ENTERGY ARKANSAS, LLC - Quarter Report: 2006 March (Form 10-Q)

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.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some of those factors (in addition to the risk factors in the Form 10-K as well as others described elsewhere in this report and in subsequent securities filings) include:

• resolution of pending and future rate cases and negotiations, including various performance-based rate discussions and implementation of new Texas legislation, and other regulatory proceedings, including those related to Entergy's System Agreement and Entergy's utility supply plan
• Entergy's ability to manage its operation and maintenance costs
• the performance of Entergy's generating plants, and particularly the capacity factors at its nuclear generating facilities
• prices for power generated by Entergy's unregulated generating facilities, the ability to hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Non-Utility Nuclear plants, the ability to meet credit support requirements, and the prices and availability of power and fuel Entergy must purchase for its utility customers and operations
• Entergy's ability to develop and execute on a point of view regarding prices of electricity, natural gas, and other energy-related commodities
• changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute its share repurchase program, and fund investments and acquisitions
• actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies' ratings criteria
• changes in inflation, interest rates, and foreign currency exchange rates
• Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms
• volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities
• changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, the establishment of a regional transmission organization that includes Entergy's utility service territory, and the application of market power criteria by the FERC
• changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those in the northeastern United States
• uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel storage and disposal
• resolution of pending or future applications for license extensions or modifications of nuclear generating facilities
• changes in law resulting from the new federal energy legislation, including the effects of PUHCA repeal
• changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances
• the economic climate, and particularly growth in Entergy's service territory
• variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of Hurricanes Katrina and Rita and recovery of costs associated with restoration including Entergy's ability to obtain financial assistance from governmental authorities in connection with these storms
• the outcome of the Chapter 11 bankruptcy proceeding of Entergy New Orleans, and the impact of this proceeding on other Entergy companies
• the potential effects of threatened or actual terrorism and war
• the effects of Entergy's strategies to reduce tax payments
• the effects of litigation and government investigations
• changes in accounting standards, corporate governance, and securities law requirements
• Entergy's ability to attract and retain talented management and directors

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Certain abbreviations or acronyms used in the text are defined below:

DEFINITIONS (Continued)

DEFINITIONS (Concluded)

Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.

• Utility generates, transmits, distributes, and sells electric power in a four-state service territory that includes portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.
• Non-Utility Nuclear owns and operates five nuclear power plants located in the northeastern United States and sells the electric power produced by those plants primarily to wholesale customers. This business also provides services to other nuclear power plant owners.

In addition to its two primary, reportable, operating segments, Entergy also operates the Energy Commodity Services segment and the Competitive Retail Services business. Energy Commodity Services includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business. Entergy-Koch sold its businesses in the fourth quarter of 2004 and is no longer an operating entity. In April 2006, Entergy sold the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas, and now reports this portion of the business as a discontinued operation. Entergy reports Energy Commodity Services and Competitive Retail Services as part of All Other in its segment disclosures.

See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which in August and September 2005 caused catastrophic damage to portions of the Utility's service territory in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. Following are updates to the discussion in the Form 10-K.

As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy is currently preparing applications to seek CDBG funding. In March 2006, Entergy New Orleans, Entergy Louisiana, and Entergy Gulf States-Louisiana provided justification statements to state and local officials. The statements, which will be reviewed by the Louisiana Recovery Authority, include the estimated costs of Hurricanes Katrina and Rita damage, as well as for Entergy New Orleans a lost customer base component intended to help offset the need for storm-related rate increases. The statements include justification for requests for CDBG funding of $718 million by Entergy New Orleans, $472 million by Entergy Louisiana, and $164 million by Entergy Gulf States-Louisiana.

As discussed more fully in the Form 10-K, Entergy estimates that its net insurance recoveries for the losses caused by Hurricanes Katrina and Rita will be approximately $382 million. Entergy has received $15 million thus far on its insurance claim, as it continues working towards payment of its covered losses.

See State and Local Rate Regulation below for an update on activity at Entergy Mississippi directed towards recovery of its storm restoration costs.

See the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following is an update to the discussion in the Form 10-K. In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006. In addition, the bankruptcy judge had set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.

Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock (4.75% Preferred) issued and outstanding.  If dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors.  If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group.  If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement. Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.

As discussed in the Form 10-K, as a result of the Entergy New Orleans bankruptcy proceeding, Entergy deconsolidated Entergy New Orleans retroactive to January 1, 2005. Because Entergy owns all of the common stock of Entergy New Orleans, this change will not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' net income or loss being presented as "Equity in earnings (loss) of unconsolidated equity affiliates" rather than its results being included in each individual income statement line item, as is the case for periods prior to 2005.

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

The base revenues and Attala cost deferral variance resulted primarily from increases at Entergy Gulf States due to formula rate plan increases and the inclusion of Perryville-related revenues in the Louisiana jurisdiction and due to the incremental purchased capacity recovery rider that began in December 2005 in the Texas jurisdiction and the transition to competition rider that began in March 2006 in the Texas jurisdiction. In addition, Entergy Mississippi deferred under-recovered Attala power plant costs that will be recovered through the power management rider during the second quarter of 2006. The net income effect of this cost deferral is partially offset in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.

The net wholesale revenue variance resulted from higher volume and higher margins on wholesale contracts.

The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction, partially offset by the Entergy Arkansas energy cost recovery true-up made in the first quarter of 2005.

The rate refund provisions variance resulted primarily from a provision recorded at Entergy Louisiana in the first quarter of 2005 as a result of a settlement with the LPSC staff.

The volume/weather variance resulted primarily from milder weather in the first quarter of 2006 compared to the first quarter of 2005. Billed usage decreased by 208 GWh in the residential sector. The decrease was partially offset by increased usage during the unbilled period.

Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing to the increase in revenues was increased generation in 2006 due to fewer refueling outages in 2006 and power uprates at certain plants completed in 2005 and 2006. Following are key performance measures for Non-Utility Nuclear for the first quarters of 2006 and 2005:

Other operation and maintenance expenses increased from $346 million for the first quarter of 2005 to $359 million for the first quarter of 2006 primarily due to:

• an increase of $5.2 million in storm reserves;
• an increase of $4.2 million in nuclear expenses for contract and labor costs associated with an unplanned outage and timing issues; and
• a credit against bad debt expense of $4.1 million at Entergy Arkansas in the first quarter of 2005 in accordance with a settlement agreement with the APSC.

Other income increased from $31 million for the first quarter of 2005 to $43 million for the first quarter of 2006 primarily due to an increase in interest and dividend income due to both increased interest income recorded on the deferred fuel balance and additional proceeds received from the radwaste settlement discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends - Central States Compact Claim" in the Form 10-K.

Other income decreased primarily due to miscellaneous income of $26 million in 2005 resulting from a reduction in the decommissioning liability for a plant in conjunction with a new decommissioning cost study. The decrease was partially offset by an increase of $3.6 million in interest income.

Interest charges increased for Parent & Other Business Segments primarily due to additional borrowing to fund the significant storm restoration costs associated with Hurricane Katrina and Hurricane Rita.

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.

See the Form 10-K for a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. Following is an update to that discussion.

As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of March 31, 2006, Entergy New Orleans had $80 million of outstanding borrowings under the DIP credit facility. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility, primarily using its portion of the income tax refund that resulted from application of the Gulf Opportunity Zone Act, which is discussed below in "Operating Activities." As of May 9, 2006, $15 million in borrowings are outstanding on the DIP credit facility.

Entergy's capitalization is balanced between equity and debt, as shown in the following table.

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy 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's financial condition.

As discussed in the Form 10-K, Entergy Corporation has in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility expires in May 2010 and the three-year facility expires in December 2008. Entergy can issue letters of credit against the total borrowing capacity of both credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities as of March 31, 2006:

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi, each have credit facilities available as of March 31, 2006 as follows:

In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' renewed facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.

In addition, Entergy Louisiana and Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, currently have 364-day credit facilities, expiring in May 2006, in the amount of $15 million. The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities cannot exceed $15 million at any one time. Because Entergy New Orleans' facility is fully drawn, no capacity is available on Entergy Louisiana's facility. Entergy Louisiana does not intend to renew its facility when it expires.

See Note 4 to the consolidated financial statements for additional discussion of Entergy's credit facilities.

See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," which sets forth the amounts of planned construction and other capital investments by operating segment for 2006 through 2008.

As shown in Entergy's Statements of Cash Flows, cash flows for the three months ended March 31, 2006 and 2005 were as follows:

Entergy's cash flow provided by operating activities increased by $515 million for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 primarily due to receipt of a $344 million income tax refund, increased collection of deferred fuel costs, and increased net revenue at Non-Utility Nuclear, partially offset by storm restoration spending. Following are cash flows from operating activities by segment:

• Utility provided $483 million in cash from operating activities in 2006 compared to providing $383 million in 2005.
• Non-Utility Nuclear provided $213 million in cash from operating activities in 2006 compared to providing $131 million in 2005.
• Parent & Other provided $338 million in cash from operating activities in 2006 compared to using $12 million in 2005.

The income tax refund was received by Entergy Corporation (including $71 million attributable to Entergy New Orleans) as a result of net operating loss carry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, $273 million of the refund was distributed to the Utility in April 2006, with most of the remainder distributed to Non-Utility Nuclear.

Net cash used in investing activities increased by $300 million for the three months ended March 31, 2006 compared to the three months ended March 31, 2005 primarily due to the following activity:

• Construction expenditures were $392 million higher in 2006 than in 2005, primarily due to an increase of $426 million in the Utility business because of storm restoration expenditures.
• The purchase of the 480 MW Attala power plant by Entergy Mississippi in January 2006.

The increase was partially offset because Entergy's investment in other temporary investments increased by $289 million during the first quarter 2005. Entergy had no activity in other temporary investments during the first quarter 2006.

Financing activities provided $16 million of cash for the three months ended March 31, 2006 compared to using $73 million of cash for the three months ended March 31, 2005 primarily due to the following activity:

• Net issuances of long-term debt by the Utility segment provided $73 million in the first quarter 2006 compared to retirements of long-term debt net of issuances using $39 million in the first quarter 2005. See Note 4 to the consolidated financial statements for the details of long-term debt activity in the first quarter of 2006.
• Entergy Corporation repurchased $383 million of its common stock in the first quarter 2005.
• In the first quarter 2006, Entergy Corporation increased the net borrowings on its credit facilities by $20 million, compared to increasing the net borrowings on its credit facilities by $408 million in the first quarter 2005. See Note 4 to the consolidated financial statements for a description of the Entergy Corporation credit facilities.

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Significant Factors and Known Trends" in the Form 10-K for discussions of rate regulation, federal regulation, market and credit risks, utility restructuring, and nuclear matters. Following are updates to the information provided in the Form 10-K.

On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation does not identify new issues in addition to the four issues listed in Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that orders Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.

Entergy Arkansas has filed for rehearing of the APSC's orders, asking that the energy cost rate filed in March 2006 be implemented in May 2006 subject to refund, asserting that the APSC did not follow appropriate procedures in suspending the operation of the energy cost recovery rider, and asking the APSC to rescind its show cause order. The APSC Staff supported Entergy Arkansas' proposal that the updated cost rate be implemented subject to refund. On May 8, 2006 the APSC denied Entergy Arkansas' requests for rehearing. A procedural schedule in the energy cost recovery rider proceedings has not been set.

In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $744 thousand to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.8 million revenue increase was in place.

In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing shows that an increase of $3.1 million in electric revenues is warranted.  The MPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the filing.  Provisions in the formula rate plan afford more time for Staff review, and it is anticipated that the review will be complete during the second quarter 2006.  A formula rate plan rate adjustment, if any, could be implemented as soon as July 2006.

As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005.  In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as securitization).  Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding.  The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization.  A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.

In April 2006, the City Council agreed to delay Entergy New Orleans' 2005 formula rate plan filing to July 2006 from the originally scheduled May 1, 2006 deadline.

See the Form 10-K for a discussion of the System Agreement litigation proceedings at the FERC. In April 2006, Entergy filed with the FERC its compliance filing to implement the provisions of the FERC's decision. The filing amends the System Agreement to provide for the calculation of production costs, average production costs, and payments among the domestic utility companies to the extent required to maintain rough production cost equalization pursuant to the FERC's decision, and makes clear that all payments/receipts will be classified as energy costs. The payments would be based on calendar year 2006 production costs, with any payments between the domestic utility companies to be made in twelve equal monthly installments, commencing in June 2007.

Independent Coordinator of Transmission (ICT)

The proposed modifications include, among other things: (1) Entergy must file with the FERC the criteria used to grant and deny transmission service, including calculating available flowgate capacity; (2) the FERC extended the initial term of the ICT from two years to four years; and Entergy is precluded from terminating the ICT prior to the end of the four year period; (3) the establishment of a transmission users group that will provide input directly to the ICT on the effectiveness of the ICT Proposal and also will propose to the FERC an appropriate means by which they could be given access to inputs in the process and models under the direction of the ICT; (4) With regard to any dispute between the ICT and Entergy concerning transmission service requests, transmission planning, and interconnection requests, the ICT's position will prevail during the pendency of the dispute resolution; (5) The WPP must be operational within approximately 14 months of the FERC order or the FERC may reevaluate all approvals to proceed with the ICT.

Power Generation

As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy's Non-Utility Nuclear business and Energy Commodity Services business, unless otherwise contracted, is subject to the fluctuation of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business' output that is sold forward as of March 31, 2006 under physical or financial contracts (2006 represents the remaining three quarters of the year):

A sale of power on a unit contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy's outstanding guarantees of availability provide for dollar limits on Entergy's maximum liability under such guarantees. The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy the power produced by the plant through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly if power market prices drop below PPA prices.

See the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA involving energy sales from the Fitzpatrick and Indian Point 3 power plants.

Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary will be required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility Nuclear sells power. The primary form of collateral to satisfy these requirements would be an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At March 31, 2006, based on power prices at that time, Entergy had in place as collateral $1,527 million of Entergy Corporation guarantees for wholesale transactions, $108 million of which support letters of credit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount up to $400 million if gas prices increase $1 per MMBtu in both the short- and long-term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, Entergy will be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.

In addition to selling the power produced by its plants, the Non-Utility Nuclear business sells installed capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of the amount of the Non-Utility Nuclear business' installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business' planned generation output and installed capacity that is currently sold forward as of March 31, 2006 (2006 represents the remaining three quarters of the year):

Following is a summary of the amount of Energy Commodity Services' output and installed capacity that is sold forward under physical or financial contracts at fixed prices as of March 31, 2006 (2006 represents the remaining three quarters of the year):

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, qualified pension and other postretirement benefits, and other contingencies. Following is an update to that discussion.

Effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.