 formula rate plan filing to set its formula rate for the 2021 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2021 and a netting adjustment for the historical year 2019. Entergy Arkansas’s earned rate of return on common equity is 7.84% for the 2021 projected year and 9.07% for the 2019 historical year. The total revenue change is based upon a deficiency of approximately $80.7 million for the 2021 projected year and approximately $23.9 million for the 2019 historical year netting adjustment. The total proposed formula rate plan rider revenue change for 2021 is $104.6 million to produce a target rate of return of 9.75% for the projected year and the historical year. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeds the constraint, the resulting increase is limited to $74.3 million. Also with this filing, Entergy Arkansas is requesting an extension of the formula rate plan rider for a second five-year term. A decision by the APSC is requested by mid-December 2020.

COVID-19 Orders

In April 2020, in light of the COVID-19 pandemic, the APSC issued an order requiring utilities, to the extent they had not already done so, to suspend service disconnections during the remaining pendency of the Arkansas Governor’s emergency declaration or until the APSC rescinds the directive. The order also authorizes utilities to establish a regulatory asset to record costs resulting from the suspension of service disconnections, directs that in future proceedings the APSC will consider whether the request for recovery of these regulatory assets is reasonable and necessary, and requires utilities to track and report the costs and any savings directly attributable to suspension of disconnects. In May 2020 the APSC approved Entergy Arkansas expanding delayed payment arrangements to assist customers during the pandemic. Entergy Arkansas is still evaluating the recovery provided for by the order and, therefore, did not record as of June 30, 2020 a regulatory asset for costs associated with the COVID-19 pandemic.

Filings with the LPSC (Entergy Louisiana)

Retail Rates - Electric

2017 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station (formerly St. Charles Power Station). The resulting interim adjustment to rates
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Notes to Financial Statements
became effective with the first billing cycle of June 2019. In June 2020, Entergy Louisiana submitted information to the LPSC to review the prudence of Entergy Louisiana’s management of the project. No procedural schedule has been established.

2018 Formula Rate Plan Filing

Commercial operation at Lake Charles Power Station commenced in March 2020. In March 2020, Entergy Louisiana filed an update to its 2018 formula rate plan evaluation report to include the estimated first-year revenue requirement of $108 million associated with the Lake Charles Power Station. The resulting interim adjustment to rates became effective with the first billing cycle of April 2020.

2019 Formula Rate Plan Filing

In May 2020, Entergy Louisiana filed with the LPSC its formula rate plan evaluation report for its 2019 calendar year operations. The 2019 test year evaluation report produced an earned return on common equity of 9.66%. As such, no change to base rider formula rate plan revenue is required. Although base rider formula rate plan revenue will not change as a result of this filing, overall formula rate plan revenues will increase by approximately $103 million. This outcome is driven by the removal of prior year credits associated with the sale of the Willow Glen Power Station and an increase in the transmission recovery mechanism. Also contributing to the overall change is an increase in legacy formula rate plan revenue requirements driven by legacy Entergy Louisiana capacity cost true-ups and higher annualized legacy Entergy Gulf States Louisiana revenues due to higher billing determinants, offset by reductions in MISO cost recovery mechanism and tax reform adjustment mechanism revenue requirements.

Request for Extension and Modification of Formula Rate Plan

In May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate plan. In its application, Entergy Louisiana seeks to maintain a 9.8% return on equity, with a bandwidth of 60 basis points above and below the midpoint, with a first-year midpoint reset. Entergy Louisiana also seeks to maintain its existing additional capacity mechanism, tax reform adjustment mechanism, transmission recovery mechanism, and the MISO cost recovery mechanism. Entergy Louisiana also seeks to add a distribution cost recovery mechanism which operates in substantially the same manner as the transmission recovery mechanism and requests a deferral of certain expenses incurred for outside of right-of-way vegetation programs.

Retail Rates - Gas

2017 Rate Stabilization Plan Filing

As discussed in the Form 10-K, in January 2018 Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2017. As-filed rates from the supplemental filing were implemented, subject to refund, with customers receiving a cost reduction of approximately $0.7 million effective with bills rendered on and after the first billing cycle of May 2018, as well as a $0.2 million reduction in the gas infrastructure rider effective with bills rendered on and after the first billing cycle of July 2018. In October 2019 the LPSC staff issued its report finding that Entergy Louisiana’s filing complied with the terms of the rate stabilization plan but recommending an additional refund of $0.7 million related to the Tax Act. In June 2020, the LPSC approved a joint report acknowledging Entergy Louisiana’s prior refunds and offsets for flood recovery costs, and required a further refund of $0.8 million, inclusive of carrying costs.

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
COVID-19 Orders

In April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees and disconnects for non-payment was extended until the first billing cycle after July 16, 2020. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of June 30, 2020, Entergy Louisiana recorded a regulatory asset of $10.7 million for costs associated with the COVID-19 pandemic.

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan Filings

See the Form 10-K for revisions to Entergy Mississippi’s formula rate plan approved by the MPSC in December 2019. In January 2020 Entergy Mississippi began billing an interim capacity rate adjustment rider to recover the $59 million first-year annual revenue requirement associated with the non-fuel ownership costs of the Choctaw Generating Station. Also, effective with the April 2020 billing cycle, Entergy Mississippi implemented a rider to recover $22 million in vegetation management costs. Vegetation management costs were previously recovered through the formula rate plan.

In March 2020, Entergy Mississippi submitted its formula rate plan 2020 test year filing and 2019 look-back filing showing Entergy Mississippi’s earned return for the historical 2019 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2020 calendar year to be below the formula rate plan bandwidth. The 2020 test year filing shows a $24.6 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.51% return on rate base, within the formula rate plan bandwidth. The 2019 look-back filing compares actual 2019 results to the approved benchmark return on rate base and reflects the need for a $7.3 million interim increase in formula rate plan revenues. In accordance with the MPSC-approved revisions to the formula rate plan, Entergy Mississippi implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2019 retail revenues, effective with the April 2020 billing cycle, subject to refund. In June 2020, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed that the 2020 test year filing showed that a $23.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.51% return on rate base, within the formula rate plan bandwidth. Pursuant to the joint stipulation, Entergy Mississippi’s 2019 look-back filing reflected an earned return on rate base of 6.75% in calendar year 2019, which is within the look-back bandwidth. As a result, there is no change in formula rate plan revenues in the 2019 look-back filing. In June 2020 the MPSC approved the joint stipulation with rates effective for the first billing cycle of July 2020.

COVID-19 Orders

In March 2020 the MPSC issued an order suspending disconnections for a period of sixty days. The MPSC extended the order on disconnections through May 26, 2020. In April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. As of June 30, 2020, Entergy Mississippi recorded a regulatory asset of $6 million for costs associated with the COVID-19 pandemic.

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Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)

Energy Efficiency

As discussed in the Form 10-K, in December 2019, Entergy New Orleans filed an application with the City Council seeking approval of an implementation plan for the Energy Smart energy efficiency program from April 2020 through December 2022. Entergy New Orleans proposed to recover the costs of the program through mechanisms previously approved by the City Council or through the energy efficiency cost recovery rider, which was approved in the 2018 combined rate case resolution. In February 2020 the City Council approved Entergy New Orleans’s application.

2018 Base Rate Case Filing

See the Form 10-K for discussion of the electric and gas base rate case filed in September 2018. In response to the City Council’s November 2019 resolution in the rate case, Entergy New Orleans made a compliance filing in December 2019 and also filed timely a petition for appeal and judicial review and for stay of or injunctive relief alleging that the resolution is unlawful in failing to produce just and reasonable rates. A hearing on the requested injunction was scheduled in Civil District Court for February 2020, but by joint motion of the City Council and Entergy New Orleans, the Civil District Court issued an order for a limited remand to the City Council to consider a potential agreement in principle/stipulation at its February 20, 2020 meeting. On February 17, 2020, Entergy New Orleans filed with the City Council an agreement in principle between Entergy New Orleans and the City Council’s advisors. On February 20, 2020, the City Council voted to approve the proposed agreement in principle and issued a resolution modifying the required treatment of certain accumulated deferred income taxes. As a result of the agreement in principle, the total annual revenue requirement reduction will be approximately $45 million ($42 million electric, including $29 million in rider reductions; and $3 million gas). As a result, Entergy New Orleans fully implemented the new rates in April 2020. The merits of the appeal will be subject to a separate procedural schedule issued by the Civil District Court.

2020 Formula Rate Plan Filing

In April 2020, Entergy New Orleans filed a motion with the City Council to delay its formula rate plan filing until June 2020. In May 2020 the City Council issued an order extending the filing deadline for Entergy New Orleans’s formula rate plan filing to June 29, 2020. On June 26, 2020, Entergy New Orleans filed a motion with the City Council to further delay the filing of its formula rate plan to August 13, 2020. In July 2020 the City Council issued an order approving the request.

COVID-19 Orders

In March 2020, Entergy New Orleans voluntarily suspended customer disconnections for non-payment of utility bills through May 2020. Subsequently, the City Council ordered that the moratorium be extended to August 1, 2020. In May 2020 the City Council issued an accounting order authorizing Entergy New Orleans to establish a regulatory asset for incremental COVID-19-related expenses. As of June 30, 2020, Entergy New Orleans recorded a regulatory asset of $4.8 million for costs associated with the COVID-19 pandemic.

In June 2020 the City Council established the City Council Cares Program and directed Entergy New Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC proceeding, currently being held in escrow, and approximately $15 million of non-securitized storm reserves to fund this program, which is intended to provide temporary bill relief to customers who become unemployed during the COVID-19 pandemic. The program became effective July 1, 2020, and offers qualifying residential customers bill credits of $100 per month for up to four months, for a maximum of $400 in residential customer bill credits.

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Notes to Financial Statements
Filings with the PUCT (Entergy Texas)

Distribution Cost Recovery Factor (DCRF) Rider

In March 2020, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $23.6 million annually, or $20.4 million in incremental annual DCRF revenue beyond Entergy Texas’s currently effective DCRF rider, based on its capital invested in distribution between January 1, 2019 and December 31, 2019. In May and June 2020 intervenors filed testimony recommending a disallowance to Entergy Texas’s annual revenue requirement ranging from approximately $0.3 million to $4.1 million. In June 2020 the parties agreed to waive the hearing on the merits. The parties have briefed the contested issues in this matter and are awaiting a proposal for decision.

Transmission Cost Recovery Factor (TCRF) Rider

As discussed in the Form 10-K, in August 2019, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The new TCRF rider is designed to collect approximately $19.4 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and June 30, 2019. In January 2020 the PUCT issued an order approving an unopposed settlement providing for recovery of the requested revenue requirement. Entergy Texas implemented the amended rider beginning with bills covering usage on and after January 23, 2020.

COVID-19 Orders

In March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In future proceedings the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. As of June 30, 2020, Entergy Texas recorded a regulatory asset of $4.1 million for costs associated with the COVID-19 pandemic.

System Agreement Cost Equalization Proceedings

Rough Production Cost Equalization Rates

Consolidated 2011, 2012, 2013, and 2014 Rate Filing Proceedings

As discussed in the Form 10-K, in April 2018 the LPSC requested rehearing of the FERC’s March 2018 order affirming the ALJ’s initial decision in the consolidated proceedings. Entergy filed in May 2018 the bandwidth true-up payments and receipts for the 2011-2014 rate filings and the payments were made in May 2018. In April 2020 the FERC issued an order partially granting the LPSC’s rehearing request.  In the order the FERC reversed its prior finding and determined that the tax gain portion of the Waterford 3 financing accumulated deferred income tax should be included in the bandwidth calculation.  The order requires Entergy Services to redetermine bandwidth true-up payments and receipts for the 2010-2012 test years.

In May 2020, Entergy and the LPSC both separately requested rehearing of the FERC’s April 2020 order partially granting the LPSC’s rehearing request. In June 2020 the FERC issued an order accepting the May 2018 true-up filing for the 2011-2014 rate filings. Also in June 2020, Entergy filed bandwidth true-up payments and receipts for the 2010-2012 test years to address the FERC’s April 2020 rehearing order:

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Notes to Financial Statements
Payments (Receipts)
(In Millions)
Entergy Arkansas($2.8)
Entergy Louisiana$2.3
Entergy Mississippi$0.2
Entergy New Orleans($0.1)
Entergy Texas$0.4

Entergy Arkansas Opportunity Sales Proceeding

As discussed in the Form 10-K, the FERC’s opportunity sales orders have been appealed to the D.C. Circuit by Entergy, the LPSC, and the APSC. In February 2020 all of the appeals were consolidated and in April 2020 the D.C. Circuit established a briefing schedule. Briefing will occur through September 2020. 

Also as discussed in the Form 10-K, in May 2019, Entergy Arkansas filed an application with the APSC requesting approval of a special rider tariff to recover the costs of its opportunity sales payments from its retail customers over a 24-month period. In January 2020 the Attorney General and Arkansas Electric Energy Consumers, Inc. filed testimony opposing the recovery by Entergy Arkansas of the opportunity sales payment but also claiming that certain components of the payment should be segregated and refunded to customers. In March 2020, Entergy Arkansas filed rebuttal testimony.

In July 2020 the APSC issued a decision concluding that the APSC was not preempted by the federal filed rate doctrine from considering the merits of Entergy Arkansas’s request, denying that the application is barred under the collateral estoppel aspect of res judicata, and finding that the application is not in the public interest. The order also directs Entergy Arkansas to refund to its retail customers within 30 days of the order the FERC-determined over-collection of $13.7 million, plus interest, associated with a recalculated bandwidth remedy. In addition to these primary findings, the order also denied the Attorney General’s request for Entergy Arkansas to prepare a compliance filing detailing all of the retail impacts from the opportunity sales and denied a request by the Arkansas Electric Energy Consumers to recalculate all costs using the revised responsibility ratio. Entergy Arkansas filed a motion for temporary stay of the 30-day requirement to allow Entergy Arkansas a reasonable opportunity to seek rehearing of the APSC order, but in July 2020 the APSC denied Entergy Arkansas’s request for a stay and directed Entergy Arkansas to refund to its retail ratepayers the component of the total FERC-determined opportunity sales payment that was associated with increased bandwidth remedy payments of $13.7 million, plus interest, by July 31, 2020. The APSC recognized Entergy Arkansas’s administrative limitations on processing the full refund by that date and stated that the refund shall be issued over the August 2020 billing cycle. While the APSC has denied Entergy Arkansas’s stay request, Entergy Arkansas believes its actions were prudent and, therefore, the costs are recoverable. In July 2020, Entergy Arkansas requested rehearing of the APSC order.

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in November 2019, in a proceeding that did not involve System Energy, the FERC issued an order addressing the methodology for determining the return on equity applicable to transmission owners in MISO. Thereafter, the participants in the System Energy proceeding agreed to amend the procedural schedule to allow the participants to file supplemental testimony addressing the order in the MISO transmission owner proceeding (Opinion No. 569).

In February 2020 the LPSC, the MPSC and APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569 and how it would affect the return on equity evaluation for the two complaint periods
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Notes to Financial Statements
concerning System Energy. For the first refund period, based on their respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 8.44%; the MPSC and APSC argue for an authorized return on equity of 8.41%; and the FERC trial staff argues for an authorized return on equity of 9.22%. For the second refund period and on a prospective basis, based on their respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 7.89%; the MPSC and APSC argue that an authorized return on equity of 8.01% may be appropriate; and the FERC trial staff argues for an authorized return on equity of 8.66%.

In April 2020, System Energy filed supplemental answering testimony addressing Opinion No. 569. System Energy argues that the Opinion No. 569 methodology is conceptually and analytically defective for purposes of establishing just and reasonable authorized return on equity determinations and proposes an alternative approach. As its primary recommendation, System Energy continues to support the return on equity determinations in its March 2019 testimony for the first refund period and its June 2019 testimony for the second refund period. Under the Opinion No. 569 methodology, System Energy calculates a “presumptively just and reasonable range” for the authorized return on equity for the first refund period of 8.57% to 9.52%, and for the second refund period of 8.28% to 9.11%. System Energy argues that these ranges are not just and reasonable results. Under its proposed alternative methodology, System Energy calculates an authorized return on equity of 10.26% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively.

In May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule was further revised in order to allow parties to the System Energy proceeding to address the Opinion No. 569-A methodology. Pursuant to the revised schedule, in June 2020, the LPSC, the MPSC and APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569-A and how it would affect the return on equity evaluation for the two complaint periods concerning System Energy. For the first refund period, based on their respective interpretations and applications of the Opinion No. 569-A methodology, the LPSC argues for an authorized return on equity for System Energy of 7.97%; the MPSC and APSC argue for an authorized return on equity of 9.24%; and the FERC trial staff argues for an authorized return on equity of 9.49%. For the second refund period and on a prospective basis, based on their respective interpretations and applications of the Opinion No. 569-A methodology, the LPSC argues for an authorized return on equity for System Energy of 7.78%; the MPSC and APSC argue that an authorized return on equity of 9.15% may be appropriate if the second complaint is not dismissed; and the FERC trial staff argues for an authorized return on equity of 9.09% if the second complaint is not dismissed.

Pursuant to the revised procedural schedule, in July 2020, System Energy filed supplemental testimony addressing Opinion No. 569-A. System Energy argues that strict application of the Opinion No. 569-A methodology produces results inconsistent with investor requirements and does not provide a sound basis on which to evaluate System Energy’s authorized return on equity. As its primary recommendation, System Energy argues for the use of a methodology that incorporates four separate financial models, including the constant growth form of the discounted cash flow model and the empirical capital asset pricing model. Based on application of its recommended methodology, System Energy argues for an authorized return on equity of 10.12% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively. Under the Opinion No. 569-A methodology, System Energy calculates an authorized return on equity of 9.44% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively.

Under the revised procedural schedule, System Energy’s supplemental testimony addressing Opinion No. 569-A is due in July 2020; rebuttal testimony addressing return on equity issues is due in August 2020; the hearing will commence in September 2020; and the initial decision is due in February 2021.

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Notes to Financial Statements
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC, and City Council filed direct testimony. The LPSC testimony sought refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions, and the cost of capital additions associated with the sale-leaseback interest, as well as interest on those amounts.

In June 2019 System Energy filed answering testimony arguing that the FERC should reject all claims for refunds.  Among other things, System Energy argued that claims for refunds of the costs of lease renewal payments and capital additions should be rejected because those costs were recovered consistent with the Unit Power Sales Agreement formula rate, System Energy was not over or double recovering any costs, and customers will save costs over the initial and renewal terms of the leases.  System Energy argued that claims for refunds associated with liabilities arising from uncertain tax positions should be rejected because the liabilities do not provide cost-free capital, the repayment timing of the liabilities is uncertain, and the outcome of the underlying tax positions is uncertain.  System Energy’s testimony also challenged the refund calculations supplied by the other parties.

In August 2019 the FERC trial staff filed direct and answering testimony seeking refunds for rate base reductions for the liabilities associated with uncertain tax positions. The FERC trial staff also argued that System Energy recovered $32 million more than it should have in depreciation expense for capital additions. In September 2019, System Energy filed cross-answering testimony disputing the FERC trial staff’s arguments for refunds, stating that the FERC trial staff’s position regarding depreciation rates for capital additions is not unreasonable, but explaining that any change in depreciation expense is only one element of a Unit Power Sales Agreement re-billing calculation. Adjustments to depreciation expense in any re-billing under the Unit Power Sales Agreement formula rate will also involve changes to accumulated depreciation, accumulated deferred income taxes, and other formula elements as needed. In October 2019 the LPSC filed rebuttal testimony increasing the amount of refunds sought for the liabilities associated with uncertain tax positions.  The LPSC seeks approximately $512 million, plus interest, which is approximately $179 million through June 30, 2020.  The FERC trial staff also filed rebuttal testimony in which it seeks refunds of a similar amount as the LPSC for the liabilities associated with uncertain tax positions.  The LPSC testimony also argued that adjustments to depreciation rates should affect rate base on a prospective basis only.

A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through June 30, 2020, is approximately $409 million, plus interest, which is approximately $101 million through June 30, 2020. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that
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Notes to Financial Statements
System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through June 30, 2020.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. In June 2020, System Energy, the LPSC, and the FERC trial staff filed briefs on exceptions, challenging several of the initial decision’s findings. System Energy’s brief on exceptions challenged the initial decision’s limitations on recovery of the lease renewal payments, its proposed rate base refund for the liabilities associated with uncertain tax positions, and its proposal to asymmetrically treat interest on bill corrections for depreciation expense adjustments. The LPSC’s and the FERC trial staff’s briefs on exceptions each challenged the initial decision’s allowance for recovery of the cost of service associated with the lease renewal based on the remaining net book value of the leased assets, its calculation of the remaining net book value of the leased assets, and the amount of the initial decision’s proposed rate base refund for the liabilities associated with uncertain tax positions. The LPSC’s brief on exceptions also challenged the initial decision’s proposal that depreciation expense adjustments include retroactive adjustments to rate base and its finding that section 203 of the Federal Power Act did not apply to the lease renewal. The FERC trial staff’s brief on exceptions also challenged the initial decision’s finding that the FERC need not institute a formal investigation into System Energy’s tariff. Briefs opposing exceptions are scheduled for September 2020. The FERC will then review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

LPSC Authorization of Additional Complaints

In May 2020 the LPSC authorized its staff to file additional complaints at FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement. The LPSC directive notes that the initial decision issued by the presiding ALJ in the Grand Gulf sale-leaseback complaint proceeding did not address, for procedural reasons, certain rate issues raised by the LPSC and declined to order further investigation of rates charged by System Energy. The LPSC directive authorizes its staff to file complaints at FERC “necessary to address these rate issues, to request a full investigation into the rates charged by System Energy for Grand Gulf power, and to seek rate refund, rate reduction, and such other remedies as may be necessary and appropriate to protect Louisiana ratepayers.” The LPSC directive further stated that the LPSC has seen “information suggesting that the Grand Gulf plant has been significantly underperforming compared to other nuclear plants in the United States, has had several extended and unexplained outages, and has been plagued with serious safety concerns.” The LPSC expressed concern that the costs paid by Entergy Louisiana's retail customers may have been detrimentally impacted, and authorized “the filing of a FERC complaint to address these performance issues and to seek appropriate refund, rate reduction, and other remedies as may be appropriate.” The complaints have not been filed as of this date, and the LPSC directive did not set a date for the filing of the complaints.


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

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
For the Three Months Ended June 30,
20202019
(In Millions, Except Per Share Data)
IncomeShares$/shareIncomeShares$/share
Basic earnings per share
Net income attributable to Entergy Corporation$360.5  200.2  $1.80  $236.4  193.0  $1.22  
Average dilutive effect of:
Stock options0.3  —  0.5  —  
Other equity plans0.4  (0.01) 0.7  —  
Diluted earnings per share$360.5  200.9  $1.79  $236.4  194.2  $1.22  

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.5 million for the three months ended June 30, 2020.

For the Six Months Ended June 30,
20202019
(In Millions, Except Per Share Data)
IncomeShares$/shareIncomeShares$/share
Basic earnings per share
Net income attributable to Entergy Corporation$479.2  200.0  $2.40  $491.0  191.3  $2.57  
Average dilutive effect of:
Stock options0.5  (0.01) 0.5  (0.01) 
Other equity plans0.4  —  0.6  (0.01) 
Equity forwards—  —  0.8  (0.01) 
Diluted earnings per share$479.2  200.9  $2.39  $491.0  193.2  $2.54  

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.5 million for the six months ended June 30, 2020 and approximately 0.3 million for the six months ended June 30, 2019.

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

Dividends declared per common share were $0.93 for the three months ended June 30, 2020 and $0.91 for the three months ended June 30, 2019. Dividends declared per common share were $1.86 for the six months ended June 30, 2020 and $1.82 for the six months ended June 30, 2019.
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Notes to Financial Statements

Treasury Stock

During the six months ended June 30, 2020, Entergy Corporation issued 1,061,599 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards.  Entergy Corporation did not repurchase any of its common stock during the six months ended June 30, 2020.

Retained Earnings

On July 31, 2020, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.93 per share, payable on September 1, 2020, to holders of record as of August 13, 2020.

Comprehensive Income

Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 2020 by component:
Cash flow
hedges
net
unrealized
gain (loss)		Pension
and
other
postretirement
liabilities		Net
unrealized
investment
gain (loss)		Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, April 1, 2020
$62,496  ($503,173) $41,690  ($398,987) 
Other comprehensive income (loss) before reclassifications
4,890  —  22,545  27,435  
Amounts reclassified from accumulated other comprehensive income (loss)
(30,296) 17,224  (3,980) (17,052) 
Net other comprehensive income (loss) for the period
(25,406) 17,224  18,565  10,383  
Ending balance, June 30, 2020
$37,090  ($485,949) $60,255  ($388,604) 
        
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Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 2019 by component:
Cash flow
hedges
net
unrealized
gain (loss)		Pension
and
other
postretirement
liabilities		Net
unrealized
investment
gain (loss)		Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, April 1, 2019
($43,246) ($520,372) $12,466  ($551,152) 
Other comprehensive income (loss) before reclassifications
99,359  —  15,834  115,193  
Amounts reclassified from accumulated other comprehensive income (loss)
(4,377) 11,496  (1,564) 5,555  
Net other comprehensive income (loss) for the period
94,982  11,496  14,270  120,748  
Ending balance, June 30, 2019
$51,736  ($508,876) $26,736  ($430,404) 

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 2020 by component:
Cash flow
hedges
net
unrealized
gain (loss)		Pension
and
other
postretirement
liabilities		Net
unrealized
investment
gain (loss)		Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, January 1, 2020
$84,206  ($557,072) $25,946  ($446,920) 
Other comprehensive income (loss) before reclassifications
97,373  34,349  40,258  171,980  
Amounts reclassified from accumulated other comprehensive income (loss)
(144,489) 36,774  (5,949) (113,664) 
Net other comprehensive income (loss) for the period
(47,116) 71,123  34,309  58,316  
Ending balance, June 30, 2020
$37,090  ($485,949) $60,255  ($388,604) 

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 2019 by component:
Cash flow
hedges
net
unrealized
gain (loss)		Pension
and
other
postretirement
liabilities		Net
unrealized
investment
gain (loss)		Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Ending balance, December 31, 2018($23,135) ($531,922) ($2,116) ($557,173) 
Implementation of accounting standards
(7,685) —  879  (6,806) 
Beginning balance, January 1, 2019
($30,820) ($531,922) ($1,237) ($563,979) 
Other comprehensive income (loss) before reclassifications
127,670  —  29,373  157,043  
Amounts reclassified from accumulated other comprehensive income (loss)
(45,114) 23,046  (1,400) (23,468) 
Net other comprehensive income (loss) for the period
82,556  23,046  27,973  133,575  
Ending balance, June 30, 2019
$51,736  ($508,876) $26,736  ($430,404) 

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended June 30, 2020 and 2019:
Pension and Other
Postretirement Liabilities
20202019
(In Thousands)
Beginning balance, April 1,
$14,029  ($7,122) 
Amounts reclassified from accumulated other
comprehensive income (loss)
(945) (969) 
Net other comprehensive income (loss) for the period
(945) (969) 
Ending balance, June 30,
$13,084  ($8,091) 
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Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the six months ended June 30, 2020 and 2019:
Pension and Other
Postretirement Liabilities
20202019
(In Thousands)
Beginning balance, January 1,
$4,562  ($6,153) 
Other comprehensive income (loss) before reclassifications
10,050  —  
Amounts reclassified from accumulated other
comprehensive income (loss)
(1,528) (1,938) 
Net other comprehensive income (loss) for the period
8,522  (1,938) 
Ending balance, June 30,
$13,084  ($8,091) 

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended June 30, 2020 and 2019 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20202019
(In Thousands)
Cash flow hedges net unrealized gain (loss)
   Power contracts$25,086  $5,589  
Competitive business operating revenues
   Interest rate swaps(48) (48) Miscellaneous - net
Total realized gain (loss) on cash flow hedges25,038  5,541  
Income taxes5,258  (1,164) Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)$30,296  $4,377  
Pension and other postretirement liabilities
   Amortization of prior-service credit$5,682  $5,325  (a)
   Amortization of loss(27,619) (18,980) (a)
   Settlement loss—  (918) (a)
Total amortization(21,937) (14,573) 
Income taxes4,713  3,077  Income taxes
Total amortization (net of tax)($17,224) ($11,496) 
Net unrealized investment gain (loss)
Realized gain (loss)$6,297  $2,475  
Interest and investment income
Income taxes(2,317) (911) Income taxes
Total realized investment gain (loss) (net of tax)$3,980  $1,564  
Total reclassifications for the period (net of tax)$17,052  ($5,555) 
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Notes to Financial Statements
        
(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost.  See Note 6 to the financial statements herein for additional details.

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the six months ended June 30, 2020 and 2019 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20202019
(In Thousands)
Cash flow hedges net unrealized gain (loss)
   Power contracts$119,509  $57,204  
Competitive business operating revenues
   Interest rate swaps(97) (97) Miscellaneous - net
Total realized gain (loss) on cash flow hedges119,412  57,107  
Income taxes25,077  (11,993) Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
$144,489  $45,114  
Pension and other postretirement liabilities
   Amortization of prior-service credit$9,401  $10,652  (a)
   Amortization of loss(54,937) (37,969) (a)
   Settlement loss—  (2,055) (a)
Total amortization(45,536) (29,372) 
Income taxes8,762  6,326  Income taxes
Total amortization (net of tax)($36,774) ($23,046) 
Net unrealized investment gain (loss)
Realized gain (loss)$9,413  $2,216  
Interest and investment income
Income taxes(3,464) (816) Income taxes
Total realized investment gain (loss) (net of tax)$5,949  $1,400  
Total reclassifications for the period (net of tax)$113,664  $23,468  

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

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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended June 30, 2020 and 2019 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20202019
(In Thousands)
Pension and other postretirement liabilities
   Amortization of prior-service credit$1,698  $1,837  (a)
   Amortization of loss(419) (526) (a)
Total amortization1,279  1,311  
Income taxes(334) (342) Income taxes
Total amortization (net of tax)945  969  
Total reclassifications for the period (net of tax)$945  $969  

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

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the six months ended June 30, 2020 and 2019 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20202019
(In Thousands)
Pension and other postretirement liabilities
   Amortization of prior-service credit$2,787  $3,674  (a)
   Amortization of loss(720) (1,052) (a)
Total amortization2,067  2,622  
Income taxes(539) (684) Income taxes
Total amortization (net of tax)1,528  1,938  
Total reclassifications for the period (net of tax)$1,528  $1,938  

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


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

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2024.  The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the six months
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ended June 30, 2020 was 2.62% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2020.
Capacity BorrowingsLetters
of Credit		Capacity
Available
(In Millions)
$3,500$160$6$3,334

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

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion.  As of June 30, 2020, Entergy Corporation had approximately $1,946 million of commercial paper outstanding.  The weighted-average interest rate for the six months ended June 30, 2020 was 2.01%.

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of June 30, 2020 as follows:
CompanyExpiration
Date		Amount of
Facility		Interest Rate (a)Amount Drawn
as of
June 30, 2020		Letters of Credit
Outstanding as of
June 30, 2020
Entergy ArkansasApril 2021$20 million (b)2.91%$—$—
Entergy ArkansasSeptember 2024$150 million (c)2.91%$—$—
Entergy LouisianaSeptember 2024$350 million (c)2.91%$—$—
Entergy MississippiApril 2021$37.5 million (d)3.28%$—$—
Entergy MississippiApril 2021$35 million (d)3.28%$—$—
Entergy MississippiApril 2021$10 million (d)3.28%$—$—
Entergy New OrleansNovember 2021$25 million (c)3.06%$—$0.8 million
Entergy TexasSeptember 2024$150 million (c)3.28%$—$1.3 million

(a)The interest rate is the estimated interest rate as of June 30, 2020 that would have been applied to outstanding borrowings under the facility.
(b)Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option. In July 2020 the amount of the credit facility was increased to $25 million.
(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
(d)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.

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

In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities primarily as a means to post
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collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of June 30, 2020:
CompanyAmount of
Uncommitted Facility		Letter of Credit FeeMISO Letters of Credit
Issued as of
June 30, 2020 (a) (b)
Entergy Arkansas$25 million0.78%$4.5 million
Entergy Louisiana$125 million 0.78%$15.5 million
Entergy Mississippi$65 million0.78%$2.5 million
Entergy New Orleans$15 million1.00%$1 million
Entergy Texas$50 million0.70%$10.2 million

(a)As of June 30, 2020, letters of credit posted with MISO covered financial transmission rights exposure of $3.1 million for Entergy Arkansas, $2.3 million for Entergy Louisiana, $1.5 million for Entergy Mississippi, $0.5 million for Entergy New Orleans, and $0.4 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of June 30, 2020, in addition to the $2.5 million MISO letter of credit, Entergy Mississippi has $7.1 million of non-MISO letters of credit outstanding under this facility.

The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are effective through July 14, 2022. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements.  The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from internal and external short-term borrowings combined may not exceed the FERC-authorized limits.  The following were the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of June 30, 2020 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
 AuthorizedBorrowings
 (In Millions)
Entergy Arkansas$250$26
Entergy Louisiana $450 $—
Entergy Mississippi$175$—
Entergy New Orleans$150$—
Entergy Texas$200$—
System Energy$200$16

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

See Note 17 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs).  To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs have commercial paper programs in place. Following is a summary as of June 30, 2020:
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Notes to Financial Statements
CompanyExpiration
Date 		Amount
of
Facility		Weighted
Average Interest
Rate on
Borrowings (a)		Amount
Outstanding as of
June 30, 2020
(Dollars in Millions)
Entergy Arkansas VIE
September 2021$802.14%$23.7
Entergy Louisiana River Bend VIE
September 2021$1052.19%$44.1
Entergy Louisiana Waterford VIE
September 2021$1052.31%$16.2
System Energy VIE
September 2021$1201.91%$80.1

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

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

The nuclear fuel company variable interest entities had notes payable that were included in debt on the respective balance sheets as of June 30, 2020 as follows:
CompanyDescriptionAmount
Entergy Arkansas VIE
3.65% Series L due July 2021
$90 million
Entergy Arkansas VIE
3.17% Series M due December 2023
$40 million
Entergy Louisiana River Bend VIE
3.38% Series R due August 2020
$70 million
Entergy Louisiana Waterford VIE
3.92% Series H due February 2021
$40 million
Entergy Louisiana Waterford VIE
3.22% Series I due December 2023
$20 million
System Energy VIE
3.42% Series J due April 2021
$100 million

In July 2020, Entergy Louisiana River Bend VIE issued $70 million of 2.51% Series V intermediate term secured notes due June 2027. Entergy Louisiana River Bend VIE expects to use the proceeds to redeem $70 million of 3.38% Series R intermediate term secured notes due August 2020.

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

Debt Issuances and Retirements

(Entergy Corporation)

In May 2020, Entergy Corporation issued $600 million of 2.80% Series senior notes due June 2030 and $600 million of 3.75% Series senior notes due June 2050. Entergy Corporation used the proceeds, together with other funds, to repay, prior to maturity, its $450 million of 5.125% Series senior notes due September 2020, a portion of its outstanding commercial paper, a portion of outstanding borrowings on its $3.5 billion credit facility, and for general corporate purposes.

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(Entergy Arkansas)

In March 2020, Entergy Arkansas issued $100 million of 4.00% Series mortgage bonds due June 2028. Entergy Arkansas used the proceeds for general corporate purposes.

(Entergy Louisiana)

In March 2020, Entergy Louisiana issued $350 million of 2.90% Series mortgage bonds due March 2051. Entergy Louisiana used the proceeds, together with other funds, to repay borrowings of $100 million on its $350 million credit facility and for general corporate purposes.

In March 2020, Entergy Louisiana issued $300 million of 4.20% Series mortgage bonds due September 2048. Entergy Louisiana expects to use the proceeds, together with other funds, to repay, at maturity, its $250 million of 3.95% Series mortgage bonds due October 2020 and for general corporate purposes.

(Entergy Mississippi)

In May 2020, Entergy Mississippi issued $170 million of 3.50% Series mortgage bonds due June 2051. Entergy Mississippi used the proceeds for general corporate purposes.

(Entergy New Orleans)

In March 2020, Entergy New Orleans issued $62 million of 3.75% Series mortgage bonds due March 2040 and $78 million of 3.00% Series mortgage bonds due March 2025. Entergy New Orleans used the proceeds to repay short-term debt, to finance a portion of the construction of the New Orleans Power Station, and for general corporate purposes.

(Entergy Texas)

In March 2020, Entergy Texas issued $175 million of 3.55% Series mortgage bonds due September 2049. Entergy Texas used the proceeds, together with other funds, to finance a portion of the construction of the Montgomery County Power Station, to repay borrowings of $100 million on its $150 million credit facility, and for general corporate purposes.

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of June 30, 2020 were as follows:
Book Value
of Long-Term Debt		Fair Value
of Long-Term Debt (a)
(In Thousands)
Entergy$19,483,373  $21,651,678  
Entergy Arkansas$3,628,588  $3,972,000  
Entergy Louisiana$7,879,741  $8,988,369  
Entergy Mississippi$1,780,040  $1,964,145  
Entergy New Orleans$674,617  $658,162  
Entergy Texas$2,070,503  $2,328,356  
System Energy$596,861  $621,692  

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

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2019 were as follows:
Book Value
of Long-Term Debt		Fair Value
of Long-Term Debt (a)
(In Thousands)
Entergy$17,873,655  $19,059,950  
Entergy Arkansas$3,517,208  $3,747,914  
Entergy Louisiana$7,303,669  $7,961,168  
Entergy Mississippi$1,614,129  $1,709,505  
Entergy New Orleans$560,906  $523,846  
Entergy Texas$1,922,956  $2,090,215  
System Energy$548,107  $565,209  

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


NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)

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

Stock Options

Entergy granted options on 530,716 shares of its common stock under the 2019 Omnibus Incentive Plan during the first quarter 2020 with a fair value of $11.45 per option.  As of June 30, 2020, there were options on 2,427,479 shares of common stock outstanding with a weighted-average exercise price of $89.72.  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of June 30, 2020.  The aggregate intrinsic value of the stock options outstanding as of June 30, 2020 was $29.7 million.

The following table includes financial information for outstanding stock options for the three months ended June 30, 2020 and 2019:
20202019
(In Millions)
Compensation expense included in Entergy’s net income$1.0  $1.0  
Tax benefit recognized in Entergy’s net income$0.2  $0.3  
Compensation cost capitalized as part of fixed assets and materials and supplies
$0.4  $0.3  

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The following table includes financial information for outstanding stock options for the six months ended June 30, 2020 and 2019:
20202019
(In Millions)
Compensation expense included in Entergy’s net income$2.0  $2.0  
Tax benefit recognized in Entergy’s net income$0.5  $0.5  
Compensation cost capitalized as part of fixed assets and materials and supplies
$0.8  $0.6  

Other Equity Awards

In January 2020 the Board approved and Entergy granted 313,805 restricted stock awards and 134,853 long-term incentive awards under the 2019 Omnibus Incentive Plan.  The restricted stock awards were made effective as of January 30, 2020 and were valued at $131.72 per share, which was the closing price of Entergy’s common stock on that date.  Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the three-year vesting period. One-third of the restricted stock awards and accrued dividends will vest upon each anniversary of the grant date.  

In addition, long-term incentive awards were also granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned. For the 2020-2022 performance period, performance will be measured based eighty percent on relative total shareholder return and twenty percent on a cumulative adjusted earnings per share metric.  The performance units were granted as of January 30, 2020 and eighty percent were valued at $169.74 per share based on various factors, primarily market conditions; and twenty percent were valued at $131.72 per share, the closing price of Entergy’s common stock on that date.  Performance units have the same dividend rights as shares of Entergy common stock and are considered issued and outstanding shares of Entergy upon vesting. Performance units are expensed ratably over the three-year vesting period and compensation cost for the portion of the award based on cumulative adjusted earnings per share will be adjusted based on the number of units that ultimately vest. See Note 12 to the financial statements in the Form 10-K for a description of the Long-Term Performance Unit Program.

The following table includes financial information for other outstanding equity awards for the three months ended June 30, 2020 and 2019:
20202019
(In Millions)
Compensation expense included in Entergy’s net income$9.6  $8.4  
Tax benefit recognized in Entergy’s net income$2.5  $2.2  
Compensation cost capitalized as part of fixed assets and materials and supplies
$3.8  $2.9  

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Notes to Financial Statements
The following table includes financial information for other outstanding equity awards for the six months ended June 30, 2020 and 2019:
20202019
(In Millions)
Compensation expense included in Entergy’s net income$19.0  $17.2  
Tax benefit recognized in Entergy’s net income$4.9  $4.4  
Compensation cost capitalized as part of fixed assets and materials and supplies
$7.2  $5.8  


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

Components of Qualified Net Pension Cost 

Entergy’s qualified pension cost, including amounts capitalized, for the second quarters of 2020 and 2019, included the following components:
20202019
(In Thousands)
Service cost - benefits earned during the period$40,379  $33,606  
Interest cost on projected benefit obligation60,799  73,912  
Expected return on assets(103,565) (103,859) 
Amortization of net loss87,259  58,420  
Settlement charges—  162  
Net pension costs$84,872  $62,241  

Entergy’s qualified pension cost, including amounts capitalized, for the six months ended June 30, 2020 and 2019, included the following components:
20202019
(In Thousands)
Service cost - benefits earned during the period$80,758  $67,213  
Interest cost on projected benefit obligation121,598  147,853  
Expected return on assets(207,130) (207,743) 
Amortization of net loss174,518  116,838  
Settlement charges—  1,299  
Net pension costs$169,744  $125,460  

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The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the second quarters of 2020 and 2019, included the following components:
2020Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$6,566  $8,794  $2,023  $663  $1,546  $1,965  
Interest cost on projected benefit obligation
11,433  12,841  3,340  1,456  2,782  2,814  
Expected return on assets(19,622) (22,402) (5,757) (2,627) (5,486) (4,663) 
Amortization of net loss16,897  16,627  4,748  2,005  3,265  4,279  
Net pension cost$15,274  $15,860  $4,354  $1,497  $2,107  $4,395  

2019Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$5,261  $7,284  $1,629  $569  $1,350  $1,550  
Interest cost on projected benefit obligation
14,175  15,882  4,068  1,874  3,612  3,363  
Expected return on assets
(20,176) (22,652) (5,968) (2,697) (5,862) (4,677) 
Amortization of net loss
11,841  11,643  3,105  1,530  2,334  2,850  
Net pension cost
$11,101  $12,157  $2,834  $1,276  $1,434  $3,086  

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the six months ended June 30, 2020 and 2019, included the following components:
2020Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$13,132  $17,588  $4,046  $1,326  $3,092  $3,930  
Interest cost on projected benefit obligation
22,866  25,682  6,680  2,912  5,564  5,628  
Expected return on assets
(39,244) (44,804) (11,514) (5,254) (10,972) (9,326) 
Amortization of net loss
33,794  33,254  9,496  4,010  6,530  8,558  
Net pension cost
$30,548  $31,720  $8,708  $2,994  $4,214  $8,790  

2019Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$10,522  $14,568  $3,258  $1,138  $2,700  $3,100  
Interest cost on projected benefit obligation
28,350  31,764  8,136  3,748  7,224  6,727  
Expected return on assets(40,352) (45,304) (11,936) (5,393) (11,724) (9,354) 
Amortization of net loss23,682  23,286  6,209  3,059  4,668  5,700  
Net pension cost$22,202  $24,314  $5,667  $2,552  $2,868  $6,173  
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Non-Qualified Net Pension Cost

Entergy recognized $4.5 million and $7.6 million in pension cost for its non-qualified pension plans in the second quarters of 2020 and 2019, respectively. Reflected in the pension cost for non-qualified pension plans in the second quarter of 2019 were settlement charges of $3.7 million related to the payment of lump sum benefits out of the plan. Entergy recognized $9.1 million and $11.6 million in pension cost for its non-qualified pension plans for the six months ended June 30, 2020 and 2019, respectively. Reflected in the pension cost for non-qualified pension plans for the six months ended June 30, 2019 were settlement charges of $3.7 million 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 for the second quarters of 2020 and 2019:
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas
(In Thousands)
2020$83  $37  $90  $8  $117  
2019$71  $41  $113  $6  $122  

Reflected in Entergy Mississippi’s non-qualified pension costs in the second quarter of 2019 were settlement charges of $40 thousand 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 for the six months ended June 30, 2020 and 2019:
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas
(In Thousands)
2020$166  $74  $180  $16  $234  
2019$144  $84  $188  $11  $246  

Reflected in Entergy Mississippi’s non-qualified pension costs for the six months ended June 30, 2019 were settlement charges of $40 thousand related to the payment of lump sum benefits out of the plan.

Components of Net Other Postretirement Benefit Cost (Income)

Entergy’s other postretirement benefit cost (income), including amounts capitalized, for the second quarters of 2020 and 2019, included the following components:
20202019
(In Thousands)
Service cost - benefits earned during the period$6,231  $4,675  
Interest cost on accumulated postretirement benefit obligation (APBO)6,888  11,975  
Expected return on assets(10,182) (9,562) 
Amortization of prior service credit(8,985) (8,844) 
Amortization of net loss1,005  358  
Net other postretirement benefit income($5,043) ($1,398) 
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Entergy’s other postretirement benefit cost (income), including amounts capitalized, for the six months ended June 30, 2020 and 2019, included the following components:
 20202019
 (In Thousands)
Service cost - benefits earned during the period$12,032  $9,350  
Interest cost on accumulated postretirement benefit obligation (APBO)14,820  23,950  
Expected return on assets(20,510) (19,124) 
Amortization of prior service credit(14,907) (17,688) 
Amortization of net loss1,473  716  
Net other postretirement benefit cost income($7,092) ($2,796) 

The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the second quarters of 2020 and 2019, included the following components:

2020Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$933  $1,524  $372  $114  $306  $321  
Interest cost on APBO1,164  1,497  372  186  477  276  
Expected return on assets(4,260) —  (1,287) (1,344) (2,403) (735) 
Amortization of prior service credit
(396) (1,695) (444) (228) (939) (282) 
Amortization of net (gain) loss
162  (81) 48  9  231  33  
Net other postretirement benefit cost (income)
($2,397) $1,245  ($939) ($1,263) ($2,328) ($387) 

2019Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$591  $1,160  $262  $92  $236  $243  
Interest cost on APBO1,807  2,666  670  395  854  476  
Expected return on assets(3,991) —  (1,199) (1,237) (2,276) (697) 
Amortization of prior service credit
(1,238) (1,837) (439) (171) (561) (363) 
Amortization of net (gain) loss
144  (174) 181  58  121  89  
Net other postretirement benefit cost (income)
($2,687) $1,815  ($525) ($863) ($1,626) ($252) 
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The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the six months ended June 30, 2020 and 2019, included the following components:
2020Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$1,761  $2,947  $723  $219  $609  $615  
Interest cost on APBO
2,381  3,220  794  413  1,059  583  
Expected return on assets
(8,586) —  (2,594) (2,699) (4,838) (1,483) 
Amortization of prior service credit
(1,057) (2,784) (765) (304) (1,489) (501) 
Amortization of net (gain) loss
217  (280) 77  (29) 443  53  
Net other postretirement benefit cost (income)
($5,284) $3,103  ($1,765) ($2,400) ($4,216) ($733) 

2019Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period
$1,182  $2,320  $524  $184  $472  $486  
Interest cost on APBO
3,614  5,332  1,340  790  1,708  952  
Expected return on assets
(7,982) —  (2,398) (2,474) (4,552) (1,394) 
Amortization of prior service credit
(2,476) (3,674) (878) (342) (1,122) (726) 
Amortization of net (gain) loss
288  (348) 362  116  242  178  
Net other postretirement benefit cost (income)
($5,374) $3,630  ($1,050) ($1,726) ($3,252) ($504) 

Reclassification out of Accumulated Other Comprehensive Income (Loss)

Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the second quarters of 2020 and 2019:
2020Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$—  $5,739  ($57) $5,682  
Amortization of net loss(26,461) (327) (831) (27,619) 
($26,461) $5,412  ($888) ($21,937) 
Entergy Louisiana
Amortization of prior service credit$—  $1,698  $—  $1,698  
Amortization of net gain (loss)(499) 81  (1) (419) 
($499) $1,779  ($1) $1,279  
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2019Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$—  $5,375  ($50) $5,325  
Amortization of net gain (loss)(18,736) 308  (552) (18,980) 
Settlement loss(162) —  (756) (918) 
($18,898) $5,683  ($1,358) ($14,573) 
Entergy Louisiana
Amortization of prior service credit$—  $1,837  $—  $1,837  
Amortization of net gain (loss)(699) 174  (1) (526) 
($699) $2,011  ($1) $1,311  

Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the six months ended June 30, 2020 and 2019:
2020Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$—  $9,516  ($115) $9,401  
Amortization of net loss(52,923) (352) (1,662) (54,937) 
($52,923) $9,164  ($1,777) ($45,536) 
Entergy Louisiana
Amortization of prior service credit$—  $2,787  $—  $2,787  
Amortization of net gain (loss)(998) 280  (2) (720) 
($998) $3,067  ($2) $2,067  

2019Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$—  $10,750  ($98) $10,652  
Amortization of net gain (loss)(37,470) 615  (1,114) (37,969) 
Settlement loss(1,299) —  (756) (2,055) 
($38,769) $11,365  ($1,968) ($29,372) 
Entergy Louisiana
Amortization of prior service credit$—  $3,674  $—  $3,674  
Amortization of net gain (loss)(1,397) 348  (3) (1,052) 
($1,397) $4,022  ($3) $2,622  
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Notes to Financial Statements

Accounting for Pension and Other Postretirement Benefits

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

Other Postretirement Benefits

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

Employer Contributions

Based on current assumptions, Entergy expects to contribute $416.3 million to its qualified pension plans in 2020.  As of June 30, 2020, Entergy had contributed $112 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 2020:
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Expected 2020 pension contributions
$78,643  $74,991  $20,115  $5,839  $5,634  $21,730  
Pension contributions made through June 2020
$17,584  $18,706  $4,296  $1,458  $1,485  $5,714  
Remaining estimated pension contributions to be made in 2020
$61,059  $56,285  $15,819  $4,381  $4,149  $16,016  


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

Entergy Corporation

Entergy’s reportable segments as of June 30, 2020 were Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants
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that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity.

Entergy’s segment financial information for the second quarters of 2020 and 2019 was as follows:
UtilityEntergy
Wholesale
Commodities		All OtherEliminationsEntergy
(In Thousands)
2020
Operating revenues$2,213,061  $199,709  $18  $—  $2,412,788  
Income taxes$73,710  $24,467  ($9,062) $—  $89,115  
Consolidated net income (loss)$348,902  $85,178  ($37,069) ($31,898) $365,113  
2019
Operating revenues$2,376,437  $289,783  $2  ($13) $2,666,209  
Income taxes$21,150  ($9,290) ($10,402) $—  $1,458  
Consolidated net income (loss)$334,752  ($25,382) ($36,939) ($31,898) $240,533  

Entergy’s segment financial information for the six months ended June 30, 2020 and 2019 was as follows:
UtilityEntergy
Wholesale
Commodities		All OtherEliminationsEntergy
(In Thousands)
2020
Operating revenues$4,307,690  $532,258  $29  ($10) $4,839,967  
Income taxes$20,761  ($6,073) $3,233  $—  $17,921  
Consolidated net income (loss)$672,751  ($25,251) ($95,298) ($63,796) $488,406  
Total assets as of June 30, 2020$51,205,266  $3,658,974  $493,119  ($1,992,057) $53,365,302  
2019
Operating revenues$4,552,419  $723,394  $2  ($23) $5,275,792  
Income taxes$9,586  $56,618  ($21,975) $—  $44,229  
Consolidated net income (loss)$568,900  $71,697  ($77,620) ($63,797) $499,180  
Total assets as of December 31, 2019
$49,557,664  $4,154,961  $514,020  ($2,502,733) $51,723,912  

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

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

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Total restructuring charges for the second quarters of 2020 and 2019 were comprised of the following:
20202019
Employee retention and severance
expenses and other benefits-related costs		Contracted economic development costsTotalEmployee retention and severance
expenses and other benefits-related costs		Contracted economic development costsTotal
 (In Millions)
Balance as of April 1,$150  $14  $164  $213  $14  $227  
Restructuring costs accrued
17  —  17  22  —  22  
Cash paid out
14  —  14  54  —  54  
Balance as of June 30,$153  $14  $167  $181  $14  $195  
        
In addition, Entergy Wholesale Commodities incurred $7 million in the second quarter 2020 and $16 million in the second quarter 2019 of impairment and other related charges associated with these strategic decisions and transactions.

Total restructuring charges for the six months ended June 30, 2020 and 2019 were comprised of the following:
20202019
Employee retention and severance
expenses and other benefits-related costs		Contracted economic development costsTotalEmployee retention and severance
expenses and other benefits-related costs		Contracted economic development costsTotal
 (In Millions)
Balance as of January 1,$129  $14  $143  $179  $14  $193  
Restructuring costs accrued38  —  38  56  —  56  
Cash paid out14  —  14  54  —  54  
Balance as of June 30,
$153  $14  $167  $181  $14  $195  

In addition, Entergy Wholesale Commodities incurred $12 million in the six months ended June 30, 2020 and $90 million in the six months ended June 30, 2019 of impairment and other related charges associated with these strategic decisions and transactions.

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Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses associated with management’s strategy to exit the merchant power business of approximately $70 million in 2020, of which $38 million has been incurred as of June 30, 2020, and a total of approximately $60 million from 2021 through 2022.

Registrant Subsidiaries

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


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

Market Risk

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

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

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

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

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Notes to Financial Statements
Derivatives

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

Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities.  Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  The maximum length of time over which Entergy Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at June 30, 2020 is approximately 9 months.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 97% for the remainder of 2020, of which approximately 61% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2020 is 7.2 TWh.

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

Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.  As of June 30, 2020, there were no derivative contracts with counterparties in a liability position. In addition to the corporate guarantee, $6 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $41 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2019, there were no derivative contracts with counterparties in a liability position. In addition to the corporate guarantee, $11 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $1 million in cash collateral and $98 million in letters of credit were required to be posted by it counterparties to the Entergy subsidiary. If the Entergy Corporation credit rating falls below investment grade, Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.   

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy had executed natural gas swaps and options as of June 30, 2020 was 3.75 years for Entergy Louisiana and the maximum length of time over which Entergy had executed natural gas swaps as of June 30, 2020 was 9 months for Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of June 30, 2020 was 37,862,000 MMBtu for Entergy, including 27,400,000 MMBtu for Entergy Louisiana and 10,462,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps and options is covered by master agreements that
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do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2020, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2020 through May 31, 2021. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 2020 was 129,379 GWh for Entergy, including 30,375 GWh for Entergy Arkansas, 61,443 GWh for Entergy Louisiana, 14,461 GWh for Entergy Mississippi, 5,873 GWh for Entergy New Orleans, and 16,793 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 2020 and December 31, 2019. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi as of June 30, 2020 and December 31, 2019.

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Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2020 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Business
(In Millions)
Derivatives designated as hedging instruments
Assets:
Electricity swaps and options
Prepayments and other (current portion)
$49($4)$45
Entergy Wholesale Commodities
Liabilities:
Electricity swaps and options
Other current liabilities
(current portion)
$1($1)$—
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
Assets:
Electricity swaps and options
Prepayments and other (current portion)
$4$—$4
Entergy Wholesale Commodities
Natural gas swaps and options
Prepayments and other (current portion)
$1$—$1Utility
Natural gas swaps and options
Other deferred debits and other assets (non-current portion)
$1$—$1Utility
Financial transmission rights
Prepayments and other
$23($1)$22
Utility and Entergy Wholesale Commodities
Liabilities:
Electricity swaps and options
Other current liabilities
(current portion)
$3($3)$—
Entergy Wholesale Commodities
Natural gas swaps and options
Other current liabilities
(current portion)
$6$—$6Utility
Natural gas swaps and options
Other non-current liabilities (non-current portion)
$2$—$2Utility
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The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2019 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Business
(In Millions)
Derivatives designated as hedging instruments
 
   
Assets:
 
   
Electricity swaps and options
Prepayments and other (current portion)
$92($1)$91
Entergy Wholesale Commodities
Electricity swaps and options
Other deferred debits and other assets (non-current portion)
$17$—$17
Entergy Wholesale Commodities
Liabilities:
 
  
 
Electricity swaps and options
Other current liabilities (current portion)
$1($1)$—
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
  
 
Assets:
 
  
 
Electricity swaps and options
Prepayments and other (current portion)
$11($1)$10
Entergy Wholesale Commodities
Natural gas swaps and options
Other deferred debits and other assets (non-current portion)
$1$—$1
Utility
Financial transmission rights
Prepayments and other
$10$—$10
Utility and Entergy Wholesale Commodities
Liabilities:
 
  
 
Electricity swaps and options
Other current liabilities (current portion)
$2($2)$—
Entergy Wholesale Commodities
Natural gas swaps and options
Other current liabilities (current portion)
$5$—$5Utility
Natural gas swaps and options
Other non-current liabilities (non-current portion)
$2$—$2Utility

(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)Excludes cash collateral in the amount of $6 million posted as of June 30, 2020 and $11 million posted and $1 million held as of December 31, 2019. Also excludes letters of credit in the amount of $8 million posted and $41 million held as of June 30, 2020 and $98 million held as of December 31, 2019.

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The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended June 30, 2020 and 2019 were as follows:
InstrumentAmount of gain (loss)
recognized in other
comprehensive
income		Income Statement locationAmount of gain
(loss)
reclassified from
accumulated
other
comprehensive
income into
income (a)
(In Millions)(In Millions)
2020
Electricity swaps and options
($7)
Competitive businesses operating revenues
$25
2019
Electricity swaps and options
$126
Competitive businesses operating revenues
$6

(a)Before taxes of $5 million and $1 million for the three months ended June 30, 2020 and 2019, respectively

The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the six months ended June 30, 2020 and 2019 were as follows:
InstrumentAmount of gain (loss)
recognized in other
comprehensive income		Income Statement locationAmount of gain
(loss)
reclassified from
accumulated
other
comprehensive
income into
income (a)
(In Millions)(In Millions)
2020
Electricity swaps and options
$60
Competitive businesses operating revenues
$120
2019
Electricity swaps and options
$152
Competitive businesses operating revenues
$57

(a)Before taxes of $25 million and $12 million for the six months ended June 30, 2020 and 2019, respectively

Based on market prices as of June 30, 2020, unrealized gains (losses) recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled $48 million of net unrealized gains.  Approximately $48 million is expected to be reclassified from accumulated other comprehensive income to operating revenues in the next twelve months.  The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices. 

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

The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended June 30, 2020 and 2019 were as follows:
InstrumentIncome Statement
location		Amount of gain (loss)
recorded in the income statement
(In Millions)
2020
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
(a)($3)
Financial transmission rights
Purchased power expense
(b)$15
Electricity swaps and options (c)
Competitive business operating revenues
($2)
2019
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
(a)($6)
Financial transmission rights
Purchased power expense
(b)$32
Electricity swaps and options (c)
Competitive business operating revenues
($2)

The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the six months ended June 30, 2020 and 2019 were as follows:
InstrumentIncome Statement
location		Amount of gain (loss)
recorded in the income statement
(In Millions)
2020
Natural gas swaps and options
Fuel, fuel-related expenses, and gas purchased for resale
(a)($9)
Financial transmission rights
Purchased power expense
(b)$28
Electricity swaps and options (c)
Competitive business operating revenues
($2)
2019
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
(a)($7)
Financial transmission rights
Purchased power expense
(b)$53
Electricity swaps and options (c)
Competitive business operating revenues
$3

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

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 2020 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Registrant
(In Millions)
Assets:
Natural gas swaps and options
Prepayments and other
$0.8$—$0.8
Entergy Louisiana
Natural gas swaps and options
Other deferred debits and other assets (non-current portion)
$0.6$—$0.6
Entergy Louisiana
Financial transmission rights
Prepayments and other
$6.3($0.2)$6.1
Entergy Arkansas
Financial transmission rights
Prepayments and other
$12.7($0.2)$12.5
Entergy Louisiana
Financial transmission rights
Prepayments and other
$1.1$—$1.1
Entergy Mississippi
Financial transmission rights
Prepayments and other
$2.6$—$2.6
Entergy Texas
Liabilities:
Natural gas swaps and options
Other current liabilities
$1.7$—$1.7
Entergy Louisiana
Natural gas swaps and options
Other non-current liabilities
$2.2$—$2.2
Entergy Louisiana
Natural gas swaps
Other current liabilities
$4.3$—$4.3
Entergy Mississippi
Financial transmission rights
Other current liabilities
$0.3($0.5)$0.2
Entergy New Orleans

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The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2019 were as follows:
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Registrant
(In Millions)
Assets:
Natural gas swaps and options
Other deferred debits and other assets
$0.8$—$0.8
Entergy Louisiana
Financial transmission rights
Prepayments and other$3.4($0.1)$3.3
Entergy Arkansas
Financial transmission rights
Prepayments and other$4.5$—$4.5
Entergy Louisiana
Financial transmission rights
Prepayments and other$0.8$—$0.8
Entergy Mississippi
Financial transmission rights
Prepayments and other$0.3$—$0.3
Entergy New Orleans
Financial transmission rights
Prepayments and other$1.0($0.1)$0.9
Entergy Texas
Liabilities:
Natural gas swaps and options
Other current liabilities
$2.4$—$2.4
Entergy Louisiana
Natural gas swaps and options
Other non-current liabilities
$2.2$—$2.2
Entergy Louisiana
Natural gas swaps
Other current liabilities
$2.3$—$2.3
Entergy Mississippi
Natural gas swaps
Other current liabilities
$0.2$—$0.2
Entergy New Orleans

(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)As of June 30, 2020, letters of credit posted with MISO covered financial transmission rights exposure of $3.1 million for Entergy Arkansas, $2.3 million for Entergy Louisiana, $1.5 million for Entergy Mississippi, $0.5 million for Entergy New Orleans, and $0.4 million for Entergy Texas. As of December 31, 2019, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi.


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The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 2020 and 2019 were as follows:
InstrumentIncome Statement LocationAmount of gain
(loss) recorded
in the income statement		Registrant
(In Millions)
2020
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
($2.5)(a)Entergy Mississippi
Financial transmission rightsPurchased power expense$4.8(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$5.4(b)Entergy Louisiana
Financial transmission rightsPurchased power expense($0.4)(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$0.2(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$5.3(b)Entergy Texas
2019
Natural gas swaps and options
Fuel, fuel-related expenses, and gas purchased for resale
($2.7)(a)Entergy Louisiana
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
($3.5)(a)Entergy Mississippi
Financial transmission rightsPurchased power expense$3.6(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$17.7(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$2.2(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$0.7(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$7.8(b)Entergy Texas

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The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2020 and 2019 were as follows:
InstrumentIncome Statement LocationAmount of gain
(loss) recorded
in the income statement		Registrant
(In Millions)
2020
Natural gas swaps and options
Fuel, fuel-related expenses, and gas purchased for resale
($1.3)
(a)
Entergy Louisiana
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
($7.7)
(a)
Entergy Mississippi
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
($0.4)
(a)
Entergy New Orleans
Financial transmission rightsPurchased power expense$9.4
(b)
Entergy Arkansas
Financial transmission rightsPurchased power expense$10.7
(b)
Entergy Louisiana
Financial transmission rightsPurchased power expense($0.5)
(b)
Entergy Mississippi
Financial transmission rightsPurchased power expense$0.6
(b)
Entergy New Orleans
Financial transmission rightsPurchased power expense$7.6
(b)
Entergy Texas
2019
Natural gas swaps and options
Fuel, fuel-related expenses, and gas purchased for resale
($1.9)
(a)
Entergy Louisiana
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
($5.2)
(a)
Entergy Mississippi
Natural gas swaps
Fuel, fuel-related expenses, and gas purchased for resale
$0.2
(a)
Entergy New Orleans
Financial transmission rights
Purchased power expense
$12.0
(b)
Entergy Arkansas
Financial transmission rights
Purchased power expense
$26.5
(b)
Entergy Louisiana
Financial transmission rights
Purchased power expense
$3.3
(b)
Entergy Mississippi
Financial transmission rights
Purchased power expense
$2.6
(b)
Entergy New Orleans
Financial transmission rights
Purchased power expense
$8.1
(b)
Entergy Texas

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

Fair Values

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

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

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

The three levels of the fair value hierarchy are:

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

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

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

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

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

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
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liabilities.  The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group.  The primary related functions of the Office of Corporate Risk Oversight include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system.  The Office of Corporate Risk Oversight is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

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

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

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

The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight.  The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group review these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and
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assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer.  The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.  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.
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$880  $—  $—  $880  
Decommissioning trust funds (a):
Equity securities
879  —  —  879  
Debt securities (b)
1,080  2,043  —  3,123  
Common trusts (c)
2,485  
Power contracts
—  —  49  49  
Securitization recovery trust account
35  —  —  35  
Escrow accounts
420  —  —  420  
Gas hedge contracts
1  1  —  2  
Financial transmission rights
—  —  22  22  
$3,295  $2,044  $71  $7,895  
Liabilities:
Gas hedge contracts
$6  $2  $—  $8  

2019Level 1Level 2Level 3Total
(In Millions)
Assets:
    
Temporary cash investments
$391  $—  $—  $391  
Decommissioning trust funds (a):
    
Equity securities
905  —  —  905  
Debt securities
1,139  1,824  —  2,963  
Common trusts (c)
2,536  
Power contracts
—  —  118  118  
Securitization recovery trust account
47  —  —  47  
Escrow accounts
459  —  —  459  
Gas hedge contracts
—  1  —  1  
Financial transmission rights
—  —  10  10  
 
$2,941  $1,825  $128  $7,430  
Liabilities:
    
Gas hedge contracts$5  $2  $—  $7  

(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements herein for additional information on the investment portfolios.
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(b)The decommissioning trust funds fair value presented herein does not include the recognition of a credit loss valuation allowance of $0.4 million on debt securities due to the adoption of ASU 2016-13. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses.
(c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2020 and 2019:
20202019
Power ContractsFinancial transmission rightsPower ContractsFinancial transmission rights
(In Millions)
Balance as of April 1,
$85  $4  ($46) $5  
Total gains (losses) for the period (a)
Included in earnings
16  —  (2) —  
Included in other comprehensive income
(7) —  126  —  
Included as a regulatory liability/asset
—  10  —  21  
Issuances of financial transmission rights
—  23  —  35  
Settlements
(45) (15) (6) (32) 
Balance as of June 30,
$49  $22  $72  $29  

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period was $3 million for the three months ended June 30, 2020 and $1.4 million for the three months ended June 30, 2019.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2020 and 2019:
20202019
Power ContractsFinancial transmission rightsPower ContractsFinancial transmission rights
(In Millions)
Balance as of January 1,
$118  $10  ($31) $15  
Total gains (losses) for the period (a)
Included in earnings
(2) —  3  —  
Included in other comprehensive income
60  —  152  —  
Included as a regulatory liability/asset
—  17  —  32  
Issuances of financial transmission rights
—  23  —  35  
Settlements
(127) (28) (52) (53) 
Balance as of June 30,
$49  $22  $72  $29  

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period was $4 million for the six months ended June 30, 2020 and ($3.5) million for the six months ended June 30, 2019.
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The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of June 30, 2020:
Transaction TypeFair ValueSignificant
Unobservable Inputs		Range
from
Average
%		Effect on
Fair Value
(In Millions)(In Millions)
Power contracts - electricity swaps
$49Unit contingent discount+/-4.75%$5

The values of financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO.

The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant
Unobservable
Input		Transaction TypePositionChange to InputEffect on
Fair Value
Unit contingent discountElectricity swapsSellIncrease (Decrease)Decrease (Increase)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020 and December 31, 2019.  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.

Entergy Arkansas
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Decommissioning trust funds (a):
Equity securities
$5.3  $—  $—  $5.3  
Debt securities
107.9  333.6  —  441.5  
Common trusts (b)
663.0  
Securitization recovery trust account
2.8  —  —  2.8  
Financial transmission rights
—  —  6.1  6.1  
$116.0  $333.6  $6.1  $1,118.7  

2019Level 1Level 2Level 3Total
(In Millions)
Assets:
Decommissioning trust funds (a):
Equity securities
$0.6  $—  $—  $0.6  
Debt securities
108.7  304.1  —  412.8  
Common trusts (b)
687.9  
Securitization recovery trust account
4.0  —  —  4.0  
Financial transmission rights
—  —  3.3  3.3  
$113.3  $304.1  $3.3  $1,108.6  
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Entergy Louisiana
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$463.4  $—  $—  $463.4  
Decommissioning trust funds (a):
Equity securities
9.2  —  —  9.2  
Debt securities
164.4  458.5  —  622.9  
Common trusts (b)
932.9  
Escrow accounts
256.7  —  —  256.7  
Securitization recovery trust account
2.9  —  —  2.9  
Gas hedge contracts
0.8  0.6  —  1.4  
Financial transmission rights
—  —  12.5  12.5  
$897.4  $459.1  $12.5  $2,301.9  
Liabilities:
Gas hedge contracts
$1.7  $2.2  $—  $3.9  

2019Level 1Level 2Level 3Total
 (In Millions)
Assets:
    
Temporary cash investments
$1.5  $—  $—  $1.5  
Decommissioning trust funds (a):
    
Equity securities
4.3  —  —  4.3  
Debt securities
180.8  420.7  —  601.5  
Common trusts (b)
958.0  
Escrow accounts
295.9  —  —  295.9  
Securitization recovery trust account
3.7  —  —  3.7  
Gas hedge contracts
—  0.8  —  0.8  
Financial transmission rights
—  —  4.5  4.5  
 
$486.2  $421.5  $4.5  $1,870.2  
Liabilities:
Gas hedge contracts$2.4  $2.2  $—  $4.6  

Entergy Mississippi
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$70.2  $—  $—  $70.2  
Escrow accounts
80.4  —  —  80.4  
Financial transmission rights
—  —  1.1  1.1  
$150.6  $—  $1.1  $151.7  
Liabilities:
Gas hedge contracts
$4.3  $—  $—  $4.3  
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2019Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$51.6  $—  $—  $51.6  
Escrow accounts
80.2  —  —  80.2  
Financial transmission rights
—  —  0.8  0.8  
 
$131.8  $—  $0.8  $132.6  
Liabilities:
Gas hedge contracts$2.3  $—  $—  $2.3  

Entergy New Orleans
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$30.5  $—  $—  $30.5  
Securitization recovery trust account
1.5  —  —  1.5  
Escrow accounts
83.0  —  —  83.0  
$115.0  $—  $—  $115.0  
Liabilities:
Financial transmission rights$—  $—  $0.2  $0.2  

2019Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$6.0  $—  $—  $6.0  
Securitization recovery trust account
2.0  —  —  2.0  
Escrow accounts
82.6  —  —  82.6  
Financial transmission rights
—  —  0.3  0.3  
$90.6  $—  $0.3  $90.9  
Liabilities:
Gas hedge contracts$0.2  $—  $—  $0.2  

Entergy Texas
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$41.1  $—  $—  $41.1  
Securitization recovery trust account
27.6  —  —  27.6  
Financial transmission rights
—  —  2.6  2.6  
$68.7  $—  $2.6  $71.3  
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2019Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$12.9  $—  $—  $12.9  
Securitization recovery trust account
37.7  —  —  37.7  
Financial transmission rights
—  —  0.9  0.9  
$50.6  $—  $0.9  $51.5  
System Energy
2020Level 1Level 2Level 3Total
(In Millions)
Assets:
Decommissioning trust funds (a):
Equity securities
$9.8  $—  $—  $9.8  
Debt Securities
166.9  251.9  —  418.8  
Common trusts (b)
630.9  
$176.7  $251.9  $—  $1,059.5  

2019Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments
$68.4  $—  $—  $68.4  
Decommissioning trust funds (a):
Equity securities
13.3  —  —  13.3  
Debt securities
176.3  209.9  —  386.2  
Common trusts (b)
654.6  
$258.0  $209.9  $—  $1,122.5  

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

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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2020.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of April 1,
$1.1  $1.9  $0.3  $—  $0.3  
Issuances of financial transmission rights
6.5  13.2  1.4  (0.1) 2.4  
Gains (losses) included as a regulatory liability/asset
3.3  2.8  (1.0) 0.1  5.2  
Settlements
(4.8) (5.4) 0.4  (0.2) (5.3) 
Balance as of June 30,
$6.1  $12.5  $1.1  ($0.2) $2.6  

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2019.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of April 1,
$1.1  $2.8  $0.7  $0.5  ($0.3) 
Issuances of financial transmission rights
9.6  18.7  3.9  2.7  0.1  
Gains (losses) included as a regulatory liability/asset
1.1  11.8  0.4  (0.5) 8.6  
Settlements
(3.6) (17.7) (2.2) (0.7) (7.8) 
Balance as of June 30,
$8.2  $15.6  $2.8  $2.0  $0.6  

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2020.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of January 1,
$3.3  $4.5  $0.8  $0.3  $0.9  
Issuances of financial transmission rights
6.5  13.2  1.4  (0.1) 2.4  
Gains (losses) included as a regulatory liability/asset
5.7  5.5  (1.6) 0.2  6.9  
Settlements
(9.4) (10.7) 0.5  (0.6) (7.6) 
Balance as of June 30,
$6.1  $12.5  $1.1  ($0.2) $2.6  
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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2019.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of January 1,
$3.4  $8.3  $2.2  $1.3  ($0.5) 
Issuances of financial transmission rights
9.6  18.7  3.9  2.7  0.1  
Gains (losses) included as a regulatory liability/asset
7.2  15.1  —  0.6  9.1  
Settlements
(12.0) (26.5) (3.3) (2.6) (8.1) 
Balance as of June 30,
$8.2  $15.6  $2.8  $2.0  $0.6  


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

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

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

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2020 on equity securities still held as of June 30, 2020 were $508 million and ($126) million, respectively. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.

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The available-for-sale securities held as of June 30, 2020 and December 31, 2019 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2020
Debt Securities (a)$2,585  $206  $2  
2019
Debt Securities (a)$2,456  $96  $6  

(a)Debt securities presented herein do not include the $538 million and $507 million of debt securities held in the wholly-owned registered investment company as of June 30, 2020 and December 31, 2019, respectively, which are not accounted for as available-for-sale.

The unrealized gains/(losses) above are reported before deferred taxes of $33 million as of June 30, 2020 and $13 million as of December 31, 2019 for debt securities. The amortized cost of available-for-sale debt securities was $2,381 million as of June 30, 2020 and $2,366 million as of December 31, 2019.  As of June 30, 2020, available-for-sale debt securities had an average coupon rate of approximately 3.19%, an average duration of approximately 7.08 years, and an average maturity of approximately 10.45 years.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of June 30, 2020 and December 31, 2019:
June 30, 2020December 31, 2019
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$116  $2  $404  $5  
More than 12 months5  —  38  1  
Total$121  $2  $442  $6  

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2020 and December 31, 2019 were as follows:
20202019
(In Millions)
Less than 1 year$36  $128  
1 year - 5 years775  807  
5 years - 10 years743  666  
10 years - 15 years309  125  
15 years - 20 years130  126  
20 years+592  604  
Total$2,585  $2,456  

During the three months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $276 million and $361 million, respectively.  During the three months ended June 30, 2020
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and 2019, gross gains of $15 million and $6 million, respectively, and gross losses of $1 million and $1 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $676 million and $726 million, respectively.  During the six months ended June 30, 2020 and 2019, gross gains of $29 million and $8 million, respectively, and gross losses of $4 million and $3 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of June 30, 2020 were $565 million for Indian Point 1, $715 million for Indian Point 2, $945 million for Indian Point 3, and $528 million for Palisades. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2019 were $556 million for Indian Point 1, $701 million for Indian Point 2, $930 million for Indian Point 3, and $498 million for Palisades. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

Entergy Arkansas

Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of June 30, 2020 and December 31, 2019 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2020
Debt Securities$441.5  $30.0  $0.1  
2019
Debt Securities$412.8  $9.9  $2.6  

The amortized cost of available-for-sale debt securities was $411.6 million as of June 30, 2020 and $405.4 million as of December 31, 2019.  As of June 30, 2020, available-for-sale debt securities had an average coupon rate of approximately 2.72%, an average duration of approximately 7.18 years, and an average maturity of approximately 8.62 years.

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2020 on equity securities still held as of June 30, 2020 were $116.8 million and ($30.4) million, respectively. 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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The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of June 30, 2020 and December 31, 2019:
June 30, 2020December 31, 2019
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$14.6  $0.1  $104.8  $2.5  
More than 12 months—  —  7.7  0.1  
Total$14.6  $0.1  $112.5  $2.6  

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2020 and December 31, 2019 were as follows:
 20202019
 (In Millions)
Less than 1 year$21.9  $44.1  
1 year - 5 years104.2  109.1  
5 years - 10 years178.2  156.0  
10 years - 15 years67.9  31.3  
15 years - 20 years29.5  23.8  
20 years+39.8  48.5  
Total$441.5  $412.8  

During the three months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $17.7 million and $22.3 million, respectively.  During the three months ended June 30, 2020 and 2019, gross gains of $1.3 million and $0.1 million, respectively, and gross losses of $0.1 million and $18 thousand, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $66.4 million and $33.2 million, respectively.  During the six months ended June 30, 2020 and 2019, gross gains of $5.8 million and $0.1 million, respectively, and gross losses of $0.2 million and $0.1 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

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Entergy Louisiana

Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of June 30, 2020 and December 31, 2019 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2020
Debt Securities$622.9  $50.1  $0.5  
2019
Debt Securities$601.5  $29.3  $0.8  

The amortized cost of available-for-sale debt securities was $573.3 million as of June 30, 2020 and $573 million as of December 31, 2019.  As of June 30, 2020, the available-for-sale debt securities had an average coupon rate of approximately 3.84%, an average duration of approximately 7.21 years, and an average maturity of approximately 12.96 years.

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2020 on equity securities still held as of June 30, 2020 were $160.8 million and ($40.1) million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of June 30, 2020 and December 31, 2019:
June 30, 2020December 31, 2019
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$29.3  $0.5  $71.2  $0.8  
More than 12 months0.8  —  7.9  —  
Total$30.1  $0.5  $79.1  $0.8  

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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2020 and December 31, 2019 were as follows:
20202019
(In Millions)
Less than 1 year$8.4  $40.7  
1 year - 5 years142.4  142.0  
5 years - 10 years144.0  132.4  
10 years - 15 years80.4  39.8  
15 years - 20 years55.4  49.2  
20 years+192.3  197.4  
Total$622.9  $601.5  

During the three months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $34.1 million and $39.5 million, respectively.  During the three months ended June 30, 2020 and 2019, gross gains of $2 million and $1.4 million, respectively, and gross losses of $0.1 million and $0.05 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $101.5 million and $95.7 million, respectively.  During the six months ended June 30, 2020 and 2019, gross gains of $4.9 million and $1.7 million, respectively, and gross losses of $0.7 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

System Energy

System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of June 30, 2020 and December 31, 2019 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2020
Debt Securities$418.8  $32.4  $0.3  
2019
Debt Securities$386.2  $15.1  $0.3  

The amortized cost of available-for-sale debt securities was $386.7 million as of June 30, 2020 and $371.4 million as of December 31, 2019.  As of June 30, 2020, available-for-sale debt securities had an average coupon rate of approximately 2.97%, an average duration of approximately 7.39 years, and an average maturity of approximately 11.19 years.

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2020 on equity securities still held as of June 30, 2020 were $111.1 million and ($28.9) million, respectively. 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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The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of June 30, 2020 and December 31, 2019:
June 30, 2020December 31, 2019
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$15.4  $0.3  $56.9  $0.3  
More than 12 months—  —  0.3  —  
Total$15.4  $0.3  $57.2  $0.3  

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of June 30, 2020 and December 31, 2019 were as follows:
20202019
(In Millions)
Less than 1 year($1.8) $8.5  
1 year - 5 years166.7  154.6  
5 years - 10 years103.4  92.3  
10 years - 15 years27.4  13.4  
15 years - 20 years6.5  14.4  
20 years+116.6  103.0  
Total$418.8  $386.2  

During the three months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $73.6 million and $87.7 million, respectively.  During the three months ended June 30, 2020 and 2019, gross gains of $5.4 million and $1.5 million, respectively, and gross losses of $0.2 million and $0.3 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2020 and 2019, proceeds from the dispositions of available-for-sale securities amounted to $165.6 million and $129.8 million, respectively.  During the six months ended June 30, 2020 and 2019, gross gains of $7 million and $1.9 million, respectively, and gross losses of $0.4 million and $0.4 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Allowance for expected credit losses

Entergy implemented ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, effective January 1, 2020. In accordance with the new standard, Entergy estimates the expected credit losses for its available for sale securities based on the current credit rating and remaining life of the securities.  To the extent an individual security is determined to be uncollectible it is written off against this allowance.  Entergy’s available-for-sale securities are held in trusts managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Specifically, available-for-sale securities are subject to credit worthiness restrictions, with requirements for both the average credit rating of the portfolio and minimum credit ratings for individual debt securities.  As of June 30, 2020, Entergy’s allowance for expected credit losses related to available-for-sale
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securities was $0.4 million. Entergy did not record any impairments of available-for-sale debt securities for the three and six months ended June 30, 2020.

Other-than-temporary impairments and unrealized gains and losses

Prior to the implementation of ASU 2016-13 on January 1, 2020, Entergy evaluated the available-for-sale debt securities in the Entergy Wholesale Commodities nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment had occurred.  The assessment of whether an investment in a debt security suffered an other-than-temporary impairment was based on whether Entergy had the intent to sell or more likely than not would have been required to sell the debt security before recovery of its amortized costs.  Further, if Entergy did not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment was considered to have occurred and it was measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and six months ended June 30, 2019. 


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

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

Tax Cuts and Jobs Act

During the second quarter 2018, Registrant Subsidiaries began returning unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This manner of regulatory accounting has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows:
Three Months
Ended June 30,		Six Months
Ended June 30,
2020201920202019
(In Millions)
Entergy$15  $61  $45  $122  
Entergy Arkansas($1) $25  $12  $57  
Entergy Louisiana$8  $7  $16  $14  
Entergy New Orleans$2  $2  $5  $2  
Entergy Texas$6  $20  $12  $42  
System Entergy$—  $7  $—  $7  

Other Tax Matters

In accordance with ASC 718, “Compensation - Stock Compensation,” Entergy and the Registrant Subsidiaries recognized excess tax deductions as a reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-based awards, Entergy recorded a permanent tax reduction of
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Notes to Financial Statements
approximately $24.7 million, including $4.8 million for Entergy Arkansas, $8.6 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.5 million for Entergy New Orleans, $2.7 million for Entergy Texas, and $1.3 million for System Energy.

In the first quarter 2020, Entergy and the IRS agreed upon and settled on the treatment of funds received by Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a reduction of income tax expense of approximately $32 million.  As a result of the settlement, the position was partially sustained and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million primarily due to the reversal of liabilities for uncertain tax positions in excess of the agreed-upon settlement.  Entergy recorded an increase to income tax expense of $26 million primarily resulting from the reduction of the deferred tax asset, associated with utilization of the net operating loss as a result of the settlement. This adjustment recorded by Entergy also accounted for the tax rate change of the Tax Cuts and Jobs Act.  As a result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55 financing order.

Tax Accounting Methods

As discussed in Note 3 to the financial statements in the Form 10-K, in 2015, System Energy adopted a new method of accounting for income tax return purposes in which its nuclear decommissioning costs are treated as production costs of electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2 billion for System Energy in 2015. Entergy expects to concede this tax position with the IRS during the third quarter 2020, which will result in an approximate $400 million decrease in federal uncertain tax positions for Entergy and System Energy and a corresponding decrease in federal deferred tax assets for Entergy and an increase in taxes payable for System Energy.

Coronavirus Aid, Relief, and Economic Security Act

In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are permitting a five year carryback of 2018-2020 net operating losses, removing the 80 percent limitation on the carryback of 2018-2020 net operating losses, increasing the limitation on interest expense deductibility for 2019 and 2020, accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable contributions during 2020, and delaying the payment of employer payroll taxes. Based on current estimates, Entergy could defer approximately $64 million of 2020 payroll tax payments, which would be payable in two installments of $32 million on December 31, 2021 and December 31, 2022.


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

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at June 30, 2020 were $281 million for Entergy, $48.4 million for Entergy Arkansas, $74.2 million for Entergy Louisiana, $21.7 million for Entergy Mississippi, $13.2 million for Entergy New Orleans, $46.7 million for Entergy Texas, and $26.1 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2019 were $406 million for Entergy, $67.9 million for Entergy Arkansas, $115.1 million for Entergy Louisiana, $34.2 million for Entergy Mississippi, $18.4 million for Entergy New Orleans, $88.1 million for Entergy Texas, and $23.2 million for System Energy.

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Notes to Financial Statements

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

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

System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 5 to the financial statements in the Form 10-K. System Energy made payments under this arrangement, including interest, of $8.6 million in each of the six months ended June 30, 2020 and the six months ended June 30, 2019.


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

Operating Revenues

See Note 19 to the financial statements in the Form 10-K for a discussion of revenue recognition.  Entergy’s total revenues for the three months ended June 30, 2020 and 2019 were as follows:
20202019
(In Thousands)
Utility:
Residential$790,869  $770,373  
Commercial526,121  595,025  
Industrial576,203  641,733  
Governmental46,959  57,623  
    Total billed retail1,940,152  2,064,754  
Sales for resale (a)52,761  75,318  
Other electric revenues (b)168,721  195,952  
    Revenues from contracts with customers2,161,634  2,336,024  
Other revenues (c)28,923  9,703  
    Total electric revenues2,190,557  2,345,727  
Natural gas22,495  30,699  
Entergy Wholesale Commodities:
Competitive businesses sales from contracts with customers (a)
175,720  280,398  
Other revenues (c)24,016  9,385  
    Total competitive businesses revenues199,736  289,783  
    Total operating revenues$2,412,788  $2,666,209  




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Entergy’s total revenues for the six months ended June 30, 2020 and 2019 are as follows:
20202019
(In Thousands)
Utility:
Residential$1,588,897  $1,572,911  
Commercial1,065,061  1,149,082  
Industrial1,133,718  1,242,734  
Governmental99,541  110,584  
    Total billed retail3,887,217  4,075,311  
Sales for resale (a)106,487  159,753  
Other electric revenues (b)218,887  211,422  
    Revenues from contracts with customers4,212,591  4,446,486  
Other revenues (c)28,605  20,265  
    Total electric revenues4,241,196  4,466,751  
Natural gas66,471  85,647  
Entergy Wholesale Commodities:
Competitive businesses sales from contracts with customers (a)
391,723  640,869  
Other revenues (c)140,577  82,525  
    Total competitive businesses revenues532,300  723,394  
    Total operating revenues$4,839,967  $5,275,792  
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Notes to Financial Statements
The Registrant Subsidiaries’ total revenues for the three months ended June 30, 2020 and 2019 were as follows:
2020Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$171,171  $301,105  $112,361  $53,420  $152,811  
Commercial106,104  209,119  89,594  36,401  84,904  
Industrial106,254  335,201  35,874  3,066  95,809  
Governmental4,344  16,781  9,798  10,475  5,560  
    Total billed retail387,873  862,206  247,627  103,362  339,084  
Sales for resale (a)36,956  82,698  18,426  8,018  13,187  
Other electric revenues (b)63,537  53,104  29,393  3,999  20,039  
Revenues from contracts with customers
488,366  998,008  295,446  115,379  372,310  
Other revenues (c)3,401  3,593  2,508  19,520  (116) 
    Total electric revenues491,767  1,001,601  297,954  134,899  372,194  
Natural gas—  10,051  —  12,444  —  
    Total operating revenues$491,767  $1,011,652  $297,954  $147,343  $372,194  

2019Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$157,714  $290,366  $116,801  $58,621  $146,871  
Commercial125,555  232,134  102,275  53,981  81,080  
Industrial118,913  384,919  38,739  8,490  90,672  
Governmental4,971  17,925  10,521  18,984  5,222  
    Total billed retail407,153  925,344  268,336  140,076  323,845  
Sales for resale (a)74,501  83,208  4,994  8,579  14,772  
Other electric revenues (b)58,209  80,307  26,982  7,263  24,656  
Revenues from contracts with customers
539,863  1,088,859  300,312  155,918  363,273  
Other revenues (c)3,066  5,400  2,425  1,234  307  
    Total electric revenues542,929  1,094,259  302,737  157,152  363,580  
Natural gas—  12,058  —  18,641  —  
    Total operating revenues$542,929  $1,106,317  $302,737  $175,793  $363,580  

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Notes to Financial Statements
The Registrant Subsidiaries’ total revenues for the six months ended June 30, 2020 and 2019 were as follows:
2020Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$390,859  $560,965  $239,463  $104,319  $293,291  
Commercial217,349  411,365  186,392  81,905  168,050  
Industrial207,342  657,542  72,264  10,413  186,157  
Governmental8,374  33,535  20,125  26,326  11,180  
    Total billed retail823,924  1,663,407  518,244  222,963  658,678  
Sales for resale (a)78,096  161,228  32,848  18,188  21,815  
Other electric revenues (b)65,134  85,113  35,836  4,763  30,742  
Revenues from contracts with customers
967,154  1,909,748  586,928  245,914  711,235  
Other revenues (c)6,525  4,394  4,948  12,416  295  
    Total electric revenues973,679  1,914,142  591,876  258,330  711,530  
Natural gas—  28,157  —  38,315  —  
    Total operating revenues$973,679  $1,942,299  $591,876  $296,645  $711,530  


2019Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$367,581  $554,431  $245,610  $110,697  $294,592  
Commercial250,133  438,912  200,189  99,723  160,125  
Industrial240,491  731,598  76,436  15,740  178,470  
Governmental9,869  34,817  20,557  34,886  10,455  
    Total billed retail868,074  1,759,758  542,792  261,046  643,642  
Sales for resale (a)154,085  167,164  9,808  18,803  31,548  
Other electric revenues (b)60,514  92,746  27,387  5,556  28,153  
Revenues from contracts with customers
1,082,673  2,019,668  579,987  285,405  703,343  
Other revenues (c)6,068  11,284  4,994  2,630  711  
    Total electric revenues1,088,741  2,030,952  584,981  288,035  704,054  
Natural gas—  34,695  —  50,952  —  
    Total operating revenues$1,088,741  $2,065,647  $584,981  $338,987  $704,054  

(a)Sales for resale and competitive businesses sales include day-ahead sales of energy in a market administered by an ISO. These sales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actual power generated and delivered in the real time market. Given the short duration of these transactions, Entergy does not consider them to be derivatives subject to fair value adjustments, and includes them as part of customer revenues.
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(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market and unbilled revenue.
(c)Other revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees.

Allowance for doubtful accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of expected losses on its accounts receivable balances. Due to the essential nature of utility services, Entergy has historically experienced a low rate of default on its accounts receivables. Due to the effect of the COVID-19 pandemic on customer receivables, however, Entergy recorded an increase in its allowance for doubtful accounts, as shown below:
EntergyEntergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of December 31, 2019
$7.4  $1.2  $1.9  $0.6  $3.2  $0.5  
Provisions
38.4  6.3  14.1  7.0  5.5  5.5  
Write-offs
(8.6) (1.8) (3.5) (1.2) (1.0) (1.1) 
Recoveries
6.0  1.6  2.0  0.8  0.7  0.9  
Balance as of June 30, 2020
$43.2  $7.3  $14.5  $7.2  $8.4  $5.8  
The allowance for currently expected credit losses is calculated as the historical rate of customer write-offs multiplied by the current accounts receivable balance, taking into account the length of time the receivable balances have been outstanding. Although the rate of customer write-offs has historically experienced minimal variation, management monitors the current condition of individual customer accounts to manage collections and ensure bad debt expense is recorded in a timely manner.
________________

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

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

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

Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2020, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended June 30, 2020 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, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the COVID-19 pandemic.

Results of Operations

Net Income

Second Quarter 2020 Compared to Second Quarter 2019

Net income increased $9.9 million primarily due to lower other operation and maintenance expenses, partially offset by lower volume/weather.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net income increased $15.3 million primarily due to lower other operation and maintenance expenses and a formula rate plan regulatory provision recorded in the first quarter 2019 to reflect the historical year netting adjustment, partially offset by lower volume/weather and higher depreciation and amortization expenses.

Operating Revenues

Second Quarter 2020 Compared to Second Quarter 2019

Following is an analysis of the change in operating revenues comparing the second quarter 2020 to the second quarter 2019:
Amount
(In Millions)
2019 operating revenues$542.9  
Fuel, rider, and other revenues that do not significantly affect net income
(64.8) 
Volume/weather
(14.2) 
Retail electric price1.0  
Return of unprotected excess accumulated deferred income taxes to customers
26.9  
2020 operating revenues$491.8  

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

The volume/weather variance is primarily due to a decrease of 316 GWh, or 7%, in billed electricity usage, including decreased commercial and small industrial usage as a result of the COVID-19 pandemic, and the effect of less favorable weather on residential sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. Entergy Arkansas continues to expect declines in sales volume during 2020 due to the
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COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of January 2020, as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. In second quarter 2020, $1.4 million was collected from customers as compared to $25.5 million returned to customers in second quarter 2019. There is no effect on net income as the reduction in operating revenues in each period was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2020 to the six months ended June 30, 2019:
Amount
(In Millions)
2019 operating revenues$1,088.7  
Fuel, rider, and other revenues that do not significantly affect net income
(132.8) 
Volume/weather
(33.3) 
Retail electric price5.7  
Return of unprotected excess accumulated deferred income taxes to customers
45.4  
2020 operating revenues$973.7  

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

The volume/weather variance is primarily due to a decrease of 525 GWh, or 5%, in billed electricity usage, including decreased commercial and small industrial usage as a result of the COVID-19 pandemic, and the effect of less favorable weather on residential sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. Entergy Arkansas continues to expect declines in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of January 2020, as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. In the six months ended June 30, 2020, $11.8 million was returned to customers as compared to $57.2 million in the
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six months ended June 30, 2019. There is no effect on net income as the reduction in operating revenues in each period was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Other Income Statement Variances

Second Quarter 2020 Compared to Second Quarter 2019

Other operation and maintenance expenses decreased primarily due to a decrease of $12.2 million in non-nuclear generation expenses primarily due to lower long-term service agreement expenses and a lower scope of work performed during plant outages in 2020 as compared to the same period in 2019, including a delay in planned outages in 2020 as a result of the COVID-19 pandemic, and a decrease of $8.4 million in nuclear generation expenses primarily due to lower nuclear labor costs, including contract labor.

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

Other regulatory credits in the second quarter 2020 included $10.5 million in amortization of the 2018 historical year netting adjustment reflected in the 2019 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the 2019 formula rate plan filing.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Other operation and maintenance expenses decreased primarily due to:

•a decrease of $17.2 million in non-nuclear generation expenses primarily due to lower long-term service agreement expenses and a lower scope of work performed during plant outages in 2020 as compared to the same period in 2019, including a delay in planned outages in 2020 as a result of the COVID-19 pandemic;
•a decrease of $11.1 million in nuclear generation expenses primarily due to lower nuclear labor costs, including contract labor; and
•higher nuclear insurance refunds of $7.6 million.

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

Other regulatory credits for the six months ended June 30, 2020 included $22.2 million in amortization of the 2018 historical year netting adjustment reflected in the 2019 formula rate plan filing. Other regulatory credits for the six months ended June 30, 2019 included an additional provision of $11.5 million to reflect the current estimate of the historical year netting adjustment that was to be included in the 2019 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the 2019 formula rate plan filing.

Income Taxes

The effective income tax rate was 24.5% for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 10.9% for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the
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Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

The effective income tax rates were (31.9%) for the second quarter 2019 and (63.9%) for the six months ended June 30, 2019. The differences in the effective income tax rates for the second quarter 2019 and the six months ended June 30, 2019 versus the federal statutory rate of 21% were primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017.  Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion.  Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2020 and 2019 were as follows:
 20202019
 (In Thousands)
Cash and cash equivalents at beginning of period$3,519  $119  
Cash flow provided by (used in):
Operating activities287,031  353,554  
Investing activities(400,864) (321,030) 
Financing activities112,887  (700) 
Net increase (decrease) in cash and cash equivalents(946) 31,824  
Cash and cash equivalents at end of period$2,573  $31,943  

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Operating Activities

Net cash flow provided by operating activities decreased $66.5 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•the timing of recovery of fuel and purchased power costs;
•an increase of $22.7 million in spending on nuclear refueling outages in 2020;
•the timing of payments to vendors;
•the timing of collection of receivables from customers, in part due to the COVID-19 pandemic; and
•an increase of $8.2 million in pension contributions in 2020. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

The decrease was partially offset by:

•$25 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
•a decrease in the return of unprotected excess accumulated deferred income taxes to customers in 2020 as compared to the same period in 2019. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Investing Activities

Net cash flow used in investing activities increased $79.8 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•an increase of $65.7 million in storm spending;
•an increase of $55.8 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•an increase of $38.2 million in nuclear construction expenditures primarily as a result of work performed in 2020 on various ANO 2 outage projects.

The increase was partially offset by $55 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized and money pool activity. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.

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 $25.2 million for the six months ended June 30, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Arkansas’s financing activities provided $112.9 million of cash for the six months ended June 30, 2020 compared to using $0.7 million of cash for the six months ended June 30, 2019 primarily due to the following activity:

•money pool activity;
•a common equity distribution of $115 million in 2019 in order to maintain Entergy Arkansas’s capital structure;
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•the issuance of $100 million of 4.00% Series mortgage bonds in March 2020;
•the issuance of $350 million of 4.20% Series mortgage bonds in March 2019; and
•net long-term borrowings of $8.6 million in 2020 compared to net repayments of long-term borrowings of $39 million in 2019 on the Entergy Arkansas nuclear fuel company variable interest entity credit facility.

Increases in Entergy Arkansas’s payable to the money pool are a source of cash flow, and Entergy Arkansas’s payable to the money pool increased by $4.2 million for the six months ended June 30, 2020 compared to decreasing by $182.7 million for the six months ended June 30, 2019.

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

Capital Structure

Entergy Arkansas’s debt to capital ratio is shown in the following table:
June 30,
2020		December 31,
2019
Debt to capital53.0 %53.0 %
Effect of excluding the securitization bonds— %— %
Debt to capital, excluding securitization bonds (a)53.0 %53.0 %
Effect of subtracting cash— %— %
Net debt to net capital, excluding securitization bonds (a)53.0 %53.0 %

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

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

Uses and Sources of Capital

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

Entergy Arkansas has experienced negative changes during 2020 to its customer payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic. Despite the effects of the pandemic on financial markets, Entergy Arkansas issued $100 million of long-term mortgage bonds in March 2020 and renewed its short-term credit facility. Additional discussion of Entergy Arkansas’s liquidity and capital resources follows.

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Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
June 30,
2020		December 31,
2019		June 30,
2019		December 31,
2018
(In Thousands)
($25,865)($21,634)$25,166($182,738)

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 September 2024. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2021. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of June 30, 2020, no cash borrowings and no letters of credit were outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2020, a $4.5 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in September 2021.  As of June 30, 2020, $23.7 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.

Searcy Solar Facility

As discussed in the Form 10-K, in May 2019, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the Searcy Solar Facility was in the public interest. In April 2020 the APSC issued an order approving Entergy Arkansas’s acquisition of the Searcy Solar facility as being in the public interest, but declined to approve Entergy Arkansas’s preferred cost recovery rider mechanism, finding instead, based on the particular facts and circumstances presented, that the formula rate plan rider was a sufficient recovery mechanism for this resource.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Retail Rates

2020 Formula Rate Plan Filing

In July 2020, Entergy Arkansas filed with the APSC its 2020 formula rate plan filing to set its formula rate for the 2021 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2021 and a netting adjustment for the historical year 2019. Entergy Arkansas’s earned rate of return on common equity is 7.84% for the 2021 projected year and 9.07% for the 2019 historical year. The total revenue change is based upon a deficiency of approximately $80.7 million for the 2021 projected year and approximately $23.9 million for the 2019 historical year netting adjustment. The total proposed formula rate plan rider revenue change for 2021 is $104.6 million to produce a target rate of return of 9.75% for the projected year and the historical year. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeds the
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constraint, the resulting increase is limited to $74.3 million. Also with this filing, Entergy Arkansas is requesting an extension of the formula rate plan rider for a second five-year term. A decision by the APSC is requested by mid-December 2020.

Energy Cost Recovery Rider

In March 2020, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01462 per kWh to $0.01052 per kWh. The redetermined rate became effective with the first billing cycle in April 2020 through the normal operation of the tariff.

Opportunity Sales Proceeding

As discussed in the Form 10-K, the FERC’s opportunity sales orders have been appealed to the D.C. Circuit by Entergy, the LPSC, and the APSC. In February 2020 all of the appeals were consolidated and in April 2020 the D.C. Circuit established a briefing schedule. Briefing will occur through September 2020.

Also as discussed in the Form 10-K, in May 2019, Entergy Arkansas filed an application with the APSC requesting approval of a special rider tariff to recover the costs of its opportunity sales payments from its retail customers over a 24-month period. In January 2020 the Attorney General and Arkansas Electric Energy Consumers, Inc. filed testimony opposing the recovery by Entergy Arkansas of the opportunity sales payment but also claiming that certain components of the payment should be segregated and refunded to customers. In March 2020, Entergy Arkansas filed rebuttal testimony.

In July 2020 the APSC issued a decision concluding that the APSC was not preempted by the federal filed rate doctrine from considering the merits of Entergy Arkansas’s request, denying that the application is barred under the collateral estoppel aspect of res judicata, and finding that the application is not in the public interest. The order also directs Entergy Arkansas to refund to its retail customers within 30 days of the order the FERC-determined over-collection of $13.7 million, plus interest, associated with a recalculated bandwidth remedy. In addition to these primary findings, the order also denied the Attorney General’s request for Entergy Arkansas to prepare a compliance filing detailing all of the retail impacts from the opportunity sales and denied a request by the Arkansas Electric Energy Consumers to recalculate all costs using the revised responsibility ratio. Entergy Arkansas filed a motion for temporary stay of the 30-day requirement to allow Entergy Arkansas a reasonable opportunity to seek rehearing of the APSC order, but in July 2020 the APSC denied Entergy Arkansas’s request for a stay and directed Entergy Arkansas to refund to its retail ratepayers the component of the total FERC-determined opportunity sales payment that was associated with increased bandwidth remedy payments of $13.7 million, plus interest, by July 31, 2020. The APSC recognized Entergy Arkansas’s administrative limitations on processing the full refund by that date and stated that the refund shall be issued over the August 2020 billing cycle. While the APSC has denied Entergy Arkansas’s stay request, Entergy Arkansas believes its actions were prudent and, therefore, the costs are recoverable. In July 2020, Entergy Arkansas requested rehearing of the APSC order.

Net Metering Legislation

As discussed in the Form 10-K, an Arkansas law was enacted effective July 2019 that, among other things, expands the definition of a “net metering customer” to include two additional types of customers: (1) customers that lease net metering facilities, subject to certain leasing arrangements, and (2) government entities or other entities exempt from state and federal income taxes that enter into a service contract for a net metering facility. The latter provision would allow eligible entities, many of whom are small and large general service customers, to purchase renewable energy directly from third party providers and receive bill credits for these purchases. The APSC was given authority under this law to address certain matters, such as cost shifting and the appropriate compensation for net metered energy, and has initiated proceedings for this purpose. The APSC issued an order in June 2020, and in July 2020 several parties, including Entergy Arkansas, filed for rehearing on multiple grounds.
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COVID-19 Orders

In April 2020, in light of the COVID-19 pandemic, the APSC issued an order requiring utilities, to the extent they had not already done so, to suspend service disconnections during the remaining pendency of the Arkansas Governor’s emergency declaration or until the APSC rescinds the directive. The order also authorizes utilities to establish a regulatory asset to record costs resulting from the suspension of service disconnections, directs that in future proceedings the APSC will consider whether the request for recovery of these regulatory assets is reasonable and necessary, and requires utilities to track and report the costs and any savings directly attributable to suspension of disconnects. In May 2020 the APSC approved Entergy Arkansas expanding delayed payment arrangements to assist customers during the pandemic. Entergy Arkansas is still evaluating the recovery provided for by the order and, therefore, did not record as of June 30, 2020 a regulatory asset for costs associated with the COVID-19 pandemic.

Federal Regulation

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

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

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

Other Postretirement Benefits
As described in Note 6 to the financial statements herein, in March 2020, Entergy announced changes to its other postretirement benefits. As a result, Entergy Arkansas now expects 2020 other postretirement health care and life insurance benefit income, including amounts capitalized, of $10.1 million.

New Accounting Pronouncements

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

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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$491,767  $542,929  $973,679  $1,088,741  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale52,692  108,596  140,103  260,755  
Purchased power42,171  48,285  88,212  95,343  
Nuclear refueling outage expenses13,552  17,194  29,799  34,442  
Other operation and maintenance164,770  188,006  316,627  354,466  
Decommissioning18,206  17,168  36,147  32,929  
Taxes other than income taxes27,172  27,181  58,232  55,544  
Depreciation and amortization84,538  77,061  168,059  152,908  
Other regulatory credits - net(19,283) (10,336) (39,284) (9,891) 
TOTAL383,818  473,155  797,895  976,496  
OPERATING INCOME107,949  69,774  175,784  112,245  
OTHER INCOME
Allowance for equity funds used during construction3,878  3,372  6,795  6,800  
Interest and investment income8,246  4,222  16,184  10,405  
Miscellaneous - net(6,133) (4,728) (12,569) (8,418) 
TOTAL5,991  2,866  10,410  8,787  
INTEREST EXPENSE
Interest expense35,969  35,827  71,592  69,210  
Allowance for borrowed funds used during construction(1,703) (1,329) (2,984) (2,743) 
TOTAL34,266  34,498  68,608  66,467  
INCOME BEFORE INCOME TAXES79,674  38,142  117,586  54,565  
Income taxes19,504  (12,157) 12,821  (34,855) 
NET INCOME$60,170  $50,299  $104,765  $89,420  
See Notes to Financial Statements.

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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Net income$104,765  $89,420  
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization243,126  231,968  
Deferred income taxes, investment tax credits, and non-current taxes accrued24,970  45,680  
Changes in assets and liabilities:
Receivables(10,360) 4,920  
Fuel inventory(12,704) (4,707) 
Accounts payable(34,009) (14,280) 
Taxes accrued(409) (19,961) 
Interest accrued119  4,155  
Deferred fuel costs16,322  56,182  
Other working capital accounts(23,858) 23,275  
Provisions for estimated losses998  11,619  
Other regulatory assets(26,191) (57,516) 
Other regulatory liabilities(50,637) 70,958  
Pension and other postretirement liabilities(419) (12,487) 
Other assets and liabilities55,318  (75,672) 
Net cash flow provided by operating activities287,031  353,554  
INVESTING ACTIVITIES
Construction expenditures(406,940) (309,696) 
Allowance for equity funds used during construction6,795  6,964  
Payment for purchase of assets(5,988) —  
Nuclear fuel purchases(57,781) (6,691) 
Proceeds from sale of nuclear fuel18,107  22,834  
Proceeds from nuclear decommissioning trust fund sales183,474  83,407  
Investment in nuclear decommissioning trust funds(194,776) (93,516) 
Change in money pool receivable - net—  (25,166) 
Changes in securitization account1,244  834  
Litigation proceeds for reimbursement of spent nuclear fuel storage costs55,001  —  
Net cash flow used in investing activities(400,864) (321,030) 
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt335,902  659,913  
Retirement of long-term debt(226,366) (361,823) 
Changes in money pool payable - net4,231  (182,738) 
Common equity distributions paid—  (115,000) 
Other(880) (1,052) 
Net cash flow provided by (used in) financing activities112,887  (700) 
Net increase (decrease) in cash and cash equivalents(946) 31,824  
Cash and cash equivalents at beginning of period3,519  119  
Cash and cash equivalents at end of period$2,573  $31,943  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 
Cash paid during the period for:
Interest - net of amount capitalized$69,276  $62,486  
See Notes to Financial Statements.
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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$2,563  $3,519  
Temporary cash investments10  —  
Total cash and cash equivalents2,573  3,519  
Securitization recovery trust account2,792  4,036  
Accounts receivable:
Customer136,852  117,679  
Allowance for doubtful accounts(7,340) (1,169) 
Associated companies37,835  29,178  
Other34,069  117,653  
Accrued unbilled revenues125,773  108,489  
Total accounts receivable327,189  371,830  
Fuel inventory - at average cost46,449  33,745  
Materials and supplies - at average cost226,429  211,320  
Deferred nuclear refueling outage costs57,241  48,875  
Prepayments and other18,656  14,096  
TOTAL681,329  687,421  
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds1,109,840  1,101,283  
Other343  345  
TOTAL1,110,183  1,101,628  
UTILITY PLANT
Electric12,520,703  12,293,483  
Construction work in progress296,333  197,775  
Nuclear fuel167,409  195,547  
TOTAL UTILITY PLANT12,984,445  12,686,805  
Less - accumulated depreciation and amortization5,137,471  5,019,826  
UTILITY PLANT - NET7,846,974  7,666,979  
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $— as of June 30, 2020 and $1,706 as of December 31, 2019)
1,693,041  1,666,850  
Deferred fuel costs67,955  67,690  
Other17,447  15,065  
TOTAL1,778,443  1,749,605  
TOTAL ASSETS$11,416,929  $11,205,633  
See Notes to Financial Statements.
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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$395,000  $—  
Accounts payable:
Associated companies77,265  111,785  
Other189,134  202,201  
Customer deposits101,675  101,411  
Taxes accrued81,422  81,831  
Interest accrued22,907  22,788  
Deferred fuel costs70,308  53,721  
Current portion of unprotected excess accumulated deferred income taxes—  9,296  
Other42,901  38,760  
TOTAL980,612  621,793  
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued1,221,140  1,183,126  
Accumulated deferred investment tax credits31,101  31,701  
Regulatory liability for income taxes - net466,850  478,174  
Other regulatory liabilities529,538  559,555  
Decommissioning1,276,988  1,242,616  
Accumulated provisions64,878  63,880  
Pension and other postretirement liabilities318,642  319,075  
Long-term debt (includes securitization bonds of $— as of June 30, 2020 and $6,772 as of December 31, 2019)
3,233,588  3,517,208  
Other62,890  62,568  
TOTAL7,205,615  7,457,903  
EQUITY
Member's equity3,230,702  3,125,937  
TOTAL3,230,702  3,125,937  
TOTAL LIABILITIES AND EQUITY$11,416,929  $11,205,633  
See Notes to Financial Statements.
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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
Member's Equity
(In Thousands)
Balance at December 31, 2018$2,983,103  
Net income39,121  
Balance at March 31, 20193,022,224  
Net income50,299  
Common equity distributions(115,000) 
Balance at June 30, 2019$2,957,523  
Balance at December 31, 2019$3,125,937  
Net income44,595  
Balance at March 31, 20203,170,532  
Net income60,170  
Balance at June 30, 2020$3,230,702  
See Notes to Financial Statements.
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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedIncrease/
20202019(Decrease)%
(Dollars In Millions)
Electric Operating Revenues:
Residential$171  $158  $13  8  
Commercial106  125  (19) (15) 
Industrial106  119  (13) (11) 
Governmental4  5  (1) (20) 
Total billed retail387  407  (20) (5) 
Sales for resale:
Associated companies27  30  (3) (10) 
Non-associated companies11  45  (34) (76) 
Other67  61  6  10  
Total$492  $543  ($51) (9) 
Billed Electric Energy Sales (GWh):
Residential1,497  1,546  (49) (3) 
Commercial1,176  1,346  (170) (13) 
Industrial1,738  1,830  (92) (5) 
Governmental52  57  (5) (9) 
Total retail4,463  4,779  (316) (7) 
Sales for resale:
Associated companies308  509  (201) (39) 
Non-associated companies831  2,037  (1,206) (59) 
Total5,602  7,325  (1,723) (24) 
Six Months EndedIncrease/
20202019(Decrease)%
(Dollars In Millions)
Electric Operating Revenues:
Residential$391  $368  $23  6  
Commercial217  250  (33) (13) 
Industrial207  240  (33) (14) 
Governmental8  10  (2) (20) 
Total billed retail823  868  (45) (5) 
Sales for resale:
Associated companies52  59  (7) (12) 
Non-associated companies27  95  (68) (72) 
Other72  67  5  7  
Total$974  $1,089  ($115) (11) 
Billed Electric Energy Sales (GWh):
Residential3,572  3,751  (179) (5) 
Commercial2,460  2,672  (212) (8) 
Industrial3,549  3,675  (126) (3) 
Governmental106  114  (8) (7) 
Total retail9,687  10,212  (525) (5) 
Sales for resale:
Associated companies711  1,106  (395) (36) 
Non-associated companies1,977  4,556  (2,579) (57) 
Total12,375  15,874  (3,499) (22) 
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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the COVID-19 pandemic.

Results of Operations

Net Income

Second Quarter 2020 Compared to Second Quarter 2019

Net income decreased $12.6 million primarily due to lower volume/weather and higher interest expense, partially offset by higher retail electric price and lower other operation and maintenance expenses.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net income increased $49.1 million primarily due to the $58 million reduction in income tax expense resulting from an IRS settlement in the first quarter 2020 related to the uncertain tax position regarding the Hurricane Isaac Louisiana Act 55 financing, which also resulted in a $29 million ($21 million net-of-tax) regulatory charge to reflect Entergy Louisiana’s agreement to share the savings with customers. Also contributing to the increase was higher retail electric price and lower other operation and maintenance expenses. The increase was partially offset by lower volume/weather, higher interest expense, and lower other income. See Note 10 to the financial statements herein for further discussion of the tax settlement.

Operating Revenues

Second Quarter 2020 Compared to Second Quarter 2019

Following is an analysis of the change in operating revenues comparing the second quarter 2020 to the second quarter 2019:
Amount
(In Millions)
2019 operating revenues$1,106.3  
Fuel, rider, and other revenues that do not significantly affect net income
(104.5) 
Volume/weather
(30.8) 
Return of unprotected excess accumulated deferred income taxes to customers
(1.3) 
Retail electric price
42.0  
2020 operating revenues$1,011.7  

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

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The volume/weather variance is primarily due to a decrease in usage during the unbilled sales period, decreased commercial usage as a result of the COVID-19 pandemic, and the effect of less favorable weather on residential sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. Entergy Louisiana continues to expect declines in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018. In second quarter 2020, $7.8 million was returned to customers as compared to $6.5 million in second quarter 2019. There is no effect on net income as the reduction in operating revenues was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an interim increase in formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and an interim increase in formula rate plan revenues effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station, each as approved by the LPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2020 to the six months ended June 30, 2019:
Amount
(In Millions)
2019 operating revenues$2,065.6  
Fuel, rider, and other revenues that do not significantly affect net income
(172.0) 
Volume/weather
(26.7) 
Return of unprotected excess accumulated deferred income taxes to customers
(2.0) 
Retail electric price
77.4  
2020 operating revenues$1,942.3  

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

The volume/weather variance is primarily due to decreased commercial usage as a result of the COVID-19 pandemic, the effect of less favorable weather on residential sales, and a decrease in usage during the unbilled sales period, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. Entergy Louisiana continues to expect declines in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018. In the six months ended June 30, 2020, $15.6 million was returned to customers as compared to $13.6
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million in the six months ended June 30, 2019. There is no effect on net income as the reduction in operating revenues was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act. 

The retail electric price variance is primarily due to an interim increase in formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and an interim increase in formula rate plan revenues effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station, each as approved by the LPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.

Other Income Statement Variances

Second Quarter 2020 Compared to Second Quarter 2019

Other operation and maintenance expenses decreased primarily due to:

•the effects of recording in second quarter 2020 final judgments to resolve claims in the Waterford 3 damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $7.7 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation;
•a decrease of $6.1 million in energy efficiency costs due to the timing of recovery from customers;
•a decrease of $5.3 million in non-nuclear generation expenses primarily due to a lower scope of work performed during plant outages in 2020 as compared to the same period in 2019, partially offset by increases resulting from the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and the Lake Charles Power Station being placed in service;
•a decrease of $4.4 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services; and
•a decrease of $3.5 million in nuclear generation expenses primarily due to a lower scope of work performed in 2020 as compared to the same period in 2019.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Lake Charles Power Station, which was placed in service in March 2020 and the J. Wayne Leonard Power Station (formerly St. Charles Power Station), which was placed in service in May 2019.

Other income decreased primarily due to a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2019, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station) project and the Lake Charles Power Station project.

Interest expense increased primarily due to the issuances of $300 million of 4.20% Series mortgage bonds and $350 million of 2.90% Series mortgage bonds, each in March 2020.

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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Other operation and maintenance expenses decreased primarily due to:

•a decrease of $9.4 million in nuclear generation expenses primarily due to a lower scope of work performed in 2020 as compared to the same period in 2019;
•a decrease of $9.2 million in non-nuclear generation expenses primarily due to a lower scope of work performed during plant outages in 2020 as compared to the same period in 2019, partially offset by increases resulting from the J. Wayne Leonard Power Station (formerly St. Charles Power Station) and the Lake Charles Power Station being placed in service;
•the effects of recording in second quarter 2020 final judgments to resolve claims in the Waterford 3 damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $7.7 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation;
•higher nuclear insurance refunds of $5.7 million; and
•a decrease of $4.7 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services.

The decrease was partially offset by an increase of $5.5 million in compensation and benefits costs primarily due to an increase in net periodic pension and other postretirement benefits costs as a result of a decrease in the discount rate used to value the benefit liabilities and an increase in employee health benefits costs. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station), which was placed in service in May 2019 and the Lake Charles Power Station, which was placed in service in March 2020.

Other income decreased primarily due to a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2019, including the J. Wayne Leonard Power Station (formerly St. Charles Power Station) project and the Lake Charles Power Station project.

Other regulatory credits include regulatory charges of $29 million recorded in first quarter 2020 due to a settlement with the IRS related to the uncertain tax position regarding Hurricane Isaac Louisiana Act 55 financing because the savings will be shared with customers. See Note 10 to the financial statements herein for further discussion of the settlement and savings obligation.

Interest expense increased primarily due to the issuance of $525 million of 4.20% Series mortgage bonds in March 2019 and the issuances of $300 million of 4.20% Series mortgage bonds and $350 million of 2.90% Series mortgage bonds, each in March 2020.

Income Taxes

The effective income tax rate was 17.4% for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, the amortization of excess accumulated deferred income taxes, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
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The effective income tax rate was (4.1%) for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to the settlement with the IRS on the treatment of funds received in conjunction with the Act 55 financing of Hurricane Isaac storm costs, permanent differences related to income tax deductions for stock-based compensation, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, book and tax differences related to the allowance for equity funds used during construction, the amortization of excess accumulated deferred income taxes, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein for discussion of the IRS settlement. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

The effective income tax rates were 17.3% for the second quarter 2019 and 15% for the six months ended June 30, 2019. The differences in the effective income tax rates for the second quarter 2019 and the six months ended June 30, 2019 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, the amortization of excess accumulated deferred income taxes, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2020 and 2019 were as follows:
20202019
(In Thousands)
Cash and cash equivalents at beginning of period$2,006  $43,364  
Cash flow provided by (used in):
    Operating activities726,789  473,220  
    Investing activities(732,085) (920,658) 
    Financing activities467,025  448,813  
Net increase in cash and cash equivalents461,729  1,375  
Cash and cash equivalents at end of period$463,735  $44,739  
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Operating Activities

Net cash flow provided by operating activities increased $253.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•the timing of payments to vendors;
•the timing of recovery of fuel and purchased power costs;
•a decrease of $63 million in spending on nuclear refueling outages;
•$28.1 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation; and
•income tax refunds of $20.7 million in 2020. Entergy Louisiana had income tax receipts in 2020 as a result of a refund of an overpayment on a prior year state income tax return.

The increase was partially offset by the timing of collection of receivables from customers, in part due to the COVID-19 pandemic, and an increase of $11.7 million in interest payments.

Investing Activities

Net cash flow used in investing activities decreased $188.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•a decrease of $118.6 million in construction expenditures due to higher spending in 2019 on the Lake Charles Power Station and J. Wayne Leonard Power Station (formerly St. Charles Power Station) projects;
•a decrease of $107.1 million in nuclear construction expenditures primarily due to decreased spending on various projects in 2020;
•a decrease of $74 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•an increase of $42.6 million in net receipts from storm reserve escrow accounts.

The decrease was partially offset by:

•money pool activity;
•an increase of $26.4 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of Entergy Louisiana’s distribution system, including increased spending on advanced metering infrastructure; and
•an increase of $24.9 million in storm spending in 2020.

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 $87.6 million for the six months ended June 30, 2020 compared to decreasing by $9.6 million for the six months ended June 30, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $18.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the issuances of $350 million of 2.90% Series mortgage bonds and $300 million of 4.20% Series mortgage bonds, each in March 2020, and a decrease of $85.5 million in common equity distributions in 2020 primarily due to upcoming capital expenditures.

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The increase was substantially offset by:

•the issuance of $525 million of 4.20% Series mortgage bonds in March 2019;
•money pool activity; and
•net repayments of long-term borrowings of $59.9 million in 2020 compared to net long-term borrowings of $46.1 million in 2019 on the nuclear fuel company variable interest entities’ credit facilities.

Decreases in Entergy Louisiana’s payable to the money pool are a use of cash flow, and Entergy Louisiana’s payable to the money pool decreased by $82.8 million for the six months ended June 30, 2020.

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

Capital Structure

Entergy Louisiana’s debt to capital ratio is shown in the following table.
June 30,
2020		December 31,
2019
Debt to capital53.9 %53.4 %
Effect of excluding securitization bonds(0.1 %)(0.1 %)
Debt to capital, excluding securitization bonds (a)53.8 %53.3 %
Effect of subtracting cash(1.5 %)(0.1 %)
Net debt to net capital, excluding securitization bonds (a)52.3 %53.2 %

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

Uses and Sources of Capital

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

Entergy Louisiana has experienced negative changes during 2020 to its customer payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic. Despite the effects of the pandemic on financial markets Entergy Louisiana issued $650 million of long-term mortgage bonds in March 2020. Additional discussion of Entergy Louisiana’s liquidity and capital resources follows.

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Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
June 30,
2020		December 31, 2019June 30,
2019		December 31,
2018
(In Thousands)
$87,635($82,826)$37,212$46,843

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

Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in September 2024.  The credit facility includes fronting commitments for the issuance of letters of credit against $15 million of the borrowing capacity of the facility. As of June 30, 2020, there were no cash borrowings and no letters of credit outstanding under the credit facility.  In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2020, $15.5 million in letters of credit were outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, each in the amount of $105 million and scheduled to expire in September 2021.  As of June 30, 2020, $44.1 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of June 30, 2020, $16.2 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.

Entergy Louisiana has $257 million in its storm reserve escrow account at June 30, 2020.

Lake Charles Power Station

As discussed in the Form 10-K, the LPSC issued an order in July 2017 approving certification that the public necessity and convenience would be served by the construction of the Lake Charles Power Station. The plant commenced commercial operation in March 2020.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Retail Rates - Electric

2017 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station (formerly St. Charles Power Station). The resulting interim adjustment to rates became effective with the first billing cycle of June 2019. In June 2020, Entergy Louisiana submitted information to the LPSC to review the prudence of Entergy Louisiana’s management of the project. No procedural schedule has been established.

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2018 Formula Rate Plan Filing

Commercial operation at Lake Charles Power Station commenced in March 2020. In March 2020, Entergy Louisiana filed an update to its 2018 formula rate plan evaluation report to include the estimated first-year revenue requirement of $108 million associated with the Lake Charles Power Station. The resulting interim adjustment to rates became effective with the first billing cycle of April 2020.

2019 Formula Rate Plan Filing

In May 2020, Entergy Louisiana filed with the LPSC its formula rate plan evaluation report for its 2019 calendar year operations. The 2019 test year evaluation report produced an earned return on common equity of 9.66%. As such, no change to base rider formula rate plan revenue is required. Although base rider formula rate plan revenue will not change as a result of this filing, overall formula rate plan revenues will increase by approximately $103 million. This outcome is driven by the removal of prior year credits associated with the sale of the Willow Glen Power Station and an increase in the transmission recovery mechanism. Also contributing to the overall change is an increase in legacy formula rate plan revenue requirements driven by legacy Entergy Louisiana capacity cost true-ups and higher annualized legacy Entergy Gulf States Louisiana revenues due to higher billing determinants, offset by reductions in MISO cost recovery mechanism and tax reform adjustment mechanism revenue requirements.

Request for Extension and Modification of Formula Rate Plan

In May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate plan. In its application, Entergy Louisiana seeks to maintain a 9.8% return on equity, with a bandwidth of 60 basis points above and below the midpoint, with a first-year midpoint reset. Entergy Louisiana also seeks to maintain its existing additional capacity mechanism, tax reform adjustment mechanism, transmission recovery mechanism, and the MISO cost recovery mechanism. Entergy Louisiana also seeks to add a distribution cost recovery mechanism which operates in substantially the same manner as the transmission recovery mechanism and requests a deferral of certain expenses incurred for outside of right-of-way vegetation programs.

Retail Rates - Gas

2017 Rate Stabilization Plan Filing

As discussed in the Form 10-K, in January 2018 Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2017. As-filed rates from the supplemental filing were implemented, subject to refund, with customers receiving a cost reduction of approximately $0.7 million effective with bills rendered on and after the first billing cycle of May 2018, as well as a $0.2 million reduction in the gas infrastructure rider effective with bills rendered on and after the first billing cycle of July 2018. In October 2019 the LPSC staff issued its report finding that Entergy Louisiana’s filing complied with the terms of the rate stabilization plan but recommending an additional refund of $0.7 million related to the Tax Act. In June 2020, the LPSC approved a joint report acknowledging Entergy Louisiana’s prior refunds and offsets for flood recovery costs, and required a further refund of $0.8 million, inclusive of carrying costs.

Fuel and purchased power recovery

In March 2020 the LPSC staff provided notice of an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2016 through 2019. Discovery has not yet commenced.

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COVID-19 Orders

In April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees and disconnects for non-pay was extended until the first billing cycle after July 16, 2020. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of June 30, 2020, Entergy Louisiana recorded a regulatory asset of $10.7 million for costs associated with the COVID-19 pandemic.

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

Other Postretirement Benefits
As described in Note 6 to the financial statements herein, in March 2020, Entergy announced changes to its other postretirement benefits. As a result, Entergy Louisiana now expects 2020 other postretirement health care and life insurance benefit cost, including amounts capitalized, of $5.6 million.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$1,001,601  $1,094,259  $1,914,142  $2,030,952  
Natural gas10,051  12,058  28,157  34,695  
TOTAL1,011,652  1,106,317  1,942,299  2,065,647  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale161,610  220,472  306,102  367,821  
Purchased power153,786  223,014  314,529  480,320  
Nuclear refueling outage expenses13,654  13,391  27,284  26,199  
Other operation and maintenance226,216  250,835  448,874  476,723  
Decommissioning16,203  14,059  32,204  27,938  
Taxes other than income taxes48,718  46,658  98,795  96,340  
Depreciation and amortization154,255  130,246  299,390  256,380  
Other regulatory credits - net(19,202) (33,878) (8,070) (61,538) 
TOTAL755,240  864,797  1,519,108  1,670,183  
OPERATING INCOME256,412  241,520  423,191  395,464  
OTHER INCOME
Allowance for equity funds used during construction6,055  20,671  20,942  44,585  
Interest and investment income93,807  49,498  74,138  121,484  
Miscellaneous - net(66,811) (22,306) (17,210) (64,650) 
TOTAL33,051  47,863  77,870  101,419  
INTEREST EXPENSE
Interest expense86,296  77,631  165,813  152,334  
Allowance for borrowed funds used during construction(3,202) (9,737) (10,334) (21,104) 
TOTAL83,094  67,894  155,479  131,230  
INCOME BEFORE INCOME TAXES206,369  221,489  345,582  365,653  
Income taxes35,910  38,405  (14,273) 54,936  
NET INCOME$170,459  $183,084  $359,855  $310,717  
See Notes to Financial Statements.

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
Net Income$170,459  $183,084  $359,855  $310,717  
Other comprehensive income (loss)
Pension and other postretirement liabilities (net of tax expense (benefit) of ($334), ($342), $3,006, and ($684))
(945) (969) 8,522  (1,938) 
Other comprehensive income (loss)(945) (969) 8,522  (1,938) 
Comprehensive Income$169,514  $182,115  $368,377  $308,779  
See Notes to Financial Statements.

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Net income$359,855  $310,717  
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization392,286  316,343  
Deferred income taxes, investment tax credits, and non-current taxes accrued(1,353) 99,015  
Changes in working capital:
Receivables(38,175) (75,330) 
Fuel inventory(2,233) (1,651) 
Accounts payable(37,576) (25,686) 
Prepaid taxes and taxes accrued91,662  46,654  
Interest accrued3,689  1,918  
Deferred fuel costs(763) (40,096) 
Other working capital accounts(13,069) (64,715) 
Changes in provisions for estimated losses(38,621) 1,612  
Changes in other regulatory assets48,536  (88,911) 
Changes in other regulatory liabilities(42,203) 26,565  
Changes in pension and other postretirement liabilities(34,280) (7,513) 
Other39,034  (25,702) 
Net cash flow provided by operating activities726,789  473,220  
INVESTING ACTIVITIES
Construction expenditures(690,049) (900,264) 
Allowance for equity funds used during construction20,942  44,585  
Payment for purchase of assets(14,511) —  
Nuclear fuel purchases(24,086) (63,026) 
Proceeds from the sale of nuclear fuel35,041  —  
Receipts from storm reserve escrow account40,589  —  
Payments to storm reserve escrow account(1,398) (3,382) 
Changes to securitization account755  406  
Proceeds from nuclear decommissioning trust fund sales223,736  195,433  
Investment in nuclear decommissioning trust funds(240,559) (211,083) 
Changes in money pool receivable - net(87,635) 9,633  
Insurance proceeds—  7,040  
Litigation proceeds for reimbursement of spent nuclear fuel storage costs5,090  —  
Net cash flow used in investing activities(732,085) (920,658) 
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt1,401,887  1,883,990  
Retirement of long-term debt(826,456) (1,332,807) 
Change in money pool payable - net(82,826) —  
Common equity distributions paid(16,500) (102,000) 
Other(9,080) (370) 
Net cash flow provided by financing activities467,025  448,813  
Net increase in cash and cash equivalents461,729  1,375  
Cash and cash equivalents at beginning of period2,006  43,364  
Cash and cash equivalents at end of period$463,735  $44,739  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized$157,926  $146,256  
Income taxes($20,684) $—  
See Notes to Financial Statements.
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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$296  $488  
Temporary cash investments463,439  1,518  
Total cash and cash equivalents463,735  2,006  
Accounts receivable:
Customer238,585  194,869  
Allowance for doubtful accounts(14,516) (1,902) 
Associated companies151,992  77,212  
Other47,547  42,179  
Accrued unbilled revenues183,761  169,201  
Total accounts receivable607,369  481,559  
Fuel inventory43,846  41,613  
Materials and supplies - at average cost378,623  354,020  
Deferred nuclear refueling outage costs32,382  56,743  
Prepaid taxes—  7,959  
Prepayments and other54,725  37,837  
TOTAL1,580,680  981,737  
OTHER PROPERTY AND INVESTMENTS
Investment in affiliate preferred membership interests1,390,587  1,390,587  
Decommissioning trust funds1,565,006  1,563,812  
Storm reserve escrow account256,684  295,875  
Non-utility property - at cost (less accumulated depreciation)317,337  312,896  
Other13,134  13,476  
TOTAL3,542,748  3,576,646  
UTILITY PLANT
Electric23,763,970  22,620,365  
Natural gas241,943  235,678  
Construction work in progress670,116  1,383,603  
Nuclear fuel200,277  267,779  
TOTAL UTILITY PLANT24,876,306  24,507,425  
Less - accumulated depreciation and amortization9,183,284  9,118,524  
UTILITY PLANT - NET15,693,022  15,388,901  
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $17,413 as of June 30, 2020 and $27,596 as of December 31, 2019)
1,266,675  1,315,211  
Deferred fuel costs168,122  168,122  
Other30,258  33,491  
TOTAL1,465,055  1,516,824  
TOTAL ASSETS$22,281,505  $21,464,108  
See Notes to Financial Statements.
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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$560,002  $320,002  
Accounts payable:
Associated companies78,264  187,615  
Other493,796  357,206  
Customer deposits152,593  153,097  
Taxes accrued83,703  —  
Interest accrued91,433  87,744  
Deferred fuel costs54,882  55,645  
Current portion of unprotected excess accumulated deferred income taxes31,138  31,138  
Other69,084  64,668  
TOTAL1,614,895  1,257,115  
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued2,484,034  2,464,513  
Accumulated deferred investment tax credits109,723  112,128  
Regulatory liability for income taxes - net478,327  500,083  
Other regulatory liabilities773,693  794,140  
Decommissioning1,534,849  1,497,349  
Accumulated provisions281,798  320,419  
Pension and other postretirement liabilities644,364  677,619  
Long-term debt (includes securitization bonds of $22,610 as of June 30, 2020 and $33,220 as of December 31, 2019)
7,319,739  6,983,667  
Other291,111  459,957  
TOTAL13,917,638  13,809,875  
Commitments and Contingencies
EQUITY
Member's equity6,735,888  6,392,556  
Accumulated other comprehensive loss13,084  4,562  
TOTAL6,748,972  6,397,118  
TOTAL LIABILITIES AND EQUITY$22,281,505  $21,464,108  
See Notes to Financial Statements.
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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
Common Equity
Member’s
Equity		Accumulated
Other
Comprehensive
Loss		Total
(In Thousands)
Balance at December 31, 2018$5,909,071  ($6,153) $5,902,918  
Net income127,633  —  127,633  
Other comprehensive loss—  (969) (969) 
Distributions declared on common equity(49,000) —  (49,000) 
Other(11) —  (11) 
Balance at March 31, 20195,987,693  (7,122) 5,980,571  
Net income183,084  —  183,084  
Other comprehensive loss—  (969) (969) 
Distributions declared on common equity(53,000) —  (53,000) 
Other(14) —  (14) 
Balance at June 30, 2019$6,117,763  ($8,091) $6,109,672  
Balance at December 31, 2019$6,392,556  $4,562  $6,397,118  
Net income189,396  —  189,396  
Other comprehensive income—  9,467  9,467  
Distributions declared on common equity(11,500) —  (11,500) 
Other(10) —  (10) 
Balance at March 31, 20206,570,442  14,029  6,584,471  
Net income170,459  —  170,459  
Other comprehensive loss—  (945) (945) 
Distributions declared on common equity(5,000) —  (5,000) 
Other(13) —  (13) 
Balance at June 30, 2020$6,735,888  $13,084  $6,748,972  
See Notes to Financial Statements.
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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedIncrease/
20202019(Decrease)%
(Dollars In Millions)
Electric Operating Revenues:
Residential$301  $290  $11  4  
Commercial209  232  (23) (10) 
Industrial335  385  (50) (13) 
Governmental17  18  (1) (6) 
Total billed retail862  925  (63) (7) 
Sales for resale:
Associated companies70  67  3  4  
Non-associated companies13  16  (3) (19) 
Other57  86  (29) (34) 
Total$1,002  $1,094  ($92) (8) 
Billed Electric Energy Sales (GWh):
Residential3,239  3,121  118  4  
Commercial2,455  2,720  (265) (10) 
Industrial7,427  7,493  (66) (1) 
Governmental189  205  (16) (8) 
Total retail13,310  13,539  (229) (2) 
Sales for resale:
Associated companies1,407  854  553  65  
Non-associated companies544  402  142  35  
Total15,261  14,795  466  3  
Six Months EndedIncrease/
20202019(Decrease)%
(Dollars In Millions)
Electric Operating Revenues:
Residential$561  $554  $7  1  
Commercial411  439  (28) (6) 
Industrial657  732  (75) (10) 
Governmental34  35  (1) (3) 
Total billed retail1,663  1,760  (97) (6) 
Sales for resale:
Associated companies136  135  1  1  
Non-associated companies25  32  (7) (22) 
Other90  104  (14) (13) 
Total$1,914  $2,031  ($117) (6) 
Billed Electric Energy Sales (GWh):
Residential6,214  6,201  13  —  
Commercial4,914  5,239  (325) (6) 
Industrial14,877  14,836  41  —  
Governmental388  408  (20) (5) 
Total retail26,393  26,684  (291) (1) 
Sales for resale:
Associated companies2,748  1,934  814  42  
Non-associated companies1,001  907  94  10  
Total30,142  29,525  617  2  
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ENTERGY MISSISSIPPI, LLC

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the COVID-19 pandemic.

Results of Operations

Net Income

Second Quarter 2020 Compared to Second Quarter 2019

Net income increased $12.2 million primarily due to higher retail electric price, partially offset by higher depreciation and amortization expenses.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net income increased $19.4 million primarily due to higher retail electric price, partially offset by higher depreciation and amortization expenses.

Operating Revenues

Second Quarter 2020 Compared to Second Quarter 2019

Following is an analysis of the change in operating revenues comparing the second quarter 2020 to the second quarter 2019:
Amount
(In Millions)
2019 operating revenues$302.7  
Fuel, rider, and other revenues that do not significantly affect net income
(23.6) 
Volume/weather(2.1) 
Retail electric price
21.0  
2020 operating revenues$298.0  

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

The volume/weather variance is primarily due to decreased commercial usage as a result of the COVID-19 pandemic and the effect of less favorable weather on residential sales. The decrease was partially offset by increased usage during the unbilled sales period and an increase in residential usage as a result of the COVID-19 pandemic. Entergy Mississippi continues to expect declines in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.
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The retail electric price variance is primarily due to increases in formula rate plan rates effective with the first billing cycles of July 2019 and April 2020 and an interim capacity rate adjustment to the formula rate plan to recover non-fuel related costs of acquiring and operating the Choctaw Generating Station, each as approved by the MPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2020 to the six months ended June 30, 2019:
Amount
(In Millions)
2019 operating revenues$585.0  
Fuel, rider, and other revenues that do not significantly affect net income
(29.5) 
Retail electric price
40.4  
Volume/weather(4.0) 
2020 operating revenues$591.9  

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

The retail electric price variance is primarily due to:

•increases in formula rate plan rates effective with the first billing cycles of July 2019 and April 2020 and an interim capacity rate adjustment to the formula rate plan to recover non-fuel related costs of acquiring and operating the Choctaw Generating Station, each as approved by the MPSC; and
•higher storm damage rider revenues. Entergy Mississippi resumed billing the storm damage rider effective with the July 2019 billing cycle.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings. See Note 2 to the financial statements in the Form 10-K for further discussion of the storm damage rider.

The volume/weather variance is primarily due to decreased commercial usage as a result of the COVID-19 pandemic and the effect of less favorable weather on residential sales. The decrease was partially offset by increased usage during the unbilled sales period and an increase in residential usage as a result of the COVID-19 pandemic. Entergy Mississippi continues to expect declines in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.


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Other Income Statement Variances

Second Quarter 2020 Compared to Second Quarter 2019

Other operation and maintenance expenses decreased primarily due to a decrease of $6.4 million in non-nuclear generation expenses primarily due to a lower scope of work done during plant outages in 2020 as compared to 2019, including a delay in planned outages in 2020 as a result of the COVID-19 pandemic. The decrease was partially offset by an increase of $4.3 million in storm damage provisions. See Note 2 to the financial statements in the Form 10-K for a discussion of storm cost recovery.

Depreciation and amortization expenses increased primarily as a result of additions to plant in service and higher depreciation rates effective July 2019, as approved by the MPSC.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Other operation and maintenance expenses increased primarily due to an increase of $8.8 million in storm damage provisions, partially offset by a decrease of $8.2 million in non-nuclear generation expenses primarily due to a lower scope of work done during plant outages in 2020 as compared to the same period in 2019, including a delay in planned outages as a result of the COVID-19 pandemic. See Note 2 to the financial statements in the Form 10-K for a discussion of storm cost recovery.

Depreciation and amortization expenses increased primarily as a result of higher depreciation rates effective July 2019, as approved by the MPSC, and additions to plant in service.

Income Taxes

The effective income tax rate was 22.6% for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 17.8% for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

The effective income tax rate was 20.8% for the second quarter 2019 and 19.9% for the six months ended June 30, 2019. The differences in the effective income tax rates for the second quarter 2019 and the six months ended June 30, 2019 versus the federal statutory rate of 21% were primarily due to book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds during construction, partially offset by state income taxes.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

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Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2020 and 2019 were as follows:
20202019
(In Thousands)
Cash and cash equivalents at beginning of period$51,601  $36,954  
Cash flow provided by (used in):
Operating activities112,422  70,969  
Investing activities(261,597) (271,691) 
Financing activities167,758  288,216  
Net increase in cash and cash equivalents18,583  87,494  
Cash and cash equivalents at end of period$70,184  $124,448  

Operating Activities

Net cash flow provided by operating activities increased $41.5 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the timing of payments to vendors. The increase was partially offset by the timing of recovery of fuel and purchased power costs and the timing of collections of receivables from customers, in part due to the COVID-19 pandemic.

Investing Activities

Net cash flow used in investing activities decreased $10.1 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to money pool activity, substantially offset by $38.6 million in storm spending in 2020 and $24.6 million in plant upgrades for the Choctaw Generating Station in March 2020.

Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased by $31.4 million for the six months ended June 30, 2020 compared to increasing by $65.4 million for the six months ended June 30, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities decreased $120.5 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the issuance of $300 million of 3.85% Series mortgage bonds in June 2019, partially offset by the issuance of $170 million of 3.5% Series mortgage bonds in May 2020. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Capital Structure

Entergy Mississippi’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Mississippi is primarily due to the issuance of $170 million of mortgage bonds in May 2020.
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June 30,
2020		December 31,
2019
Debt to capital52.7 %51.2 %
Effect of subtracting cash(1.0 %)(0.8 %)
Net debt to net capital51.7 %50.4 %

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

Uses and Sources of Capital

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

Entergy Mississippi has experienced negative changes during 2020 to its customer payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic. Despite the effects of the pandemic on financial markets Entergy Mississippi renewed its short-term credit facilities in April 2020 and issued $170 million of long-term mortgage bonds in May 2020. Additional discussion of Entergy Mississippi’s liquidity and capital resources follows.

Entergy Mississippi’s receivables from the money pool were as follows:
June 30,
2020		December 31,
2019		June 30,
2019		December 31, 2018
(In Thousands)
$13,311$44,693$106,760$41,380

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

Entergy Mississippi has three separate credit facilities in the aggregate amount of $82.5 million scheduled to expire in April 2021. No borrowings were outstanding under the credit facilities as of June 30, 2020.  In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility primarily as a means to post collateral to support its obligations to MISO. As of June 30, 2020, $2.5 million of MISO letters of credit and $7.1 million of non-MISO letters of credit were outstanding under this facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Entergy Mississippi has $33 million in its storm reserve escrow account at June 30, 2020.

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Sunflower Solar Facility

In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi.  The estimated base purchase price is approximately $138.4 million.  The estimated total investment, including the base purchase price and other related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  The project will be built by Sunflower County Solar Project, LLC, an indirect subsidiary of Recurrent Energy, LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met.  In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for Sunflower Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility.  Entergy Mississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the annual ownership costs of the Sunflower Solar Facility. In December 2019 the MPSC approved Entergy Mississippi’s proposed revisions to its formula rate plan to provide for an interim capacity rate adjustment mechanism. Recovery through the interim capacity rate adjustment requires MPSC approval for each new resource. In August 2019 consultants retained by the Mississippi Public Utilities Staff filed a report expressing concerns regarding the project economics. In March 2020, Entergy Mississippi filed supplemental testimony addressing questions and observations raised by the consultants retained by the Mississippi Public Utilities Staff and proposing an alternative structure for the transaction that would reduce its cost. A hearing before the MPSC was held in March 2020. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar Facility and its recovery through the interim capacity rate adjustment mechanism, subject to certain conditions including: (i) that Entergy Mississippi pursue a partnership structure through which the partnership would acquire and own the facility under the build-own-transfer agreement and (ii) that if Entergy Mississippi does not consummate the partnership structure under the terms of the order, there will be a cap of $136 million on the level of recoverable costs. Closing is targeted to occur by the end of 2021.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Formula Rate Plan Filings

See the Form 10-K for revisions to Entergy Mississippi’s formula rate plan approved by the MPSC in December 2019. In January 2020 Entergy Mississippi began billing an interim capacity rate adjustment rider to recover the $59 million first-year annual revenue requirement associated with the non-fuel ownership costs of the Choctaw Generating Station. Also, effective with the April 2020 billing cycle, Entergy Mississippi implemented a rider to recover $22 million in vegetation management costs. Vegetation management costs were previously recovered through the formula rate plan.

In March 2020, Entergy Mississippi submitted its formula rate plan 2020 test year filing and 2019 look-back filing showing Entergy Mississippi’s earned return for the historical 2019 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2020 calendar year to be below the formula rate plan bandwidth. The 2020 test year filing shows a $24.6 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.51% return on rate base, within the formula rate plan bandwidth. The 2019 look-back filing compares actual 2019 results to the approved benchmark return on rate base and reflects the need for a $7.3 million interim increase in formula rate plan revenues. In accordance with the MPSC-approved revisions to the formula rate plan, Entergy Mississippi
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implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2019 retail revenues, effective with the April 2020 billing cycle, subject to refund. In June 2020, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed that the 2020 test year filing that showed a $23.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.51% return on rate base, within the formula rate plan bandwidth. Pursuant to the joint stipulation, Entergy Mississippi’s 2019 look-back filing reflected an earned return on rate base of 6.75% in calendar year 2019, which is within the look-back bandwidth. As a result, there is no change in formula rate plan revenues in the 2019 look-back filing. In June 2020 the MPSC approved the joint stipulation with rates effective for the first billing cycle of July 2020.

Fuel and purchased power recovery

In November 2019, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation included $39.6 million of prior over-recovery flowing back to customers beginning February 2020. Entergy Mississippi’s balance in its deferred fuel account did not decrease as expected after implementation of the new factor. In an effort to assist customers during the COVID-19 pandemic, in May 2020, Entergy Mississippi requested an interim adjustment to the energy cost recovery rider to credit approximately $50 million from the over-recovered balance in the deferred fuel account to customers over four consecutive billing months, June through September 2020. The MPSC approved this interim adjustment in May 2020 effective for June 2020 bills.

COVID-19 Orders

In March 2020 the MPSC issued an order suspending disconnections for a period of sixty days. The MPSC extended the order on disconnections through May 26, 2020. In April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. As of June 30, 2020, Entergy Mississippi recorded a regulatory asset of $6 million for costs associated with the COVID-19 pandemic.

Federal Regulation

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

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

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

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Other Postretirement Benefits
As described in Note 6 to the financial statements herein, in March 2020, Entergy announced changes to its other postretirement benefits. As a result, Entergy Mississippi now expects 2020 other postretirement health care and life insurance benefit income, including amounts capitalized, of $3.6 million.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
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ENTERGY MISSISSIPPI, LLC
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$297,954  $302,737  $591,876  $584,981  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale38,730  47,391  102,027  100,620  
Purchased power56,679  73,720  109,322  145,175  
Other operation and maintenance66,343  66,921  128,680  126,104  
Taxes other than income taxes22,697  25,813  49,887  51,940  
Depreciation and amortization52,296  39,718  103,451  78,806  
Other regulatory charges (credits) - net(6,496) 3,567  (10,377) 5,937  
TOTAL230,249  257,130  482,990  508,582  
OPERATING INCOME67,705  45,607  108,886  76,399  
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction1,588  2,349  3,027  4,262  
Interest and investment income135  397  255  549  
Miscellaneous - net(2,589) (327) (4,885) (590) 
TOTAL(866) 2,419  (1,603) 4,221  
INTEREST EXPENSE
Interest expense17,192  15,342  33,775  29,882  
Allowance for borrowed funds used during construction(634) (1,006) (1,185) (1,791) 
TOTAL16,558  14,336  32,590  28,091  
INCOME BEFORE INCOME TAXES50,281  33,690  74,693  52,529  
Income taxes11,388  7,023  13,274  10,464  
NET INCOME $38,893  $26,667  $61,419  $42,065  
See Notes to Financial Statements.

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STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Net income$61,419  $42,065  
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization103,451  78,806  
Deferred income taxes, investment tax credits, and non-current taxes accrued13,126  19,924  
Changes in assets and liabilities:
Receivables7,076  (6,288) 
Fuel inventory(5,747) (4,265) 
Accounts payable9,943  4,545  
Taxes accrued(34,195) (46,815) 
Interest accrued1,399  2,022  
Deferred fuel costs(2,840) 26,126  
Other working capital accounts135  1,850  
Provisions for estimated losses(1,782) (6,274) 
Other regulatory assets(28,290) (13,248) 
Other regulatory liabilities(11,548) (17,754) 
Pension and other postretirement liabilities(5,353) (3,323) 
Other assets and liabilities5,628  (6,402) 
Net cash flow provided by operating activities112,422  70,969  
INVESTING ACTIVITIES
Construction expenditures(267,231) (210,263) 
Allowance for equity funds used during construction3,027  4,262  
Changes in money pool receivable - net31,382  (65,380) 
Payment for the purchase of assets(28,612) —  
Other(163) (310) 
Net cash flow used in investing activities(261,597) (271,691) 
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt165,408  293,051  
Common equity distributions paid(2,500) —  
Other4,850  (4,835) 
Net cash flow provided by financing activities167,758  288,216  
Net increase in cash and cash equivalents18,583  87,494  
Cash and cash equivalents at beginning of period51,601  36,954  
Cash and cash equivalents at end of period$70,184  $124,448  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$31,196  $26,563  
See Notes to Financial Statements.
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ENTERGY MISSISSIPPI, LLC
BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
 20202019
 (In Thousands)
CURRENT ASSETS  
Cash and cash equivalents:  
Cash$12  $11  
Temporary cash investments70,172  51,590  
Total cash and cash equivalents70,184  51,601  
Accounts receivable:  
Customer82,289  92,050  
Allowance for doubtful accounts(7,195) (636) 
Associated companies16,750  49,257  
Other9,549  14,986  
Accrued unbilled revenues63,232  47,426  
Total accounts receivable164,625  203,083  
Fuel inventory - at average cost20,886  15,139  
Materials and supplies - at average cost54,604  57,972  
Prepayments and other10,622  7,149  
TOTAL320,921  334,944  
OTHER PROPERTY AND INVESTMENTS  
Non-utility property - at cost (less accumulated depreciation)4,552  4,560  
Escrow accounts80,365  80,201  
TOTAL84,917  84,761  
UTILITY PLANT  
Electric5,832,362  5,672,589  
Construction work in progress144,951  88,373  
TOTAL UTILITY PLANT5,977,313  5,760,962  
Less - accumulated depreciation and amortization1,941,524  1,894,000  
UTILITY PLANT - NET4,035,789  3,866,962  
DEFERRED DEBITS AND OTHER ASSETS  
Regulatory assets:  
Other regulatory assets406,262  377,972  
Other16,269  10,105  
TOTAL422,531  388,077  
TOTAL ASSETS$4,864,158  $4,674,744  
See Notes to Financial Statements.  
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ENTERGY MISSISSIPPI, LLC
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
 20202019
 (In Thousands)
CURRENT LIABILITIES  
Accounts payable:  
Associated companies$38,478  $48,090  
Other101,418  94,729  
Customer deposits86,267  85,938  
Taxes accrued56,466  90,661  
Interest accrued20,299  18,900  
Deferred fuel costs67,562  70,402  
Other48,043  32,667  
TOTAL418,533  441,387  
NON-CURRENT LIABILITIES  
Accumulated deferred income taxes and taxes accrued615,383  594,832  
Accumulated deferred investment tax credits9,522  9,602  
Regulatory liability for income taxes - net232,053  236,988  
Other regulatory liabilities14,899  21,512  
Asset retirement cost liabilities9,497  9,727  
Accumulated provisions48,239  50,021  
Pension and other postretirement liabilities94,064  99,406  
Long-term debt1,780,040  1,614,129  
Other40,858  54,989  
TOTAL2,844,555  2,691,206  
Commitments and Contingencies  
EQUITY  
Member's equity1,601,070  1,542,151  
TOTAL1,601,070  1,542,151  
TOTAL LIABILITIES AND EQUITY$4,864,158  $4,674,744  
See Notes to Financial Statements.  
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STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
  
 Member's Equity
 (In Thousands)
Balance at December 31, 2018$1,292,226  
Net income15,398  
Balance at March 31, 20191,307,624  
Net income26,667  
Balance at June 30, 2019$1,334,291  
Balance at December 31, 2019$1,542,151  
Net income22,526  
Common equity distributions(2,500) 
Balance at March 31, 20201,562,177  
Net income38,893  
Balance at June 30, 2020$1,601,070  
See Notes to Financial Statements.
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SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
 Three Months EndedIncrease/ 
20202019(Decrease)%
 (Dollars In Millions) 
Electric Operating Revenues:    
Residential$112  $117  ($5) (4) 
Commercial90  102  (12) (12) 
Industrial36  39  (3) (8) 
Governmental10  11  (1) (9) 
Total billed retail248  269  (21) (8) 
Sales for resale:    
Non-associated companies18  5  13  260  
Other32  29  3  10  
Total$298  $303  ($5) (2) 
    
Billed Electric Energy Sales (GWh):    
Residential1,117  1,160  (43) (4) 
Commercial967  1,105  (138) (12) 
Industrial562  588  (26) (4) 
Governmental90  103  (13) (13) 
Total retail2,736  2,956  (220) (7) 
Sales for resale:    
Non-associated companies1,039  214  825  386  
Total3,775  3,170  605  19  
 Six Months EndedIncrease/ 
20202019(Decrease)%
 (Dollars In Millions) 
Electric Operating Revenues:    
Residential$239  $246  ($7) (3) 
Commercial187  200  (13) (7) 
Industrial72  76  (4) (5) 
Governmental20  21  (1) (5) 
Total billed retail518  543  (25) (5) 
Sales for resale:    
Non-associated companies33  10  23  230  
Other41  32  9  28  
Total$592  $585  $7  1  
    
Billed Electric Energy Sales (GWh):
Residential2,367  2,475  (108) (4) 
Commercial1,973  2,145  (172) (8) 
Industrial1,118  1,154  (36) (3) 
Governmental184  201  (17) (8) 
Total retail5,642  5,975  (333) (6) 
Sales for resale:    
Non-associated companies1,866  380  1,486  391  
Total7,508  6,355  1,153  18  
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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the COVID-19 pandemic.

Results of Operations

Net Income

Second Quarter 2020 Compared to Second Quarter 2019

Net income decreased $8.1 million primarily due to lower retail electric price and lower volume/weather, partially offset by lower other operation and maintenance expenses.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net income decreased $5.9 million primarily due to lower retail electric price and lower volume/weather, partially offset by a lower effective income tax rate and lower other operation and maintenance expenses.

Operating Revenues

Second Quarter 2020 Compared to Second Quarter 2019

Following is an analysis of the change in operating revenues comparing the second quarter 2020 to the second quarter 2019:
Amount
(In Millions)
2019 operating revenues$175.8  
Fuel, rider, and other revenues that do not significantly affect net income
(15.1) 
Retail electric price(8.3) 
Volume/weather(5.1) 
2020 operating revenues$147.3  

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

The retail electric price variance is primarily due to the effects of a rate reduction implemented with April 2020 bills that was effective August 2019 in accordance with the City Council resolution and related agreement in principle reached in the 2018 base rate case. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the rate case.

The volume/weather variance is primarily due to a decrease of 126 GWh, or 9%, in billed electricity usage, including the effect of decreased commercial and governmental usage as a result of the COVID-19 pandemic.
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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2020 to the six months ended June 30, 2019:
Amount
(In Millions)
2019 operating revenues$339.0  
Fuel, rider, and other revenues that do not significantly affect net income
(22.4) 
Retail electric price(14.9) 
Volume/weather(5.1) 
2020 operating revenues$296.6  

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

The retail electric price variance is primarily due to the effects of a rate reduction implemented with April 2020 bills that was effective August 2019 in accordance with the City Council resolution and related agreement in principle reached in the 2018 base rate case. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the rate case.

The volume/weather variance is primarily due to a decrease of 124 GWh, or 5%, in billed electricity usage, including the effect of decreased commercial and governmental usage as a result of the COVID-19 pandemic and the effect of less favorable weather on residential sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic. Entergy New Orleans continues to expect a decline in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial customer class. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

Other Income Statement Variances

Second Quarter 2020 Compared to Second Quarter 2019

Other operation and maintenance expenses decreased primarily due to a decrease of $2.1 million in information technology costs primarily due to lower costs related to applications and infrastructure support and a decrease of $1.1 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services.

Interest expense increased primarily due to the issuance of:

•$78 million of 3.00% Series mortgage bonds in March 2020;
•$62 million of 3.75% Series mortgage bonds in March 2020; and
•a $70 million term loan at 3.0% in December 2019.

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Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Other operation and maintenance expenses decreased primarily due to a decrease of $2.8 million in information technology costs primarily due to lower costs related to applications and infrastructure support and a decrease of $1.2 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services, partially offset by an increase of $1.1 million in loss provisions.

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

Other regulatory charges (credits) include regulatory credits recorded in first quarter 2020 to reflect compliance with terms of the 2018 combined rate case resolution approved by the City Council in February 2020. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the rate case resolution.

Interest expense increased primarily due to the issuance of:

•a $70 million term loan at 3.0% in December 2019;
•$78 million of 3.00% Series mortgage bonds in March 2020; and
•$62 million of 3.75% Series mortgage bonds in March 2020.

Income Taxes

The effective income tax rate was (53.5%) for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes and the provision for uncertain tax positions. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (38.2%) for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, book and tax differences related to the allowance for equity funds used during construction, and permanent differences related to income tax deductions for stock-based compensation, partially offset by the provision for uncertain tax positions and state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

The effective income tax rate was 9.5% for the second quarter 2019. The difference in the effective income tax rate for the second quarter 2019 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, flow-through tax accounting, certain book and tax differences related to utility plant items, and book and tax differences related to the allowance for equity funds used during construction, partially offset by the provision for uncertain tax positions and state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 16.7% for the six months ended June 30, 2019. The difference in the effective income tax rate for the six months ended June 30, 2019 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, book and tax differences related to the allowance for equity funds used during construction, and flow through tax accounting, partially offset by the provision for uncertain tax positions and state
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income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017.  Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion.  Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2020 and 2019 were as follows:
20202019
(In Thousands)
Cash and cash equivalents at beginning of period$6,017  $19,677  
Cash flow provided by (used in):
Operating activities24,660  29,365  
Investing activities(112,552) (78,716) 
Financing activities112,620  29,973  
Net increase (decrease) in cash and cash equivalents24,728  (19,378) 
Cash and cash equivalents at end of period$30,745  $299  

Operating Activities

Net cash flow provided by operating activities decreased $4.7 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•the timing of collection of receivables from customers, in part due to the COVID-19 pandemic;
•income tax payments of $3.3 million made in 2020 in accordance with an intercompany tax allocation agreement; and
•an increase of $1.4 million in interest paid in 2020.

The decrease was partially offset by the timing of payments to vendors.

Investing Activities

Net cash flow used in investing activities increased $33.8 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to money pool activity and an increase of $7.2 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of Entergy New Orleans’s distribution system, including increased spending on advanced metering infrastructure.

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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 $0.6 million for the six months ended June 30, 2020 compared to decreasing $22 million for the six months ended June 30, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $82.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the issuance of $78 million of 3.00% Series mortgage bonds and the issuance of $62 million of 3.75% Series mortgage bonds, each in March 2020. The increase was partially offset by money pool activity and repayments of $20 million on long-term credit borrowings in 2020.

Increases in Entergy New Orleans’s payable to the money pool are a source of cash flow, and Entergy New Orleans’s payable to the money pool increased $36.3 million for the six months ended June 30, 2019.

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

Capital Structure

Entergy New Orleans’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of $140 million of mortgage bonds in March 2020.
June 30,
2020		December 31,
2019
Debt to capital56.9 %53.1 %
Effect of excluding securitization bonds (1.8 %)(2.4 %)
Debt to capital, excluding securitization bonds (a)55.1 %50.7 %
Effect of subtracting cash(1.2 %)(0.3 %)
Net debt to net capital, excluding securitization bonds (a)53.9 %50.4 %

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

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

Uses and Sources of Capital

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

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Entergy New Orleans has experienced negative changes during 2020 to its customer payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic. Despite the effects of the pandemic on financial markets Entergy New Orleans issued $140 million of long-term mortgage bonds in March 2020. Additional discussion of Entergy New Orleans’s liquidity and capital resources follows.

Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
June 30,
2020		December 31,
2019		June 30,
2019		December 31,
2018
(In Thousands)
$5,777$5,191($36,303)$22,016

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

Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in November 2021. The credit facility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of June 30, 2020, there were no cash borrowings and an $0.8 million letter of credit outstanding under the facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2020, a $1 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Entergy New Orleans has $83 million in its storm reserve escrow account at June 30, 2020. As discussed in “COVID-19 Orders” below, the City Council has directed Entergy New Orleans to use approximately $15 million of its storm reserve escrow to fund the City Council Cares Program.

New Orleans Power Station

As discussed in the Form 10-K, in June 2019, a state court judge in New Orleans affirmed the City Council’s approval of the New Orleans Power Station and dismissed the petition for judicial review of that decision that had been filed in April 2018. The petitioners have filed an appeal of that ruling. Also in June 2019, with regard to the lawsuit challenging the City Council’s decision on the basis of a violation of the open meetings law, the same state court judge in New Orleans ruled that there was a violation of the open meetings law at the February 2018 meeting of the City Council’s Utility Committee at which that Committee considered the New Orleans Power Station approval, and further ruled that, although there was no violation of the open meetings law at the March 2018 City Council meeting at which the New Orleans Power Station was approved, both the approval of the Utility Committee and the approval of the City Council were void. The City Council and Entergy New Orleans each filed a suspensive appeal of the open meetings law ruling. A suspensive appeal suspends the effect of the judgment in the open meetings law proceeding while the appeal is being taken. The petitioners sought in the state appellate court, and then at the Louisiana Supreme Court, to terminate the suspension of the effect of the judgment, but both courts declined to do so. Oral argument in both cases was heard in January 2020. In February 2020 the state appellate court reversed the lower court’s ruling that the City Council’s approval of the New Orleans Power Station was void due to a violation of the open meetings law at the City Council’s Utility Committee meeting in February 2018.  The state appellate court ruled that there was no violation of the open meetings law at the City Council meeting in March 2018 and that the lower court erred in voiding the City Council resolution approving the New Orleans Power Station.  In March 2020 the appellees in that proceeding filed a writ application with the Louisiana Supreme Court seeking review of the appellate court’s decision and several New Orleans-based organizations filed an amicus brief in support of the appellees’ writ application. Entergy New Orleans and the City Council each filed an opposition to the writ application in June 2020, and the City Council also filed its own writ application seeking reversal of the appellate court’s holding that there was a violation of the open meetings law at the February 2018 City Council’s Utility Committee meeting. In its writ application the City Council requested that the Louisiana
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Supreme Court deny the appellees’ writ application, and grant the City Council’s writ application only if the Supreme Court grants the appellees’ writ application. In April 2020 the state appellate court affirmed the district court’s judicial review decision that affirmed the City Council’s approval of the New Orleans Power Station as in the public interest. In June 2020 appellants in that case filed a writ application with the Louisiana Supreme Court seeking review and reversal of that appellate court ruling. In July 2020 the City Council and Entergy New Orleans each filed an opposition to appellants’ writ application in the judicial review case. Commercial operation of the plant commenced in May 2020. In accordance with the City Council resolution issued in the 2018 base rate case proceeding, Entergy New Orleans is deferring the New Orleans Power Station non-fuel costs pending the conclusion of the appellate proceedings.

Gas Infrastructure Rebuild Plan

As discussed in the Form 10-K, in September 2016, Entergy New Orleans submitted to the City Council a request for authorization for Entergy New Orleans to proceed with annual incremental capital funding of $12.5 million for its gas infrastructure rebuild plan, which would replace all of Entergy New Orleans’s low pressure cast iron, steel, and vintage plastic pipe over a ten-year period commencing in 2017.  Entergy New Orleans also proposed that recovery of the investment to fund its gas infrastructure replacement plan be determined in connection with its next base rate case.  As a result of the rate case, the City Council approved the planned gas rebuild expenditures through 2019, but rejected Entergy New Orleans’s proposed gas infrastructure rider. In April 2020, Entergy New Orleans submitted its gas infrastructure rebuild plan to the City Council, which maintained the previously proposed timeline and cost estimates, but included measures to spread out the cost impact to customers of the program.

State and Local Rate Regulation

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

Retail Rates

Energy Efficiency

As discussed in the Form 10-K, in December 2019, Entergy New Orleans filed an application with the City Council seeking approval of an implementation plan for the Energy Smart energy efficiency program from April 2020 through December 2022. Entergy New Orleans proposed to recover the costs of the program through mechanisms previously approved by the City Council or through the energy efficiency cost recovery rider, which was approved in the 2018 combined rate case resolution. In February 2020 the City Council approved Entergy New Orleans’s application.

2018 Base Rate Case Filing

See the Form 10-K for discussion of the electric and gas base rate case filed in September 2018. In response to the City Council’s November 2019 resolution in the rate case, Entergy New Orleans made a compliance filing in December 2019 and also filed timely a petition for appeal and judicial review and for stay of or injunctive relief alleging that the resolution is unlawful in failing to produce just and reasonable rates. A hearing on the requested injunction was scheduled in Civil District Court for February 2020, but by joint motion of the City Council and Entergy New Orleans, the Civil District Court issued an order for a limited remand to the City Council to consider a potential agreement in principle/stipulation at its February 20, 2020 meeting. On February 17, 2020, Entergy New Orleans filed with the City Council an agreement in principle between Entergy New Orleans and the City Council’s advisors. On February 20, 2020, the City Council voted to approve the proposed agreement in principle and issued a resolution modifying the required treatment of certain accumulated deferred income taxes.
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As a result of the agreement in principle, the total annual revenue requirement reduction will be approximately $45 million ($42 million electric, including $29 million in rider reductions; and $3 million gas). As a result, Entergy New Orleans fully implemented the new rates in April 2020. The merits of the appeal will be subject to a separate procedural schedule issued by the Civil District Court.

2020 Formula Rate Plan Filing

In April 2020, Entergy New Orleans filed a motion with the City Council to delay its formula rate plan filing until June 2020. In May 2020 the City Council issued an order extending the filing deadline for Entergy New Orleans’s formula rate plan filing to June 29, 2020. On June 26, 2020, Entergy New Orleans filed a motion with the City Council to further delay the filing of its formula rate plan to August 13, 2020. In July 2020 the City Council issued an order approving the request.

COVID-19 Orders

In March 2020, Entergy New Orleans voluntarily suspended customer disconnections for non-payment of utility bills through May 2020. Subsequently, the City Council ordered that the moratorium be extended to August 1, 2020. In May 2020 the City Council issued an accounting order authorizing Entergy New Orleans to establish a regulatory asset for incremental COVID-19-related expenses. As of June 30, 2020, Entergy New Orleans recorded a regulatory asset of $4.8 million for costs associated with the COVID-19 pandemic.

In June 2020 the City Council established the City Council Cares Program and directed Entergy New Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC proceeding, currently being held in escrow, and the approximately $15 million of non-securitized storm reserves to fund this program, which is intended to provide temporary bill relief to customers who become unemployed during the COVID-19 pandemic. The program became effective July 1, 2020, and offers qualifying residential customers bill credits of $100 per month for up to four months, for a maximum of $400 in residential customer bill credits.

Renewable Portfolio Standard Rulemaking 

As discussed in the Form 10-K, in March 2019 the City Council initiated a rulemaking proceeding to consider whether to establish a renewable portfolio standard. In March 2020 the City Council’s Utility Committee recommended a resolution for approval by the City Council that directed the City Council advisors to work toward development of a rule for enacting a Renewable and Clean Portfolio Standard. The four components of the Renewable and Clean Portfolio Standard that the City Council expressed a desire to implement are: (1) a mandatory requirement that Entergy New Orleans achieve 100% net zero carbon emissions by 2040; (2) reliance on renewable energy credits purchased without the associated energy for compliance with the standard being phased out over the ten-year period from 2040 to 2050; (3) no carbon-emitting resources in the portfolio of resources Entergy New Orleans uses to serve New Orleans by 2050; and (4) a mechanism to limit costs in any one plan year to no more than one percent of plan year total utility retail sales revenues. The City Council adopted the Utility Committee resolution in April 2020. The first technical meeting of the parties occurred in June 2020 followed by the City Council advisors’ publication of a draft rule in July 2020, which draft will be the subject of written comments and further technical meetings before final rules are proposed for consideration by the parties and the City Council. A City Council decision is expected in December 2020.

Federal Regulation

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

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Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

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

Other Postretirement Benefits

As described in Note 6 to the financial statements herein, Entergy announced changes to its other postretirement benefits. As a result, Entergy New Orleans now expects 2020 other postretirement health care and life insurance benefit income, including amounts capitalized, of $4.9 million.

New Accounting Pronouncements

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

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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$134,899  $157,152  $258,330  $288,035  
Natural gas12,444  18,641  38,315  50,952  
TOTAL147,343  175,793  296,645  338,987  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale16,836  27,190  44,331  57,950  
Purchased power57,985  66,981  114,452  127,630  
Other operation and maintenance29,126  32,252  59,830  62,550  
Taxes other than income taxes15,642  13,135  28,848  26,677  
Depreciation and amortization15,626  14,226  30,701  28,390  
Other regulatory charges (credits) - net4,526  4,500  (1,210) 2,145  
TOTAL139,741  158,284  276,952  305,342  
OPERATING INCOME7,602  17,509  19,693  33,645  
OTHER INCOME
Allowance for equity funds used during construction2,048  2,686  4,533  4,976  
Interest and investment income43  64  96  243  
Miscellaneous - net168  (942) (570) (2,448) 
TOTAL2,259  1,808  4,059  2,771  
INTEREST EXPENSE
Interest expense7,635  6,019  14,275  11,955  
Allowance for borrowed funds used during construction(985) (1,073) (2,180) (1,987) 
TOTAL6,650  4,946  12,095  9,968  
INCOME BEFORE INCOME TAXES3,211  14,371  11,657  26,448  
Income taxes(1,718) 1,368  (4,458) 4,422  
NET INCOME$4,929  $13,003  $16,115  $22,026  
See Notes to Financial Statements.
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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Net income$16,115  $22,026  
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization30,701  28,390  
Deferred income taxes, investment tax credits, and non-current taxes accrued1,228  15,053  
Changes in assets and liabilities:
Receivables5,255  (9,614) 
Fuel inventory1,042  (336) 
Accounts payable(1,725) (3,412) 
Taxes accrued1,887  (6,189) 
Interest accrued529  (289) 
Deferred fuel costs3,351  2,028  
Other working capital accounts(19,793) (13,204) 
Provisions for estimated losses1,521  399  
Other regulatory assets3,508  (16,470) 
Other regulatory liabilities(14,151) (8,574) 
Pension and other postretirement liabilities(7,523) (3,627) 
Other assets and liabilities2,715  23,184  
Net cash flow provided by operating activities24,660  29,365  
INVESTING ACTIVITIES
Construction expenditures(114,961) (105,545) 
Allowance for equity funds used during construction4,533  4,976  
Payment for purchase of assets(1,584) —  
Changes in money pool receivable - net(586) 22,016  
Payments to storm reserve escrow account(405) (931) 
Changes in securitization account451  768  
Net cash flow used in investing activities(112,552) (78,716) 
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt138,939  —  
Retirement of long-term debt(25,616) (5,420) 
Change in money pool payable - net—  36,303  
Other(703) (910) 
Net cash flow provided by financing activities112,620  29,973  
Net increase (decrease) in cash and cash equivalents24,728  (19,378) 
Cash and cash equivalents at beginning of period6,017  19,677  
Cash and cash equivalents at end of period$30,745  $299  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$13,132  $11,726  
Income taxes$3,332  $—  
See Notes to Financial Statements.
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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents
Cash$295  $26  
Temporary cash investments30,450  5,991  
Total cash and cash equivalents30,745  6,017  
Securitization recovery trust account1,538  1,989  
Accounts receivable: 
Customer51,468  48,265  
Allowance for doubtful accounts(8,382) (3,226) 
Associated companies6,676  6,280  
Other4,076  7,378  
Accrued unbilled revenues25,643  25,453  
Total accounts receivable79,481  84,150  
Fuel inventory - at average cost878  1,920  
Materials and supplies - at average cost15,003  13,522  
Prepayments and other11,898  4,846  
TOTAL139,543  112,444  
OTHER PROPERTY AND INVESTMENTS
Non-utility property at cost (less accumulated depreciation)1,016  1,016  
Storm reserve escrow account83,010  82,605  
TOTAL84,026  83,621  
UTILITY PLANT
Electric1,683,153  1,467,215  
Natural gas317,273  311,432  
Construction work in progress68,793  201,829  
TOTAL UTILITY PLANT2,069,219  1,980,476  
Less - accumulated depreciation and amortization728,665  715,406  
UTILITY PLANT - NET1,340,554  1,265,070  
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Deferred fuel costs4,080  4,080  
Other regulatory assets (includes securitization property of $43,790 as of June 30, 2020 and $49,542 as of December 31, 2019)
255,855  259,363  
Other19,187  10,720  
TOTAL279,122  274,163  
TOTAL ASSETS$1,843,245  $1,735,298  
See Notes to Financial Statements.
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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$25,000  $25,000  
Payable due to associated company1,838  1,838  
Accounts payable:
Associated companies40,359  43,222  
Other39,837  43,963  
Customer deposits28,055  28,493  
Taxes accrued6,189  4,302  
Interest accrued7,445  6,916  
Deferred fuel costs8,269  4,918  
Current portion of unprotected excess accumulated deferred income taxes3,663  9,470  
Other4,900  15,827  
TOTAL165,555  183,949  
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued358,318  354,536  
Accumulated deferred investment tax credits2,100  2,131  
Regulatory liability for income taxes - net47,893  49,090  
Asset retirement cost liabilities3,643  3,522  
Accumulated provisions90,063  88,542  
Long-term debt (includes securitization bonds of $47,146 as of June 30, 2020 and
   $52,641 as of December 31, 2019)
635,250  521,539  
Long-term payable due to associated company12,529  12,529  
Other14,200  21,881  
TOTAL1,163,996  1,053,770  
Commitments and Contingencies
EQUITY
Member's equity513,694  497,579  
TOTAL513,694  497,579  
TOTAL LIABILITIES AND EQUITY$1,843,245  $1,735,298  
See Notes to Financial Statements.
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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
  
 Member's Equity
 (In Thousands)
Balance at December 31, 2018$444,950  
Net income9,023  
Balance at March 31, 2019453,973  
Net income13,003  
Balance at June 30, 2019$466,976  
Balance at December 31, 2019$497,579  
Net income11,186  
Balance at March 31, 2020508,765  
Net income4,929  
Balance at June 30, 2020$513,694  
See Notes to Financial Statements. 

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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
 Three Months EndedIncrease/ 
20202019(Decrease)%
 (Dollars In Millions) 
Electric Operating Revenues:   
Residential$53  $58  ($5) (9) 
Commercial36  54  (18) (33) 
Industrial3  8  (5) (63) 
Governmental11  19  (8) (42) 
Total billed retail103  139  (36) (26) 
Sales for resale:    
Non-associated companies8  9  (1) (11) 
Other24  9  15  167  
Total$135  $157  ($22) (14) 
Billed Electric Energy Sales (GWh):    
Residential520  517  3  1  
Commercial440  549  (109) (20) 
Industrial106  105  1  1  
Governmental177  198  (21) (11) 
Total retail1,243  1,369  (126) (9) 
Sales for resale:    
Non-associated companies473  461  12  3  
Total1,716  1,830  (114) (6) 
 Six Months EndedIncrease/ 
20202019(Decrease)%
 (Dollars In Millions) 
Electric Operating Revenues:   
Residential$104  $110  ($6) (5) 
Commercial82  100  (18) (18) 
Industrial11  16  (5) (31) 
Governmental26  35  (9) (26) 
Total billed retail223  261  (38) (15) 
Sales for resale:    
  Non-associated companies18  19  (1) (5) 
Other17  8  9  113  
Total$258  $288  ($30) (10) 
Billed Electric Energy Sales (GWh):    
Residential1,021  1,028  (7) (1) 
Commercial936  1,041  (105) (10) 
Industrial208  202  6  3  
Governmental361  379  (18) (5) 
Total retail2,526  2,650  (124) (5) 
Sales for resale:    
Non-associated companies1,074  989  85  9  
Total3,600  3,639  (39) (1) 
163

ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the COVID-19 pandemic.

Results of Operations

Net Income

Second Quarter 2020 Compared to Second Quarter 2019

Net income increased $7.9 million primarily due to higher retail electric price and higher other income, partially offset by higher depreciation and amortization expenses.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net income increased $19.3 million primarily due to higher retail electric price, higher other income, a lower effective income tax rate, after excluding the effect of the return of unprotected excess accumulated deferred income taxes which is offset in operating revenues, and higher volume/weather, partially offset by higher depreciation and amortization expenses.

Operating Revenues

Second Quarter 2020 Compared to Second Quarter 2019

Following is an analysis of the change in operating revenues comparing the second quarter 2020 to the second quarter 2019:
Amount
(In Millions)
2019 operating revenues$363.6  
Fuel, rider, and other revenues that do not significantly affect net income
(14.3) 
Return of unprotected excess accumulated deferred income taxes to customers
13.8  
Retail electric price10.5  
Volume/weather(1.4) 
2020 operating revenues$372.2  

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

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018. In second quarter 2020, $6.5 million was returned to customers as compared to $20.3 million in second quarter 2019. There is no
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effect on net income as the reduction in operating revenues is offset by a reduction in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an increase in the transmission cost recovery factor rider effective January 2020, as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filing.  

The volume/weather variance is primarily due to a decrease in usage during the unbilled sales period, decreased commercial usage as a result of the COVID-19 pandemic, and the effect of less favorable weather on residential sales, partially offset by an increase in residential usage as a result of the COVID-19 pandemic and an increase in industrial usage as a result of new expansion in the petrochemicals industry. Entergy Texas continues to expect a decline in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2020 to the six months ended June 30, 2019:
Amount
(In Millions)
2019 operating revenues$704.1  
Fuel, rider, and other revenues that do not significantly affect net income
(42.9) 
Return of unprotected excess accumulated deferred income taxes to customers
30.4  
Retail electric price16.0  
Volume/weather3.9  
2020 operating revenues$711.5  

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

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018. In the six months ended June 30, 2020, $12.2 million was returned to customers as compared to $42.6 million in the six months ended June 30, 2019. There is no effect on net income as the reduction in operating revenues is offset by a reduction in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an increase in the transmission cost recovery factor rider effective January 2020, as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filing.

The volume/weather variance is primarily due to an increase in residential usage as a result of the COVID-19 pandemic and an increase in industrial usage as a result of new expansion in the petrochemicals industry, partially offset by the effect of less favorable weather on billed residential sales and decreased commercial
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usage as a result of the COVID-19 pandemic. Entergy Texas continues to expect a decline in sales volume during 2020 due to the COVID-19 pandemic, especially in the commercial and industrial customer classes. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic.

Other Income Statement Variances

Second Quarter 2020 Compared to Second Quarter 2019

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

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the Montgomery County Power Station project.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Other operation and maintenance expenses decreased primarily due to a decrease of $5.7 million in non-nuclear generation expenses primarily due to a lower scope of work performed during plant outages in 2020 as compared to 2019 and a decrease of $1.9 million primarily due to contract costs in 2019 related to initiatives to explore new customer products and services. The decrease is partially offset by an increase of $1.6 million in distribution operations costs primarily due to higher contract costs for meter services, an increase of $1.1 million in vegetation management costs in 2020 as compared to 2019, and an increase of $0.8 million due to the amortization of 2018 rate case expenses effective February 2020.

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

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the Montgomery County Power Station project.

Income Taxes

The effective income tax rate was 5.2% for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, book and tax differences related to the allowance for equity funds used during construction, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (2.1%) for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, permanent differences related to income tax deductions for stock-based compensation, book and tax differences related to the allowance for equity funds used during construction, and certain book and tax differences related to utility plant items. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation. 
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The effective income tax rates were (43.5%) for the second quarter 2019 and (98.3%) for the six months ended June 30, 2019. The differences in the effective income tax rates for the second quarter 2019 and the six months ended June 30, 2019 versus the federal statutory rate of 21% were primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, and book and tax differences related to the allowance for equity funds used during construction. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2020 and 2019 were as follows:
20202019
(In Thousands)
Cash and cash equivalents at beginning of period$12,929  $56  
Cash flow provided by (used in):
Operating activities170,548  106,877  
Investing activities(464,795) (402,651) 
Financing activities323,557  297,565  
Net increase in cash and cash equivalents29,310  1,791  
Cash and cash equivalents at end of period$42,239  $1,847  

Operating Activities

Net cash flow provided by operating activities increased $63.7 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the timing of recovery of fuel and purchased power costs and a decrease in the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements in the Form 10-K and Note 10 to the financial statements herein for a discussion of the effects and the regulatory activity regarding the Tax Cuts and Jobs Act.

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Investing Activities

Net cash flow used in investing activities increased $62.1 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase of $50 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of Entergy Texas’s distribution system, including increased spending on advanced metering infrastructure and an increase of $23.5 million in transmission construction expenditures primarily due to a higher scope of work performed in 2020 as compared to 2019.

Financing Activities

Net cash flow provided by financing activities increased $26 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to:

•a capital contribution of $175 million received from Entergy Corporation in March 2020 in anticipation of upcoming expenditures, including Montgomery County Power Station;
•the repayment, at maturity, of $500 million of 7.125% Series mortgage bonds in February 2019; and
•the issuance of $175 million of 3.55% Series mortgage bonds in March 2020.

The increase was partially offset by the issuances of $300 million of 4.0% Series first mortgage bonds and $400 million of 4.5% Series first mortgage bonds, each in January 2019, and money pool activity. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $146.3 million for the six months ended June 30, 2019. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Capital Structure

Entergy Texas’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy Texas is primarily due to the $175 million capital contribution received in 2020.
June 30,
2020		December 31,
2019
Debt to capital50.3 %51.7 %
Effect of excluding the securitization bonds(2.1 %)(2.8 %)
Debt to capital, excluding securitization bonds (a)48.2 %48.9 %
Effect of subtracting cash(0.5 %)(0.2 %)
Net debt to net capital, excluding securitization bonds (a)
47.7 %48.7 %

(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 finance lease obligations and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy 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 creditors in evaluating Entergy Texas’s financial condition because net debt
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indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

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

Entergy Texas has experienced negative changes during 2020 to its customer payment patterns and its operating cash flow activity due to the COVID-19 pandemic, and expects them to continue throughout 2020. See “The COVID-19 Pandemic” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the COVID-19 pandemic. Despite the effects of the pandemic on financial markets Entergy Texas issued $175 million of long-term mortgage bonds in March 2020. Additional discussion of Entergy Texas’s liquidity and capital resources follows.

Entergy Texas’s receivables from or (payables to) the money pool were as follows:
June 30,
2020		December 31,
2019		June 30,
2019		December 31,
2018
(In Thousands)
$7,802$11,181($168,664)($22,389)

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

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in September 2024.  The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of June 30, 2020, there were no cash borrowings and $1.3 million of letters of credit outstanding under the credit facility.  In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2020, $10.2 million in letters of credit were outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Distribution Cost Recovery Factor (DCRF) Rider

In March 2020, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect approximately $23.6 million annually, or $20.4 million in incremental annual DCRF revenue beyond Entergy Texas’s currently effective DCRF rider from Entergy Texas’s retail customers based on its capital invested in distribution between January 1, 2019 and December 31, 2019. In May and June 2020 intervenors filed testimony recommending a disallowance to Entergy Texas’s annual revenue requirement ranging from approximately $0.3 million to $4.1 million. In June 2020, the parties agreed to waive the hearing on the merits. The parties have briefed the contested issues in this matter and are awaiting a proposal for decision.

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Transmission Cost Recovery Factor (TCRF) Rider

As discussed in the Form 10-K, in August 2019, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The new TCRF rider is designed to collect approximately $19.4 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and June 30, 2019. In January 2020 the PUCT issued an order approving an unopposed settlement providing for recovery of the requested revenue requirement. Entergy Texas implemented the amended rider beginning with bills covering usage on and after January 23, 2020.

Fuel and purchased power recovery

In September 2019, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period from April 2016 through March 2019. During the reconciliation period, Entergy Texas incurred approximately $1.6 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texas estimated an under-recovery balance of approximately $25.8 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2019. In March 2020 an intervenor filed testimony proposing that the PUCT disallow: (1) $2 million in replacement power costs associated with generation outages during the reconciliation period; and (2) $24.4 million associated with the operation of the Spindletop natural gas storage facility during the reconciliation period.  In April 2020, Entergy Texas filed rebuttal testimony refuting all points raised by the intervenor. In June 2020 the parties filed a stipulation and settlement agreement, which included a $1.2 million disallowance not associated with any particular issue raised by any party. The settlement is currently pending before the PUCT.

In July 2020, Entergy Texas filed an application with the PUCT to implement an interim fuel refund of $25.5 million, including interest. Entergy Texas proposes that the interim fuel refund be implemented beginning with the first August 2020 billing cycle over a three-month period for smaller customers and in a lump sum amount in the billing month of August 2020 for transmission-level customers. The interim fuel refund was approved in July 2020.

COVID-19 Orders

In March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In future proceedings the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. As of June 30, 2020, Entergy Texas recorded a regulatory asset of $4.1 million for costs associated with the COVID-19 pandemic.

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.

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Table of Contents
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. The following is an update to that discussion.

Other Postretirement Benefits
As described in Note 6 to the financial statements herein, in March 2020, Entergy announced changes to its other postretirement benefits. As a result, Entergy Texas now expects 2020 other postretirement health care and life insurance benefit income, including amounts capitalized, of $8.9 million.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
171
ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$372,194  $363,580  $711,530  $704,054  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale47,790  16,971  89,136  65,074  
Purchased power124,351  171,133  244,142  312,001  
Other operation and maintenance60,527  61,426  119,460  121,052  
Taxes other than income taxes20,524  21,263  39,796  39,903  
Depreciation and amortization43,835  37,312  86,401  74,349  
Other regulatory charges - net18,724  19,453  40,092  38,912  
TOTAL315,751  327,558  619,027  651,291  
OPERATING INCOME56,443  36,022  92,503  52,763  
OTHER INCOME
Allowance for equity funds used during construction11,601  6,413  22,242  11,494  
Interest and investment income343  374  772  2,056  
Miscellaneous - net(791) 1,228  (1,137) 865  
TOTAL11,153  8,015  21,877  14,415  
INTEREST EXPENSE
Interest expense23,137  20,153  45,995  42,613  
Allowance for borrowed funds used during construction(4,985) (3,256) (9,558) (5,836) 
TOTAL18,152  16,897  36,437  36,777  
INCOME BEFORE INCOME TAXES49,444  27,140  77,943  30,401  
Income taxes2,576  (11,796) (1,632) (29,877) 
NET INCOME46,868  38,936  79,575  60,278  
Preferred dividend requirements471  —  941  —  
EARNINGS APPLICABLE TO COMMON STOCK$46,397  $38,936  $78,634  $60,278  
See Notes to Financial Statements.



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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Net income$79,575  $60,278  
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization86,401  74,349  
Deferred income taxes, investment tax credits, and non-current taxes accrued9,470  8,895  
Changes in assets and liabilities:
Receivables(20,524) 25,236  
Fuel inventory1,222  (589) 
Accounts payable(3,543) (15,596) 
Taxes accrued(11,390) (9,091) 
Interest accrued359  (7,787) 
Deferred fuel costs17,226  (12,445) 
Other working capital accounts9,928  1,998  
Provisions for estimated losses91  (3,294) 
Other regulatory assets50,347  28,742  
Other regulatory liabilities(23,947) (50,817) 
Pension and other postretirement liabilities(13,825) (3,899) 
Other assets and liabilities(10,842) 10,897  
Net cash flow provided by operating activities170,548  106,877  
INVESTING ACTIVITIES
Construction expenditures(495,560) (424,229) 
Allowance for equity funds used during construction22,242  11,551  
Payment for purchase of assets(4,931) —  
Changes in money pool receivable - net3,379  —  
Changes in securitization account10,075  10,027  
Net cash flow used in investing activities(464,795) (402,651) 
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt194,256  691,808  
Retirement of long-term debt(43,376) (541,442) 
Capital contribution from parent175,000  —  
Change in money pool payable - net—  146,275  
Preferred stock dividends paid(1,124) —  
Other(1,199) 924  
Net cash flow provided by financing activities323,557  297,565  
Net increase in cash and cash equivalents29,310  1,791  
Cash and cash equivalents at beginning of period12,929  56  
Cash and cash equivalents at end of period$42,239  $1,847  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$44,683  $49,229  
Income taxes$4,031  $2,292  
See Notes to Financial Statements.
173
ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$1,113  $25  
Temporary cash investments41,126  12,904  
Total cash and cash equivalents42,239  12,929  
Securitization recovery trust account27,645  37,720  
Accounts receivable:
Customer77,596  59,365  
Allowance for doubtful accounts(5,848) (471) 
Associated companies19,656  24,001  
Other9,496  17,050  
Accrued unbilled revenues66,238  50,048  
Total accounts receivable167,138  149,993  
Fuel inventory - at average cost46,371  47,593  
Materials and supplies - at average cost46,404  46,056  
Prepayments and other11,801  21,012  
TOTAL341,598  315,303  
OTHER PROPERTY AND INVESTMENTS
Investments in affiliates - at equity373  396  
Non-utility property - at cost (less accumulated depreciation)376  376  
Other20,521  20,077  
TOTAL21,270  20,849  
UTILITY PLANT
Electric5,515,459  5,199,027  
Construction work in progress854,846  760,354  
TOTAL UTILITY PLANT6,370,305  5,959,381  
Less - accumulated depreciation and amortization1,816,733  1,770,852  
UTILITY PLANT - NET4,553,572  4,188,529  
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $125,578 as of June 30, 2020 and $160,375 as of December 31, 2019)
462,301  512,648  
Other55,920  33,393  
TOTAL518,221  546,041  
TOTAL ASSETS$5,434,661  $5,070,722  
See Notes to Financial Statements.  
174
ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$125,000  $—  
Accounts payable:
Associated companies$49,231  $58,055  
Other152,363  188,460  
Customer deposits39,661  40,232  
Taxes accrued38,318  49,708  
Interest accrued19,351  18,992  
Current portion of unprotected excess accumulated deferred income taxes28,017  26,552  
Deferred fuel costs30,227  13,001  
Other12,248  10,521  
TOTAL494,416  405,521  
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued603,479  585,413  
Accumulated deferred investment tax credits10,250  10,559  
Regulatory liability for income taxes - net204,006  225,980  
Other regulatory liabilities38,647  42,085  
Asset retirement cost liabilities7,844  7,631  
Accumulated provisions8,199  8,108  
Long-term debt (includes securitization bonds of $162,114 as of June 30, 2020 and $205,349 as of December 31, 2019)
1,945,503  1,922,956  
Other69,286  63,062  
TOTAL2,887,214  2,865,794  
Commitments and Contingencies
EQUITY
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2020 and 2019
49,452  49,452  
Paid-in capital955,172  780,182  
Retained earnings1,013,407  934,773  
Total common shareholder's equity2,018,031  1,764,407  
Preferred stock without sinking fund35,000  35,000  
TOTAL2,053,031  1,799,407  
TOTAL LIABILITIES AND EQUITY$5,434,661  $5,070,722  
See Notes to Financial Statements.
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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
Common Equity
Preferred StockCommon
Stock		Paid-in
Capital		Retained
Earnings		Total
(In Thousands)
Balance at December 31, 2018$—  $49,452  $596,994  $775,956  $1,422,402  
Net income—  —  —  21,342  21,342  
Balance at March 31, 2019 —  49,452  596,994  797,298  1,443,744  
Net income—  —  —  38,936  38,936  
Balance at June 30, 2019$—  $49,452  $596,994  $836,234  $1,482,680  
Balance at December 31, 2019$35,000  $49,452  $780,182  $934,773  $1,799,407  
Net income—  —  —  32,707  32,707  
Capital contribution from parent—  —  175,000  —  175,000  
Preferred stock dividends—  —  —  (470) (470) 
Balance at March 31, 202035,000  49,452  955,182  967,010  2,006,644  
Net income—  —  —  46,868  46,868  
Preferred stock dividends—  —  —  (471) (471) 
Other—  —  (10) —  (10) 
Balance at June 30, 2020$35,000  $49,452  $955,172  $1,013,407  $2,053,031  
See Notes to Financial Statements.
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ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedIncrease/
20202019(Decrease)%
(Dollars In Millions)
Electric Operating Revenues:
Residential$153  $147  $6  4  
Commercial85  81  4  5  
Industrial96  91  5  5  
Governmental6  6  —  —  
Total billed retail340  325  15  5  
Sales for resale:
Associated companies10  14  (4) (29) 
Non-associated companies3  —  3  —  
Other19  25  (6) (24) 
Total$372  $364  $8  2  
Billed Electric Energy Sales (GWh):
Residential1,386  1,308  78  6  
Commercial1,033  1,122  (89) (8) 
Industrial2,013  1,949  64  3  
Governmental62  63  (1) (2) 
Total retail4,494  4,442  52  1  
Sales for resale:
Associated companies320  383  (63) (16) 
Non-associated companies225  56  169  302  
Total5,039  4,881  158  3  
Six Months EndedIncrease/
20202019(Decrease)%
(Dollars In Millions)
Electric Operating Revenues:
Residential$293  $295  ($2) (1) 
Commercial168  160  8  5  
Industrial186  178  8  4  
Governmental12  11  1  9  
Total billed retail659  644  15  2  
Sales for resale:
Associated companies18  28  (10) (36) 
Non-associated companies4  3  1  33  
Other31  29  2  7  
Total$712  $704  $8  1  
Billed Electric Energy Sales (GWh):
Residential2,712  2,668  44  2  
Commercial2,033  2,168  (135) (6) 
Industrial3,909  3,780  129  3  
Governmental126  125  1  1  
Total retail8,780  8,741  39  —  
Sales for resale:
Associated companies564  785  (221) (28) 
Non-associated companies310  152  158  104  
Total9,654  9,678  (24) —  
177

SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


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.

Results of Operations

Net Income

Second Quarter 2020 Compared to Second Quarter 2019

Net income increased $4.5 million primarily due to provisions against revenue recorded in the second quarter 2019 in connection with the return on equity complaint against System Energy. Also contributing to the increase was an increase in the allowance for equity funds used during construction resulting from increased capital spending in the second quarter 2020 including the scheduled 2020 Grand Gulf refueling outage. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the return on equity complaint against System Energy.

Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019

Net income increased $9.5 million primarily due to provisions against revenue recorded in 2019 in connection with the return on equity complaint against System Energy. Also contributing to the increase was an increase in the allowance for equity funds used during construction resulting from increased capital spending in 2020 including the scheduled 2020 Grand Gulf refueling outage. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the return on equity complaint against System Energy.

Income Taxes

The effective income tax rate was 20.5% for the second quarter 2020. The difference in the effective income tax rate for the second quarter 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes.

The effective income tax rate was 18.4% for the six months ended June 30, 2020. The difference in the effective income tax rate for the six months ended June 30, 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items, book and tax differences related to the allowance for equity funds used during construction, and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

The effective income tax rates were (7.6%) for the second quarter 2019 and 8.4% for the six months ended June 30, 2019. The differences in the effective income tax rates for the second quarter 2019 and the six months ended June 30, 2019 versus the federal statutory rate of 21% were primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset
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by state income taxes. See Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2019, 2018, and 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2020 and 2019 were as follows:
20202019
(In Thousands)
Cash and cash equivalents at beginning of period$68,534  $95,685  
Cash flow provided by (used in):
Operating activities84,736  130,376  
Investing activities(157,713) (13,477) 
Financing activities4,550  (128,623) 
Net decrease in cash and cash equivalents(68,427) (11,724) 
Cash and cash equivalents at end of period$107  $83,961  

Operating Activities

Net cash flow provided by operating activities decreased $45.6 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to an increase in spending of $34.9 million on nuclear refueling outages in 2020 as compared to the same period in 2019.

Investing Activities

Net cash flow used in investing activities increased $144.2 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the following activity:

•an increase of $90.6 million in nuclear construction expenditures as a result of spending in 2020 on Grand Gulf outage projects and upgrades; and
•an increase of $81.8 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.

The increase was partially offset by money pool activity.

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Management's Financial Discussion and Analysis
Decreases in System Energy’s receivable from the money pool are a source of cash flow and System Energy’s receivable from the money pool decreased by $59.3 million for the six months ended June 30, 2020 compared to decreasing by $35.6 million for the six months ended June 30, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

System Energy’s financing activities provided $4.6 million of cash for the six months ended June 30, 2020 compared to using $128.6 million of cash for the six months ended June 30, 2019 primarily due to the following activity:

•net long-term borrowings of $48.5 million in 2020 compared to net repayments of long-term borrowings of $39.5 million in 2019 on the nuclear fuel company variable interest entity’s credit facility;
•a decrease of $28.3 million in common stock dividends and distributions in 2020 in order to maintain System Energy’s capital structure; and
•money pool activity.

Increases in System Energy’s payable to the money pool is a source of cash flow, and System Energy’s payable to the money pool increased by $15.8 million for the six months ended June 30, 2020.

Capital Structure

System Energy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to borrowings in 2020 on the nuclear fuel company variable interest entity’s credit facility.
 June 30,
2020		December 31,
2019
Debt to capital45.7 %43.5 %
Effect of subtracting cash— %(3.3 %)
Net debt to net capital45.7 %40.2 %

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

Uses and Sources of Capital

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

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System Energy’s receivables from or (payables to) the money pool were as follows:
June 30,
2020		December 31,
2019		June 30,
2019		December 31,
2018
(In Thousands)
($15,774)$59,298$71,534$107,122

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

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in September 2021. As of June 30, 2020, $80.1 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

Federal Regulation

See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in November 2019, in a proceeding that did not involve System Energy, the FERC issued an order addressing the methodology for determining the return on equity applicable to transmission owners in MISO. Thereafter, the participants in the System Energy proceeding agreed to amend the procedural schedule to allow the participants to file supplemental testimony addressing the order in the MISO transmission owner proceeding (Opinion No. 569).

In February 2020 the LPSC, the MPSC and APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569 and how it would affect the return on equity evaluation for the two complaint periods concerning System Energy. For the first refund period, based on their respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 8.44%; the MPSC and APSC argue for an authorized return on equity of 8.41%; and the FERC trial staff argues for an authorized return on equity of 9.22%. For the second refund period and on a prospective basis, based on their respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 7.89%; the MPSC and APSC argue that an authorized return on equity of 8.01% may be appropriate; and the FERC trial staff argues for an authorized return on equity of 8.66%.

In April 2020, System Energy filed supplemental answering testimony addressing Opinion No. 569. System Energy argues that the Opinion No. 569 methodology is conceptually and analytically defective for purposes of establishing just and reasonable authorized return on equity determinations and proposes an alternative approach. As its primary recommendation, System Energy continues to support the return on equity determinations in its March 2019 testimony for the first refund period and its June 2019 testimony for the second refund period. Under the Opinion No. 569 methodology, System Energy calculates a “presumptively just and reasonable range” for the authorized return on equity for the first refund period of 8.57% to 9.52%, and for the second refund period of 8.28% to 9.11%. System Energy argues that these ranges are not just and reasonable results. Under its proposed alternative methodology, System Energy calculates an authorized return on equity of 10.26% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively.

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In May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule was further revised in order to allow parties to the System Energy proceeding to address the Opinion No. 569-A methodology. Pursuant to the revised schedule, in June 2020, the LPSC, the MPSC and APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569-A and how it would affect the return on equity evaluation for the two complaint periods concerning System Energy. For the first refund period, based on their respective interpretations and applications of the Opinion No. 569-A methodology, the LPSC argues for an authorized return on equity for System Energy of 7.97%; the MPSC and APSC argue for an authorized return on equity of 9.24%; and the FERC trial staff argues for an authorized return on equity of 9.49%. For the second refund period and on a prospective basis, based on their respective interpretations and applications of the Opinion No. 569-A methodology, the LPSC argues for an authorized return on equity for System Energy of 7.78%; the MPSC and APSC argue that an authorized return on equity of 9.15% may be appropriate if the second complaint is not dismissed; and the FERC trial staff argues for an authorized return on equity of 9.09% if the second complaint is not dismissed.

Pursuant to the revised procedural schedule, in July 2020, System Energy filed supplemental testimony addressing Opinion No. 569-A. System Energy argues that strict application of the Opinion No. 569-A methodology produces results inconsistent with investor requirements and does not provide a sound basis on which to evaluate System Energy’s authorized return on equity. As its primary recommendation, System Energy argues for the use of a methodology that incorporates four separate financial models, including the constant growth form of the discounted cash flow model and the empirical capital asset pricing model. Based on application of its recommended methodology, System Energy argues for an authorized return on equity of 10.12% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively. Under the Opinion No. 569-A methodology, System Energy calculates an authorized return on equity of 9.44% for the first refund period, which also falls within the presumptively just and reasonable range calculated for the second refund period and prospectively.

Under the revised procedural schedule, System Energy’s supplemental testimony addressing Opinion No. 569-A is due in July 2020; rebuttal testimony addressing return on equity issues is due in August 2020; the hearing will commence in September 2020; and the initial decision is due in February 2021.

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

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC, and City Council filed direct testimony. The LPSC testimony sought refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions, and the cost of capital additions associated with the sale-leaseback interest, as well as interest on those amounts.

In June 2019 System Energy filed answering testimony arguing that the FERC should reject all claims for refunds.  Among other things, System Energy argued that claims for refunds of the costs of lease renewal payments and capital additions should be rejected because those costs were recovered consistent with the Unit Power Sales Agreement formula rate, System Energy was not over or double recovering any costs, and customers will save costs over the initial and renewal terms of the leases.  System Energy argued that claims for refunds associated with liabilities arising from uncertain tax positions should be rejected because the liabilities do not provide cost-free capital, the repayment timing of the liabilities is uncertain, and the outcome of the underlying tax positions is uncertain.  System Energy’s testimony also challenged the refund calculations supplied by the other parties.

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In August 2019 the FERC trial staff filed direct and answering testimony seeking refunds for rate base reductions for the liabilities associated with uncertain tax positions. The FERC trial staff also argued that System Energy recovered $32 million more than it should have in depreciation expense for capital additions. In September 2019, System Energy filed cross-answering testimony disputing the FERC trial staff’s arguments for refunds, stating that the FERC trial staff’s position regarding depreciation rates for capital additions is not unreasonable, but explaining that any change in depreciation expense is only one element of a Unit Power Sales Agreement re-billing calculation. Adjustments to depreciation expense in any re-billing under the Unit Power Sales Agreement formula rate will also involve changes to accumulated depreciation, accumulated deferred income taxes, and other formula elements as needed. In October 2019 the LPSC filed rebuttal testimony increasing the amount of refunds sought for the liabilities associated with uncertain tax positions.  The LPSC seeks approximately $512 million, plus interest, which is approximately $179 million through June 30, 2020.  The FERC trial staff also filed rebuttal testimony in which it seeks refunds of a similar amount as the LPSC for the liabilities associated with uncertain tax positions.  The LPSC testimony also argued that adjustments to depreciation rates should affect rate base on a prospective basis only.

A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through June 30, 2020, is approximately $409 million, plus interest, which is approximately $101 million through June 30, 2020. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through June 30, 2020.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. In June 2020, System Energy, the LPSC, and the FERC trial staff filed briefs on exceptions, challenging several of the initial decision’s findings. System Energy’s brief on exceptions challenged the initial decision’s limitations on recovery of the lease renewal payments, its proposed rate base refund for the liabilities associated with uncertain tax positions, and its proposal to asymmetrically treat interest on bill corrections for depreciation expense adjustments. The LPSC’s and the FERC trial staff’s briefs on exceptions each challenged the initial decision’s allowance for recovery of the cost of service associated with the lease renewal based on the remaining net book value of the leased assets, its calculation of the remaining net book value of the leased assets, and the amount of the initial decision’s proposed rate base refund for the liabilities associated with uncertain tax positions. The LPSC’s brief on exceptions also challenged the initial decision’s proposal that depreciation expense adjustments include retroactive adjustments to rate base and its finding that section 203 of the Federal Power Act did not apply to the lease renewal. The FERC trial staff’s brief on exceptions also challenged the initial decision’s finding that the FERC need not institute a formal investigation into System Energy’s tariff. Briefs opposing exceptions are scheduled for September 2020. The FERC will then review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in
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Management's Financial Discussion and Analysis
whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

LPSC Authorization of Additional Complaints

In May 2020 the LPSC authorized its staff to file additional complaints at FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement. The LPSC directive notes that the initial decision issued by the presiding ALJ in the Grand Gulf sale-leaseback complaint proceeding did not address for procedural reasons certain rate issues raised by the LPSC and declined to order further investigation of rates charged by System Energy. The LPSC directive authorizes its staff to file complaints at FERC “necessary to address these rate issues, to request a full investigation into the rates charged by System Energy for Grand Gulf power, and to seek rate refund, rate reduction, and such other remedies as may be necessary and appropriate to protect Louisiana ratepayers.” The LPSC directive further stated that the LPSC has seen “information suggesting that the Grand Gulf plant has been significantly underperforming compared to other nuclear plants in the United States, has had several extended and unexplained outages, and has been plagued with serious safety concerns.” The LPSC expressed concern that the costs paid by Entergy Louisiana's retail customers may have been detrimentally impacted, and authorized “the filing of a FERC complaint to address these performance issues and to seek appropriate refund, rate reduction, and other remedies as may be appropriate.” The complaints have not been filed as of this date, and the LPSC directive did not set a date for the filing of the complaints.

Nuclear Matters

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

Environmental Risks

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

Critical Accounting Estimates

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

Other Postretirement Benefits
As described in Note 6 to the financial statements herein, in March 2020, Entergy announced changes to its other postretirement benefits. As a result, System Energy now expects 2020 other postretirement health care and life insurance benefit income, including amounts capitalized, of $1.5 million.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
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SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
Three Months EndedSix Months Ended
2020201920202019
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$126,049  $139,009  $256,713  $279,113  
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale6,008  21,026  19,151  42,587  
Nuclear refueling outage expenses5,666  8,415  13,938  16,601  
Other operation and maintenance42,802  52,468  83,273  97,750  
Decommissioning9,248  8,888  18,405  17,687  
Taxes other than income taxes7,105  7,176  15,078  14,715  
Depreciation and amortization27,501  26,574  54,400  53,148  
Other regulatory credits - net(3,517) (9,838) (14,077) (19,043) 
TOTAL94,813  114,709  190,168  223,445  
OPERATING INCOME 31,236  24,300  66,545  55,668  
OTHER INCOME
Allowance for equity funds used during construction3,200  1,678  6,784  3,267  
Interest and investment income12,108  6,371  17,446  13,362  
Miscellaneous - net(2,157) (1,490) (4,617) (2,718) 
TOTAL13,151  6,559  19,613  13,911  
INTEREST EXPENSE
Interest expense8,534  8,524  17,074  17,921  
Allowance for borrowed funds used during construction(634) (410) (1,345) (799) 
TOTAL7,900  8,114  15,729  17,122  
INCOME BEFORE INCOME TAXES36,487  22,745  70,429  52,457  
Income taxes7,496  (1,727) 12,925  4,407  
NET INCOME$28,991  $24,472  $57,504  $48,050  
See Notes to Financial Statements.

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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
20202019
(In Thousands)
OPERATING ACTIVITIES
Net income$57,504  $48,050  
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization88,343  106,972  
Deferred income taxes, investment tax credits, and non-current taxes accrued517  4,799  
Changes in assets and liabilities:
Receivables18,213  (15,402) 
Accounts payable(18,591) (6,770) 
Prepaid taxes and taxes accrued6,020  (3,196) 
Interest accrued(12) (1,275) 
Other working capital accounts(41,850) 1,205  
Other regulatory assets(21,072) (7,238) 
Other regulatory liabilities(21,672) 87,502  
Pension and other postretirement liabilities(5,354) (2,121) 
Other assets and liabilities22,690  (82,150) 
Net cash flow provided by operating activities84,736  130,376  
INVESTING ACTIVITIES
Construction expenditures(147,889) (58,714) 
Allowance for equity funds used during construction6,784  3,267  
Nuclear fuel purchases(75,024) (1,964) 
Proceeds from the sale of nuclear fuel9,573  18,280  
Proceeds from nuclear decommissioning trust fund sales275,563  190,975  
Investment in nuclear decommissioning trust funds(286,018) (200,909) 
Changes in money pool receivable - net59,298  35,588  
Net cash flow used in investing activities(157,713) (13,477) 
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt482,533  847,380  
Retirement of long-term debt(434,104) (888,003) 
Change in money pool payable - net15,774  —  
Common stock dividends and distributions paid(59,653) (88,000) 
Net cash flow provided by (used in) financing activities4,550  (128,623) 
Net decrease in cash and cash equivalents(68,427) (11,724) 
Cash and cash equivalents at beginning of period68,534  95,685  
Cash and cash equivalents at end of period$107  $83,961  
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized$8,589  $12,462  
Income taxes($4,000) $—  
See Notes to Financial Statements.
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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$107  $93  
Temporary cash investments—  68,441  
Total cash and cash equivalents107  68,534  
Accounts receivable:
Associated companies48,658  121,972  
Other3,350  7,547  
Total accounts receivable52,008  129,519  
Materials and supplies - at average cost118,094  108,766  
Deferred nuclear refueling outage costs46,294  14,493  
Prepayments and other6,767  6,045  
TOTAL223,270  327,357  
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds1,059,540  1,054,098  
TOTAL1,059,540  1,054,098  
UTILITY PLANT
Electric5,267,331  5,070,859  
Construction work in progress67,059  164,996  
Nuclear fuel201,890  149,574  
TOTAL UTILITY PLANT5,536,280  5,385,429  
Less - accumulated depreciation and amortization3,306,393  3,285,487  
UTILITY PLANT - NET2,229,887  2,099,942  
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets511,155  490,083  
Accumulated deferred income tax—  8,023  
Other3,218  3,192  
TOTAL514,373  501,298  
TOTAL ASSETS$4,027,070  $3,982,695  
See Notes to Financial Statements.
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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2020 and December 31, 2019
(Unaudited)
20202019
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$100,012  $10  
Accounts payable:
Associated companies25,772  14,619  
Other54,427  64,144  
Taxes accrued19,852  13,832  
Interest accrued11,981  11,993  
Other3,382  3,381  
TOTAL215,426  107,979  
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued820,699  821,963  
Accumulated deferred investment tax credits39,542  40,181  
Regulatory liability for income taxes - net136,339  142,845  
Other regulatory liabilities518,249  533,415  
Decommissioning950,135  931,729  
Pension and other postretirement liabilities104,462  109,816  
Long-term debt496,849  548,097  
Other35,450  34,602  
TOTAL3,101,725  3,162,648  
Commitments and Contingencies
COMMON EQUITY
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350
    shares in 2020 and 2019
601,850  601,850  
Retained earnings108,069  110,218  
TOTAL709,919  712,068  
TOTAL LIABILITIES AND EQUITY$4,027,070  $3,982,695  
See Notes to Financial Statements.
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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2020 and 2019
(Unaudited)
Common Equity
Common
Stock		Retained
Earnings		Total
(In Thousands)
Balance at December 31, 2018$601,850  $135,348  $737,198  
Net income—  23,578  23,578  
Common stock dividends and distributions—  (45,500) (45,500) 
Balance at March 31, 2019601,850  113,426  715,276  
Net income—  24,472  24,472  
Common stock dividends and distributions—  (42,500) (42,500) 
Balance at June 30, 2019$601,850  $95,398  $697,248  
Balance at December 31, 2019$601,850  $110,218  $712,068  
Net income—  28,513  28,513  
Common stock dividends and distributions—  (13,653) (13,653) 
Balance at March 31, 2020601,850  125,078  726,928  
Net income—  28,991  28,991  
Common stock dividends and distributions—  (46,000) (46,000) 
Balance at June 30, 2020$601,850  $108,069  $709,919  
See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy.  Also see Notes 1 and 2 to the financial statements herein and “Item 5, Other Information, Environmental Regulation” below for updates regarding environmental proceedings and regulation.

Item 1A.  Risk Factors

See the risk factors discussed in “Part I, Item 1A. Risk Factors” in the Form 10-K, which could materially affect Entergy’s and its Registrant Subsidiaries’ business, financial condition, or future results. The information set forth in this report, including the risk factor presented below, updates and should be read in conjunction with the risk factors and information disclosed in the Form 10-K. In addition, because Entergy cannot predict the ultimate impacts of COVID-19, the actual impacts may also exacerbate other risks discussed in “Item 1A. Risk Factors” in the Form 10-K, any of which could have a material effect on Entergy and its Registrant Subsidiaries. The situation remains fluid and while Entergy and its Utility operating companies have not incurred significant disruptions thus far from the COVID-19 global pandemic, the likelihood of an adverse impact could increase the longer the global pandemic persists.

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

The impacts of the COVID-19 outbreak and responsive measures taken on Entergy’s and its Utility operating companies’ business, results of operations, and financial condition are highly uncertain and cannot be predicted.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. Since then, COVID-19 has spread throughout most countries in the world, including the United States.  Public health officials in the United States have both recommended and mandated precautions to mitigate the spread of COVID-19, including prohibitions on congregating in heavily-populated areas, mandated closure or limitations on the functions of non-essential business, and shelter-in-place orders or similar measures, including throughout Entergy’s service areas. It is unclear how long these mitigation measures will remain in place, whether they will be reinstated in the future, and how they will impact the general economy, Entergy’s customers, and its operations.

Entergy and its Utility operating companies have experienced a decline in commercial and industrial sales and an increase in late customers payments, and expect such reduced levels of sales and delays in customer payments to continue, the extent and duration of which management cannot predict.  The Utility operating companies have temporarily suspended disconnecting customers for non-payment of bills and while they are working with regulators to ensure ultimate recovery for those and other COVID-19 related costs, such recovery cannot be guaranteed.  Entergy and its Registrant Subsidiaries also could experience, and in some cases have experienced, among other challenges, supply chain, vendor, and contractor disruptions, delays in completion of capital or other construction projects, maintenance, and other operations activities, including prolonged or delayed outages, delays in regulatory proceedings, workforce availability, health or safety issues, increased cybersecurity risks as a result of many employees telecommuting, increased late or uncollectible customer payments, volatility in the credit or capital markets (and any related increased cost of capital or any inability to access the capital markets or draw on available credit facilities), or other adverse impacts on their ability to execute on business strategies and initiatives.
A sustained or further economic decline could adversely impact Entergy’s and the Utility operating companies’ liquidity and cash flows, including through declining sales, reduced revenues, delays in receipts of customer payments, or increased bad debt expense. In addition, if the pandemic continues to create disruptions or turmoil in the credit or financial markets, or adversely impacts Entergy’s credit metrics or ratings, such
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developments could adversely affect its ability to access capital on favorable terms and continue to meet its liquidity needs, or cause a decrease in the value of its defined benefit pension trust funds, as well as its nuclear decommissioning trust funds, all of which are highly uncertain and cannot be predicted.

The situation continues to rapidly evolve, and Entergy cannot predict the extent or duration of the outbreak, governmental responsive measures, or the extent of the effects or ultimate impacts on the global, national or local economy, the capital markets, or its customers, suppliers, operations, financial condition, results of operations, or cash flows.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (a)
PeriodTotal Number of
Shares Purchased		Average Price Paid
per Share		Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan		Maximum $
Amount
of Shares that May
Yet be Purchased
Under a Plan (b)
4/01/2020-4/30/2020—  $—  —  $350,052,918  
5/01/2020-5/31/2020—  $—  —  $350,052,918  
6/01/2020-6/30/2020—  $—  —  $350,052,918  
Total—  $—  —   

In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock.  According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market.  Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.  In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities.  In addition, in the first quarter 2020, Entergy withheld 151,159 shares of its common stock at $126.31 per share, 79,153 shares of its common stock at $129.55 per share, 41,167 shares of its common stock at $131.52 per share, 2,269 shares of its common stock at $124.28 per share, 1,331 shares of its common stock at $123.74 per share, 1,088 shares of its common stock at $102.93 per share, 441 shares of its common stock at $132.19 per share, 71 shares of its common stock at $86.51 per share, 31 shares of its common stock at $115.90 per share, and 19 shares of its common stock at $86.74 per share to pay income taxes due upon vesting of restricted stock granted and payout of performance units as part of its long-term incentive program.

(a)See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.
(b)Maximum amount of shares that may yet be repurchased relates only to the $500 million plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.

Item 5.  Other Information

Regulation of the Nuclear Power Industry

Following is an update to the “Regulation of the Nuclear Power Industry” section of Part I, Item 1 of the Form 10-K.

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Nuclear Waste Policy Act of 1982

Nuclear Plant Decommissioning

In March 2020 filings with the NRC were made reporting on decommissioning funding for all of Entergy subsidiaries’ nuclear plants.  Those reports showed that decommissioning funding for each of the nuclear plants met the NRC’s financial assurance requirements.

Environmental Regulation

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

Hazardous Air Pollutants

As discussed in the Form 10-K, the EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which had a compliance date, with a widely granted one-year extension, of April 2016. The required controls have been installed and are operational at all affected Entergy units. In May 2020 the EPA finalized a rule that finds that it is not “appropriate and necessary” to regulate hazardous air pollutants from electric steam generating units under the provisions of section 112(n) of the Clean Air Act. This is a reversal of the EPA’s previous finding requiring such regulation. The final appropriate and necessary finding does not revise the underlying MATS rule. Several lawsuits have been filed challenging the appropriate and necessary finding. Entergy will continue to monitor this situation.

Regional Haze

As discussed in the Form 10-K, in Louisiana, Entergy has worked with the Louisiana Department of Environmental Quality (LDEQ) and the EPA to revise the Louisiana state implementation plan (SIP) for regional haze, which had been disapproved in part in 2012. The LDEQ submitted a revised SIP in February 2017. In May 2017 the EPA proposed to approve a majority of the revisions. In September 2017 the EPA issued a proposed SIP approval for the Nelson plant, requiring an emission limitation consistent with the use of low-sulfur coal, with a compliance date of January 22, 2021. The EPA issued final approval in December 2017. The EPA approval was appealed to the U.S. Court of Appeals for the Fifth Circuit. In October 2019 the Fifth Circuit affirmed EPA’s SIP approval. A petition for rehearing filed by plaintiffs was denied by the Fifth Circuit. Plaintiffs did not petition for further review by the Supreme Court.

The second planning period (2018-2028) for the regional haze program requires states to examine sources for impacts on visibility and to prepare SIPs by 2021. Entergy has received information collection requests from Arkansas and Louisiana requesting an evaluation of technical and economic feasibility of various NOx and SO2 control technologies for Independence, Nelson 6, and Ninemile. Responses are due through the third quarter of 2020.

New and Existing Source Performance Standards for Greenhouse Gas Emissions

In July 2019 the EPA released the Affordable Clean Energy Rule (ACE), which applies only to existing coal-fired electric generating units. The ACE determines that heat rate improvements are the best system of emission reductions and lists six candidate technologies for consideration by states at each coal unit. The rule and associated rulemakings by the EPA replace the Obama administration’s Clean Power Plan rule. The ACE rule provides states discretion in determining how the best system for emission reductions applies to individual units, including through the consideration of technical feasibility and the remaining useful life of the facility. Arkansas and Louisiana have issued information collection requests to Entergy facilities to help the states collect the information needed to determine the best system of emission reductions for each facility. Entergy will respond as required and will continue to monitor litigation challenging the rule. The EPA also has proposed a revision to the
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new source performance standard on greenhouse gas emissions that primarily impacts new coal units and, therefore, should not impact Entergy.

Coal Combustion Residuals

As discussed in the Form 10-K, in late-2017, Entergy determined that certain in-ground wastewater treatment system recycle ponds at its White Bluff and Independence facilities require management under EPA regulations. In order to meet these regulations, one of two recycle ponds at White Bluff commenced closure in October 2018. Additionally, Entergy anticipates commencing closure of the remaining recycle pond at White Bluff and both recycle ponds at Independence in the fourth quarter of 2020.


Item 6.  Exhibits
4(a) -
Officer’s Certificate for Entergy Corporation relating to 2.80% Senior Notes due June 15, 2030 (4.02(a) to Form 8-K filed May 19, 2020 in 1-11299).
4(b) -
Officer’s Certificate for Entergy Corporation relating to 3.75% Senior Notes due June 15, 2050 (4.02(b) to Form 8-K filed May 19, 2020 in 1-11299).
4(c) -
Thirty-ninth Supplemental Indenture, dated as of May 1, 2020, to Entergy Mississippi Mortgage and Deed of Trust, dated as of February 1, 1988 (4.56 to Form 8-K filed May 22, 2020 in 1-31508).
*31(a) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.
*31(b) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation.
*31(c) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.
*31(d) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas.
*31(e) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
*31(f) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana.
*31(g) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
*31(h) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi.
*31(i) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
*31(j) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans.
*31(k) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
*31(l) -
Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
*31(m) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
*31(n) -
Rule 13a-14(a)/15d-14(a) Certification for System Energy.
**32(a) -
Section 1350 Certification for Entergy Corporation.
**32(b) -
Section 1350 Certification for Entergy Corporation.
**32(c) -
Section 1350 Certification for Entergy Arkansas.
**32(d) -
Section 1350 Certification for Entergy Arkansas.
**32(e) -
Section 1350 Certification for Entergy Louisiana.
**32(f) -
Section 1350 Certification for Entergy Louisiana.
**32(g) -
Section 1350 Certification for Entergy Mississippi.
**32(h) -
Section 1350 Certification for Entergy Mississippi.
194
Table of Contents
**32(i) -
**32(j) -
**32(k) -
**32(l) -
**32(m) -
**32(n) -
*101 INS -
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*101 SCH -
Inline XBRL Schema Document.
*101 PRE -
Inline XBRL Presentation Linkbase Document.
*101 LAB -
Inline XBRL Label Linkbase Document.
*101 CAL -
Inline XBRL Calculation Linkbase Document.
*101 DEF -
Inline XBRL Definition Linkbase Document.
*104 -
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibits 101).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
*Filed herewith.
**Furnished, not filed, herewith.
195
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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, LLC
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, LLC
ENTERGY NEW ORLEANS, LLC
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
/s/ Kimberly A. Fontan
Kimberly A. Fontan
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)

Date: August 5, 2020

196

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