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ENTERGY CORP /DE/ - Quarter Report: 2022 September (Form 10-Q)

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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 September 30, 2022
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)
2107 Research Forest Drive
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
__________________________________________________________________________________________


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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, 4.875% Series due September 2066
EAI
New York Stock Exchange
 
 
 
Entergy Louisiana, LLC
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.
5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share)
ETI/PR
New York Stock Exchange



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Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes ☑ 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 October 31, 2022
Entergy Corporation($0.01 par value)203,483,660

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, 2021 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022, filed by the individual registrants with the SEC, and should be read in conjunction therewith.


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TABLE OF CONTENTS
Page Number
Part I. Financial Information
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, LLC and Subsidiaries
Entergy Louisiana, LLC and Subsidiaries
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Page Number
Entergy Mississippi, LLC and Subsidiaries
Entergy New Orleans, LLC and Subsidiaries
Entergy Texas, Inc. and Subsidiaries
System Energy Resources, Inc.
Statements of Operations
Part II. Other Information
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FORWARD-LOOKING INFORMATION

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

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

•resolution of pending and future rate cases and related litigation, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs, as well as delays in cost recovery resulting from these proceedings;
•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 owned or operated nuclear generating facilities, nuclear materials and fuel, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and 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, changing economic conditions, and emerging operating and industry issues, and the risks related to recovery of these costs and capital expenditures from Entergy’s customers (especially in an increasing cost environment);
•the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating facilities;
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FORWARD-LOOKING INFORMATION (Continued)

•Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
•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 and related laws, regulations, and other governmental actions;
•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;
•effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land and wetland loss;
•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 and a utility industry mutual insurance company;
•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;
•the effects of supply chain disruptions, including those driven by the COVID-19 global pandemic or by trade-related governmental actions, on Entergy’s ability to complete its capital projects in a timely and cost-effective manner;
•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 events and circumstances that could influence economic conditions in those areas, including power prices and inflation, and the risk that anticipated load growth may not materialize;
•changes to federal income tax laws and regulations, including the Inflation Reduction Act of 2022, and the continued impact of the Tax Cuts and Jobs Act of 2017 and the CARES Act of 2020, and any related intended or 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 and cost of capital and Entergy’s ability to refinance existing securities and fund investments and acquisitions;
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FORWARD-LOOKING INFORMATION (Concluded)

•actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
•changes in inflation and interest rates;
•the effects of litigation and government investigations or proceedings;
•changes in technology, including (i) Entergy’s ability to implement new or emerging technologies, (ii) the impact of changes relating to new, developing, or alternative sources of generation such as distributed energy and energy storage, renewable energy, energy efficiency, demand side management and other measures that reduce load and government policies incentivizing development of the foregoing, and (iii) competition from other companies offering products and services to Entergy’s customers based on new or emerging technologies or alternative sources of generation;
•Entergy’s ability to effectively formulate and implement plans to reduce its carbon emission rate and aggregate carbon emissions, including its commitment to achieve net-zero carbon emissions by 2050, and the potential impact on its business of attempting to achieve such objectives;
•the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
•the effects of a global or geopolitical event or pandemic, such as the COVID-19 global pandemic and the military activities between Russia and Ukraine, 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 best practices;
•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 effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments; and
•Entergy and its subsidiaries’ ability to successfully execute on their business strategies, including their ability to complete strategic transactions that they may undertake.


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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. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.
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, 2021 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
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DEFINITIONS (Continued)
Abbreviation or AcronymTerm
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
HLBVHypothetical liquidation at book value
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2020 and was sold in May 2021
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2021 and was sold in May 2021
IRS
Internal Revenue Service
ISO
Independent System Operator
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
LURC
Louisiana Utilities Restoration Corporation
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), which equals one thousand kilowatts
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
NRC
Nuclear Regulatory Commission
Palisades
Palisades Nuclear Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in May 2022 and was sold in June 2022
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
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.
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DEFINITIONS (Concluded)
Abbreviation or AcronymTerm
System Energy
System Energy Resources, Inc.
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
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ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

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

•The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.
•The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of the shutdown and sale of each of the Entergy Wholesale Commodities nuclear power plants. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.

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

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

Third Quarter 2022 Compared to Third Quarter 2021

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the third quarter 2022 to the third quarter 2021 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)
2021 Net Income (Loss) Attributable to Entergy Corporation$570,366 $25,517 ($64,880)$531,003 
Operating revenues965,376 (100,266)(27)865,083 
Fuel, fuel-related expenses, and gas purchased for resale623,649 5,380 (3)629,026 
Purchased power101,408 2,323 3 103,734 
Other regulatory charges (credits) - net(111,607)— — (111,607)
Other operation and maintenance132,029 (40,994)1,515 92,550 
Asset write-offs, impairments, and related charges (credits)— (4)— (4)
Taxes other than income taxes8,938 (1,257)28 7,709 
Depreciation and amortization39,246 (7,298)(405)31,543 
Other income (deductions)(35,648)(2,819)(24,279)(62,746)
Interest expense14,589 (1,042)4,413 17,960 
Other expenses10,097 (24,800)— (14,703)
Income taxes18,616 9,416 (2,202)25,830 
Preferred dividend requirements of subsidiaries and noncontrolling interest(9,239)— (48)(9,287)
2022 Net Income (Loss) Attributable to Entergy Corporation$672,368 ($19,292)($92,487)$560,589 

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



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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 third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues$3,191 
Fuel, rider, and other revenues that do not significantly affect net income811 
Retail electric price100 
Volume/weather92 
Retail one-time bill credit(37)
2022 operating revenues$4,157 

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 retail electric price variance is primarily due to:

•an increase in Entergy Arkansas’s formula rate plan rates effective January 2022;
•increases in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021 and September 2022;
•increases in Entergy Mississippi’s formula rate plan rates effective April 2022 and August 2022;
•increases in Entergy New Orleans’s formula rate plan rates effective November 2021 and September 2022; and
•an increase in the distribution cost recovery factor rider effective January 2022 and an increase in the transmission cost recovery factor rider effective March 2022, each at Entergy Texas.

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

The volume/weather variance is primarily due to an increase of 2,260 GWh, or 7%, in electricity usage across all customer classes, including the effect of more favorable weather on residential and commercial sales and the effects of Hurricane Ida in third quarter 2021. The increase in industrial usage was due to an increase in demand from expansion projects, primarily in the chemicals industry, an increase in demand from small industrial customers, and an increase in demand from cogeneration customers. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021.

The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided to Entergy Mississippi’s retail customers, effective during the September 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements herein for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.


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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


Total electric energy sales for Utility for the three months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential11,272 10,545 7 
Commercial8,223 7,649 8 
Industrial13,926 13,021 7 
Governmental702 648 8 
Total retail34,123 31,863 7 
Sales for resale4,809 4,350 11 
Total38,932 36,213 8 

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

Entergy Wholesale Commodities

Operating revenues for Entergy Wholesale Commodities decreased from $162 million for the third quarter 2021 to $62 million for the third quarter 2022 primarily due to the shutdown of Palisades in May 2022.

Following are key performance measures for Entergy Wholesale Commodities for the third quarters 2022 and 2021:
20222021
Owned capacity (MW) (a)3941,205
GWh billed5772,166
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor—%97%
GWh billed—1,702
Average energy price ($/MWh)$—$69.35
Average capacity price ($/kW-month)$—$0.15

(a)The reduction in owned capacity is due to the shutdown of the 811 MW Palisades plant in May 2022. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $644 million for the third quarter 2021 to $776 million for the third quarter 2022 primarily due to:

•an increase of $36 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•an increase of $30 million in nuclear generation expenses primarily due to a higher scope of work performed and higher outage costs in 2022 as compared to prior year and higher nuclear labor costs;
•an increase of $20 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•a gain of $15 million, recorded in the third quarter 2021, on the sale of a pipeline; and
•an increase of $13 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic.

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

Other regulatory charges (credits) - net includes:

•a regulatory credit of $37 million, recorded in the third quarter 2022 at Entergy Mississippi, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill cycle. See Note 2 to the financial statements herein for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds; and
•regulatory credits of $23 million, recorded in the third quarter 2022 at Entergy Mississippi, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2022 formula rate plan filing.

In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.

Other income decreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in 2021. The decrease was partially offset by an increase of $24 million in intercompany dividend income. The increase in intercompany dividend income results from the Entergy Louisiana storm trust’s investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The intercompany dividend income on the affiliate preferred membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary. See Note 2 to the financial statements herein for discussion of the securitization.

Interest expense increased primarily due to:

•the issuance by Entergy Arkansas of $200 million of 4.20% Series mortgage bonds in March 2022;
•the issuance by Entergy Louisiana of $1 billion of 0.95% Series mortgage bonds in October 2021;
•the issuance by Entergy Louisiana of $500 million of 4.75% Series mortgage bonds in August 2022;
•the issuance by Entergy Mississippi of $200 million of 2.55% Series mortgage bonds in November 2021;
•the $150 million unsecured term loan proceeds received by Entergy Mississippi in June 2022;
•borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility;
•the issuances by Entergy New Orleans of $90 million of 4.19% Series mortgage bonds and $70 million of 4.51% Series mortgage bonds, each in November 2021; and
•the issuance by Entergy Texas of $325 million of 5.00% Series mortgage bonds in August 2022.


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Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $51 million for the third quarter 2021 to $10 million for the third quarter 2022 primarily due to a decrease of $39 million resulting from the absence of expenses from Palisades, after it was shut down in May 2022, and a decrease of $3 million in severance and retention expenses. 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 plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses.

Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense from Palisades, after it was shut down in May 2022.

Other expenses decreased primarily due to the absence of decommissioning expense and nuclear refueling outage expense from Palisades, after it was shut down in May 2022 and sold in June 2022. See Note 14 to the financial statements herein for discussion of the sale of Palisades.

Parent and Other

Other income decreased primarily due to the elimination for consolidation purposes of intercompany dividend income, as discussed above.

Income Taxes

The effective income tax rate was 24.9% for the third quarter 2022. The difference in the effective income tax rate for the third quarter 2022 versus the federal statutory rate of 21% was primarily due to state income taxes and a provision recorded for uncertain tax positions, partially offset by the amortization of excess accumulated deferred income taxes 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 22.8% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by the amortization of excess accumulated deferred income taxes 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.


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Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021 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)
2021 Net Income (Loss) Attributable to Entergy Corporation$1,252,835 ($212,101)($181,140)$859,594 
Operating revenues1,729,800 (258,430)(73)1,471,297 
Fuel, fuel-related expenses, and gas purchased for resale803,142 17,533 3 820,678 
Purchased power305,790 6,093 (3)311,880 
Other regulatory charges (credits) - net643,891 — — 643,891 
Other operation and maintenance192,684 (139,562)8,054 61,176 
Asset write-offs, impairments, and related charges (credits)— (508,690)— (508,690)
Taxes other than income taxes48,849 (1,427)66 47,488 
Depreciation and amortization103,258 (22,689)(1,359)79,210 
Other income (deductions)(87,226)(109,424)(36,762)(233,412)
Interest expense40,651 (6,357)18,803 53,097 
Other expenses11,199 (93,355)— (82,156)
Income taxes(408,823)93,639 342 (314,842)
Preferred dividend requirements of subsidiaries and noncontrolling interest(10,801)— (144)(10,945)
2022 Net Income (Loss) Attributable to Entergy Corporation$1,165,569 $74,860 ($243,737)$996,692 

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

Results of operations for the nine months ended September 30, 2022 include: 1) a regulatory charge of $551 million ($413 million net-of-tax), recorded at Utility, as a result of System Energy’s partial settlement agreement and offer of settlement related to pending proceedings before the FERC; 2) a $283 million reduction in income tax expense as a result of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization financing, which also resulted in a $224 million ($165 million net-of-tax) regulatory charge, recorded at Utility, to reflect Entergy Louisiana’s obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding; and 3) a gain of $166 million ($130 million net-of-tax) as a result of the sale of the Palisades plant in June 2022. See Note 2 to the financial statements herein for further discussion of the System Energy partial settlement agreement and offer of settlement. See Notes 2 and 10 to the financial statements herein for further discussion of the securitization. See Note 14 to the financial statements herein for discussion of the sale of the Palisades plant.

Results of operations for the nine months ended September 30, 2021 include a charge of $340 million ($268 million net-of-tax) as a result of the sale of the Indian Point Energy Center in May 2021. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center.


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Operating Revenues

Utility

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
Amount
(In Millions)
2021 operating revenues$8,461 
Fuel, rider, and other revenues that do not significantly affect net income1,220 
Retail electric price249 
Volume/weather218 
Storm restoration carrying costs59 
Return of unprotected excess accumulated deferred income taxes to customers21 
Retail one-time bill credit(37)
2022 operating revenues$10,191 

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 retail electric price variance is primarily due to:

•increases in Entergy Arkansas’s formula rate plan rates effective May 2021 and January 2022;
•increases in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021 and September 2022;
•increases in Entergy Mississippi’s formula rate plan rates effective April 2021, July 2021, April 2022, and August 2022;
•an increase in Entergy New Orleans’s formula rate plan rates effective November 2021; and
•increases in the transmission cost recovery factor rider effective March 2021 and March 2022, an increase in the distribution cost recovery factor rider effective January 2022, and the implementation of the generation cost recovery rider, which includes the first-year revenue requirement for the Montgomery County Power Station, effective in late January 2021, each at Entergy Texas.

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

The volume/weather variance is primarily due to an increase of 5,317 GWh, or 6%, in electricity usage across all customer classes, including the effect of more favorable weather on residential and commercial sales. The increase in industrial usage was due to an increase in demand from expansion projects, primarily in the chemicals, transportation, and petroleum refining industries, an increase in demand from cogeneration customers, an increase in demand from existing customers, primarily in the chemicals, pulp and paper, and transportation industries as a result of prior year temporary plant shutdowns, partially offset by decreased demand in the petroleum refining industry as a result of a permanent plant shutdown due to Hurricane Ida, and an increase in demand from small industrial customers. The increase in weather-adjusted commercial usage was primarily due to an increase in customers and the effect of the COVID-19 pandemic on businesses in 2021. The increased usage from these

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industrial and commercial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.

Storm restoration carrying costs, representing the equity component of storm restoration carrying costs, includes $37 million at Entergy Louisiana and $22 million at Entergy Texas, recorded in second quarter 2022, recognized as part of the Entergy Louisiana storm cost securitization in May 2022 and the Entergy Texas storm cost securitization in April 2022. See Note 2 to the financial statements herein for discussion of storm cost securitizations.

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 nine months ended September 30, 2022, $50 million was returned to customers through reductions in operating revenues as compared to $71 million in the nine months ended September 30, 2021. There is no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided to Entergy Mississippi’s retail customers, effective during the September 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.

Total electric energy sales for Utility for the nine months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential29,218 27,695 5 
Commercial21,697 20,490 6 
Industrial39,903 37,399 7 
Governmental1,928 1,845 4 
Total retail92,746 87,429 6 
Sales for resale12,371 13,365 (7)
Total105,117 100,794 4 

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

Entergy Wholesale Commodities

Operating revenues for Entergy Wholesale Commodities decreased from $559 million for the nine months ended September 30, 2021 to $301 million for the nine months ended September 30, 2022 primarily due to the shutdown of Indian Point 3 in April 2021 and Palisades in May 2022.


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Following are key performance measures for Entergy Wholesale Commodities for the nine months ended September 30, 2022 and 2021:
20222021
Owned capacity (MW) (a)3941,205
GWh billed4,1729,265
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor93%97%
GWh billed2,7418,046
Average energy price ($/MWh)$48.99$54.65
Average capacity price ($/kW-month)$0.15$0.26

(a)The reduction in owned capacity is due to the shutdown of the 811 MW Palisades plant in May 2022. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $1,937 million for the nine months ended September 30, 2021 to $2,130 million for the nine months ended September 30, 2022 primarily due to:

•an increase of $54 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;
•an increase of $37 million in nuclear generation expenses primarily due to a higher scope of work performed and higher nuclear labor costs in 2022, partially offset by spending in 2021 on sanitation and social distancing protocols as a result of the COVID-19 pandemic;
•an increase of $21 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•an increase of $16 million in customer service center support costs primarily due to higher contract costs;
•a gain of $15 million, recorded in the third quarter 2021, on the sale of a pipeline;
•an increase of $14 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic; and
•an increase of $11 million in energy efficiency expenses due to the timing of recovery from customers.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments, increases in franchise taxes, and increases in employment taxes.

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

Other regulatory charges (credits) - net includes:

•the reversal in first quarter 2021 of the remaining $39 million regulatory liability for Entergy Arkansas’s 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2020 formula rate plan filing;
•a regulatory charge of $224 million, recorded by Entergy Louisiana in second quarter 2022, to reflect its obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order

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issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the storm cost securitization;
•a regulatory credit of $37 million, recorded in the third quarter 2022 at Entergy Mississippi, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill cycle. See Note 2 to the financial statements herein for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds;
•regulatory credits of $20 million, recorded in the second quarter 2021 at Entergy Mississippi, to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2021 formula rate plan filing;
•regulatory credits of $23 million, recorded in the third quarter 2022 at Entergy Mississippi, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2022 formula rate plan filing; and
•a regulatory charge of $551 million, recorded by System Energy in second quarter 2022, to reflect the effects of the partial settlement agreement and offer of settlement related to pending proceedings before the FERC. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and offer of settlement.

In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.

Other income decreased primarily due to:

•changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in 2022 and 2021; and
•a $32 million charge at Entergy Louisiana for the LURC’s 1% beneficial interest in the storm trust established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization.

This decrease was partially offset by:

•an increase of $35 million in intercompany dividend income. The increase in intercompany dividend income results from the Entergy Louisiana storm trust’s investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The intercompany dividend income on the affiliate preferred membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary; and
•an increase of $12 million due to the recognition of storm restoration carrying costs, primarily related to Hurricane Ida.

See Note 2 to the financial statements herein for discussion of the securitization.

Interest expense increased primarily due to:

•the issuance by Entergy Arkansas of $400 million of 3.35% Series mortgage bonds in March 2021;
•the issuance by Entergy Arkansas of $200 million of 4.20% Series mortgage bonds in March 2022;
•the issuances by Entergy Louisiana of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021;

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•the issuance by Entergy Louisiana of $1 billion of 0.95% Series mortgage bonds in October 2021;
•the $1.2 billion unsecured term loan proceeds received by Entergy Louisiana in January 2022. The term loan was repaid in June 2022;
•the issuance by Entergy Louisiana of $500 million of 4.75% Series mortgage bonds in August 2022;
•the issuance by Entergy Mississippi of $200 million of 3.50% Series mortgage bonds in March 2021;
•the issuance by Entergy Mississippi of $200 million of 2.55% Series mortgage bonds in November 2021; and
•the issuances by Entergy New Orleans of $90 million of 4.19% Series mortgage bonds and $70 million of 4.51% Series mortgage bonds, each in November 2021.

The increase was partially offset by the repayment by Entergy Arkansas of $350 million of 3.75% Series mortgage bonds in February 2021 and the repayment by Entergy Louisiana of $200 million of 4.8% Series mortgage bonds in May 2021.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $233 million for the nine months ended September 30, 2021 to $94 million for the nine months ended September 30, 2022 primarily due to a decrease of $127 million resulting from the absence of expenses from Indian Point 3, after it was shut down in April 2021, and Palisades, after it was shut down in May 2022, and a decrease of $8 million in severance and retention expenses. Severance and retention expenses were incurred in 2022 and 2021 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 plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses.

Asset write-offs, impairments, and related charges (credits) for the nine months ended September 30, 2022 include a gain of $166 million ($130 million net-of-tax) as a result of the sale of the Palisades plant in June 2022. Asset write-offs, impairments, and related charges (credits) for the nine months ended September 30, 2021 include a charge of $340 million ($268 million net-of-tax) as a result of the sale of the Indian Point Energy Center in May 2021. See Note 14 to the financial statements herein for discussion of the sale of the Palisades plant and Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. 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 plants in the Entergy Wholesale Commodities merchant nuclear fleet.

Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense from Indian Point 3, after it was shut down in April 2021, and Palisades, after it was shut down in May 2022. The decrease was partially offset by the effect of recording in 2021 a final judgment to resolve claims in the Palisades damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded included $9 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.

Other income decreased primarily due to the absence of earnings from the nuclear decommissioning trust funds that were transferred in the sale of the Indian Point Energy Center in May 2021 and the sale of Palisades in June 2022, partially offset by lower non-service pension costs. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. See Note 14 to the financial statements herein for discussion of the sale of Palisades. See Note 6 to the financial statements herein for a discussion of pension and other postretirement benefits costs.


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Other expenses decreased primarily due to the absence of decommissioning expense from Indian Point 2 and Indian Point 3, after the sale of the Indian Point Energy Center in May 2021, and from Palisades, after the sale of Palisades in June 2022. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. See Note 14 to the financial statements herein for discussion of the sale of Palisades.

Parent and Other

Other income decreased primarily due to the elimination for consolidation purposes of intercompany dividend income, as discussed above.

Income Taxes

The effective income tax rate was (12.2%) for the nine months ended September 30, 2022. The difference in the effective income tax rate for the nine months ended September 30, 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, 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 of and regulatory activity regarding the Tax Cuts and Jobs Act. See Notes 2 and 10 to the financial statements herein for discussion of the Entergy Louisiana securitization.

The effective income tax rate was 19.1% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, a reduction of a valuation allowance, 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 of and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for discussion of the valuation allowance reduction.

Income Tax Legislation

The Inflation Reduction Act of 2022, signed into law on August 16, 2022, significantly expanded federal tax incentives for clean energy production, including the extension of production tax credits to solar projects and certain qualified nuclear power plants. Additionally, the Inflation Reduction Act of 2022 enacted a 1% excise tax on the buyback of public company stock and a new corporate alternative minimum tax (CAMT). Effective for tax years beginning after December 31, 2022, the CAMT imposes a 15% tax on the Adjusted Financial Statement Income (AFSI) on each corporation in a group of corporations that averages greater than $1 billion in AFSI over a three-year period. Taxpayers subject to the CAMT regime must pay the greater of 15% of AFSI or their regular federal tax liability. Entergy and the Registrant Subsidiaries are closely monitoring any potential impact associated with the expansion of federal tax incentives, the 1% excise tax, and CAMT. Based on current information and forecasts, Entergy and the Registrant Subsidiaries may be subject to the CAMT beginning in 2026. The United States Treasury Department is expected to issue guidance beginning later this year that will further clarify how the tax credit provisions and CAMT provisions will be interpreted and applied. This guidance will determine the amount of tax credits and incremental cash tax payments Entergy expects in the future as a result of the legislation. Prior to receiving this guidance, Entergy cannot adequately assess the expected future effects on its results of operations, financial position and cash flows. There are no expected effects on the financial statements as of and for the year ended December 31, 2022.


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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 plants in the Entergy Wholesale Commodities merchant nuclear fleet.  Following are updates to that discussion.

In April 2022, Entergy and Nebraska Public Power District signed an agreement to mutually terminate the management support services contract, under which Entergy provided plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska, effective July 31, 2022.

In October 2022, Entergy sold its 50% membership interest in RS Cogen LLC, an unconsolidated joint venture which owns the RS Cogen plant, to a subsidiary of the other 50% equity partner. Entergy sold its 50% membership interest in RS Cogen, LLC for approximately $5 million with no resulting income statement effect.

Shutdown and Sale of Palisades

As discussed in the Form 10-K, in July 2018, Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site, for $1,000 (subject to adjustment for net liabilities and other amounts) to a Holtec subsidiary. Palisades was shut down in May 2022 and defueled in June 2022. The transaction closed in June 2022. The sale included the transfer of the nuclear decommissioning trust and the asset retirement obligation for spent fuel management and plant decommissioning. The transaction resulted in a gain of $166 million ($130 million net-of-tax) in the second quarter of 2022. See Note 14 to the financial statements herein for further discussion of the sale of the Palisades plant. In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. In February 2021 several parties, including the Michigan Attorney General, filed with the NRC petitions to intervene and requests for hearing challenging the license transfer application. The NRC issued an order approving the application in December 2021, subject to the NRC’s authority to condition, revise, or rescind the approval order based on the resolution of pending requests for hearing. These petitions and requests for hearing remained pending with the NRC at the time of the closing of the Palisades transaction in June 2022. In July 2022 the NRC issued an order granting the Michigan Attorney General’s petition hearing request.

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.


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Capital Structure and Resources

Entergy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy as of September 30, 2022 is primarily due to an increase in equity resulting from net income, partially offset by the net issuance of debt in 2022.
September 30,
2022		December 31,
2021
Debt to capital69.0 %69.5 %
Effect of excluding securitization bonds(0.2 %)(0.1 %)
Debt to capital, excluding securitization bonds (a)68.8 %69.4 %
Effect of subtracting cash(0.8 %)(0.3 %)
Net debt to net capital, excluding securitization bonds (a)68.0 %69.1 %

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

As of September 30, 2022, 20% of the debt outstanding is at the parent company, Entergy Corporation, 79.5% is at the Utility, and 0.5% is at Entergy Wholesale Commodities. Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and commercial paper, finance lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents.  Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in June 2027.  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 nine months ended September 30, 2022 was 2.39% on the drawn portion of the facility. As of September 30, 2022, amounts outstanding and capacity available under the $3.5 billion credit facility are:

Capacity BorrowingsLetters
of Credit		Capacity
Available
(In Millions)
$3,500$150$3$3,347
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.  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 Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit facility’s maturity date may occur.  See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Utility operating companies’ credit facilities.

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Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of September 30, 2022, Entergy Corporation had $1.387 billion of commercial paper outstanding. The weighted-average interest rate for the nine months ended September 30, 2022 was 1.52%.

Entergy Louisiana had $291 million and Entergy Mississippi had $33 million in their storm reserve escrow accounts at September 30, 2022.

Equity Issuances and Equity Distribution Program

As discussed in the Form 10-K, in January 2021, Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may also enter into forward sale agreements for the sale of its common stock. Initially, the aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement could not exceed an aggregate gross sales price of $1 billion. In May 2022, Entergy increased the aggregate gross sales price authorized under the at the market equity distribution program by $1 billion. Through September 30, 2022, Entergy has utilized the equity distribution program either to sell or to enter into forward sale agreements with respect to shares of common stock with an aggregate gross sales price of approximately $1 billion, of which approximately $870 million of aggregate gross sales price is the subject of forward sale agreements that have not been settled and is subject to adjustment pursuant to the forward sale agreements. Entergy currently expects to settle the forward sales agreements by December 31, 2022. In addition to settlement of existing forward sale agreements, Entergy Corporation currently expects to issue approximately $130 million of equity through 2024. See Note 3 to the financial statements herein for discussion of the forward sale agreements and common stock issuances and sales under the equity distribution program.

Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida (Entergy Louisiana)

As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages.

In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a supplemental filing updating the total restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by these storms were estimated to be approximately $2.06 billion, including approximately $1.68 billion in capital costs and approximately $380 million in non-capital costs. Including carrying costs through January 2022, Entergy Louisiana sought an LPSC determination that $2.11 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally, Entergy Louisiana requested that the LPSC determine that re-establishment of a storm escrow account to the previously authorized amount of $290 million was appropriate. In July 2021, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.


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In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy Louisiana sought approval for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.

After filing of testimony by the LPSC staff and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, the parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in February 2022. The settlement agreement contained the following key terms: $2.1 billion of restoration costs from Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and were eligible for recovery; carrying costs of $51 million were recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana was authorized to finance $3.186 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. The LPSC issued an order approving the settlement in March 2022. As a result of the financing order, Entergy Louisiana reclassified $1.942 billion from utility plant to other regulatory assets.

In May 2022 the securitization financing closed, resulting in the issuance of $3.194 billion principal amount of bonds by Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana legislature approved in 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust I (the storm trust).

Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust to purchase 31,635,718.7221 Class A preferred, non-voting membership interest units (the preferred interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2022 on the preferred interests issued to the storm trust. These annual dividends received by the storm trust will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust. Specifically, 1% of the annual dividends received by the storm trust will be distributed to the LURC, for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred interests have a stated annual cumulative cash dividend rate of 7% and a liquidation price of $100 per unit. The terms of the preferred interests include certain financial covenants to which Entergy Finance Company is subject.

Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of June 2022 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust is required to liquidate Entergy Finance Company preferred interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.


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From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company distributed $1.4 billion to its parent, Entergy Holdings Company, LLC. Subsequently, Entergy Holdings Company liquidated, distributing the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and 2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana had acquired these preferred membership interests with proceeds from previous securitizations of storm restoration costs. Entergy Finance Company loaned the remaining $1.7 billion from the preferred membership interests proceeds to Entergy which used the cash to redeem $650 million of 4.00% Series senior notes due July 2022 and indirectly contributed $1 billion to Entergy Louisiana as a capital contribution.

Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane Ida escrow account and subsequently withdrew the $1 billion from the escrow account. With a portion of the $1 billion withdrawn from the escrow account and the $1.4 billion from the Entergy Holdings Company liquidation, Entergy Louisiana deposited $290 million in a restricted escrow account as a storm damage reserve for future storms, used $1.2 billion to repay its unsecured term loan due June 2023, and used $435 million to redeem a portion of its 0.62% Series mortgage bonds due November 2023.

As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a reduction of income tax expense of approximately $290 million by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was partially offset by other tax charges resulting in a net reduction of income tax expense of $283 million. In recognition of obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded a $224 million ($165 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.

As discussed in Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In second quarter 2022, Entergy Louisiana recorded a charge of $31.6 million in other income to reflect the LURC’s beneficial interest in the trust.

In April 2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimated to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs of $57 million through December 2022, Entergy Louisiana is seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, is eligible for recovery from customers. As part of this filing, Entergy Louisiana also is seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount is exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana is requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, is eligible for recovery from customers. As discussed above, in March 2022 the LPSC approved financing of a $1 billion storm escrow account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. In October 2022 the LPSC staff recommended a finding that the requested storm restoration costs of $2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and are eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above. A procedural schedule has been established with a hearing in December 2022.


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Hurricane Ida (Entergy New Orleans)

As discussed in the Form 10-K, in August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. In June 2022, Entergy New Orleans filed an application with the City Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately $170 million, which included $11 million in estimated costs, were reasonable, necessary, and prudently incurred to enable Entergy New Orleans to restore electric service to its customers and to repair Entergy New Orleans’s electric utility infrastructure. In addition, estimated carrying costs through December 2022 related to Hurricane Ida restoration costs were $9 million. Also, Entergy New Orleans is requesting approval that the $39 million withdrawal from its funded storm reserve in September 2021 and $7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms are properly applied to Hurricane Ida storm restoration costs, the application of which reduces the amount to be recovered from Entergy New Orleans customers by $46 million.

Additionally, as discussed in the Form 10-K, in February 2022, Entergy New Orleans filed with the City Council a securitization application requesting that the City Council review Entergy New Orleans’s storm reserve and increase the storm reserve funding level to $150 million, to be funded through securitization. In August 2022 the City Council’s advisors recommended that the City Council authorize a single securitization bond issuance to fund Entergy New Orleans’s storm recovery reserves to an amount sufficient to: (1) allow recovery of all of Entergy New Orleans’s unrecovered storm recovery costs following Hurricane Ida, subject to City Council review and certification; (2) provide initial funding of storm recovery reserves for future storms to a level of $75 million; and (3) fund the storm recovery bonds’ upfront financing costs. In September 2022, Entergy New Orleans and the City Council’s advisors entered into an agreement in principle, which was approved by the City Council along with a financing order in October 2022, authorizing Entergy New Orleans to proceed with a single securitization bond issuance of $206 million, with $125 million interim recovery, subject to City Council review and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs; $75 million to provide for a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds’ upfront financing costs. In November 2022 the City Council adopted a procedural schedule regarding the certification of the Hurricane Ida storm restoration costs in which the hearing officer shall certify the record for City Council consideration no later than August 2023.

Hurricane Laura, Hurricane Delta, and Winter Storm Uri (Entergy Texas)

As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization in December 2021. In November 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022, Entergy Texas reclassified $153 million from utility plant to other regulatory assets.

In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured system restoration bonds (securitization bonds). With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization

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bonds. Entergy Texas began cost recovery through the system restoration charge effective with the first billing cycle of May 2022 and the system restoration charge is expected to remain in place up to 15 years. See Note 4 to the financial statements herein for a discussion of the April 2022 issuance of the securitization bonds.

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 2022 through 2024. Following are updates to that discussion.

Entergy is developing its capital investment plan for 2023 through 2025 and currently anticipates that the Utility will make approximately $15.5 billion in capital investments during that period. The preliminary Utility estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy’s portfolio, including Walnut Bend Solar, West Memphis Solar, Driver Solar, Orange County Advanced Power Station, and St. Jacques Louisiana Solar; investments in Entergy’s nuclear fleet; transmission spending to drive reliability and resilience while also supporting renewables expansion; distribution and Utility support spending to improve reliability, resilience, and customer experience through projects focused on asset renewals and enhancements and grid stability; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.

While Entergy is still assessing the effect on its planned solar projects, the investigation by the U.S. Department of Commerce into potential circumvention of duties and tariffs may result in increased duties or tariffs on imported solar panels and has exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.

Walnut Bend Solar

As discussed in the Form 10-K, the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing was expected to occur in 2022. The counter-party notified Entergy Arkansas that it was terminating the project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.

West Memphis Solar

As discussed in the Form 10-K, in October 2021 the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. In April 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in 2023. The counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.


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Driver Solar

In April 2022, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the 250 MW Driver Solar facility is in the public interest and requested cost recovery through the formula rate plan rider. The APSC established a procedural schedule with a hearing scheduled in June 2022, but the parties later agreed to waive the hearing and submit the matter to the APSC for a decision consistent with the filed record. In August 2022 the APSC granted Entergy Arkansas’s petition and approved the acquisition of Driver Solar and cost recovery through the formula rate plan rider. In addition, the APSC directed Entergy Arkansas to inform the APSC as to the status of a tax equity partnership once construction is commenced. The parties are evaluating the effects of certain matters related to the Inflation Reduction Act of 2022, including with respect to the viability of a tax equity partnership. The facility is expected to be in service by the end of 2024.

2021 Solar Certification and the Geaux Green Option

As discussed in the Form 10-K, in November 2021, Entergy Louisiana filed an application with the LPSC seeking certification of and approval for the addition of four new solar photovoltaic resources with a combined nameplate capacity of 475 megawatts (the 2021 Solar Portfolio) and the implementation of a new green tariff, the Geaux Green Option (Rider GGO). These resources, all of which would be constructed in Louisiana, include (i) Vacherie Solar Energy Center, a 150 megawatt resource in St. James Parish; (ii) Sunlight Road Solar, a 50 megawatt resource in Washington Parish; (iii) St. Jacques Louisiana Solar, a 150 megawatt resource in St. James Parish; and (iv) Elizabeth Solar facility, a 125 megawatt resource in Allen Parish. St. Jacques Louisiana Solar would be acquired through a build-own-transfer agreement; the remaining resources involve power purchase agreements. Sunlight Road Solar and Elizabeth Solar facility have estimated in service dates in 2024, and Vacherie Solar Energy Center and St. Jacques Louisiana Solar have estimated in service dates in 2025. In March 2022 direct testimony from Walmart, the Louisiana Energy Users Group (LEUG), and the LPSC staff was filed. Each party recommended that the LPSC approve the resources proposed in Entergy Louisiana’s application, and the LPSC staff witness indicated that the process through which Entergy Louisiana solicited or obtained the proposals for the resources complied with applicable LPSC orders. The LPSC staff and LEUG’s witnesses made recommendations to modify the proposed Rider GGO and Entergy Louisiana’s proposed rate relief. In April 2022 the LPSC staff and LEUG filed cross-answering testimony concerning the other party’s proposed modifications to Rider GGO and the proposed rate recovery. Entergy Louisiana filed rebuttal testimony in June 2022. In August 2022 the parties reached a settlement certifying the 2021 Solar Portfolio and approving implementation of Rider GGO. In September 2022 the LPSC approved the settlement.

Sunflower Solar

As discussed in the Form 10-K, 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. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that were then used to make an initial payment of $105 million for acquisition of the facility. In July 2022, pursuant to the MPSC’s April 2020 order, Entergy Mississippi submitted a compliance filing to the MPSC with updated calculations of the impact of the Sunflower Solar facility on rate base and revenue requirement for the Sunflower Solar facility and benefits of the tax equity partnership. In November 2022 the MPSC approved Entergy Mississippi’s July 2022 compliance filing and authorized the recovery of the costs of the Sunflower Solar facility through the interim capacity rate adjustment mechanism in the formula rate plan with rates effective in December 2022. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment is currently expected in fourth quarter 2022. Commercial operation at the Sunflower Solar facility commenced in September 2022. See Note 14 to the financial statements herein for discussion of Entergy Mississippi’s purchase of the Sunflower Solar facility.


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Orange County Advanced Power Station

As discussed in the Form 10-K, in September 2021, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Orange County Advanced Power Station, a new 1,215 MW combined-cycle combustion turbine facility to be located in Bridge City, Texas at an initially-estimated expected total cost of $1.2 billion inclusive of the estimated costs of the generation facilities, transmission upgrades, contingency, an allowance for funds used during construction, and necessary regulatory expenses, among others. The project includes combustion turbine technology with dual fuel capability, able to co-fire up to 30% hydrogen by volume upon commercial operation and upgradable to support 100% hydrogen operations in the future. In December 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2022 certain intervenors filed testimony opposing the hydrogen co-firing component of the proposed project and others filed testimony opposing the project outright. Also in March 2022 the PUCT staff filed testimony opposing the hydrogen co-firing component of the proposed project, but otherwise taking no specific position on the merits of the project. The PUCT staff also proposed that the PUCT establish a maximum amount that Entergy Texas may recover in rates attributable to the project. In April 2022, Entergy Texas filed rebuttal testimony addressing and rebutting these various arguments. Also in April 2022 the ALJs with the State Office of Administrative Hearings approved a continuance of the hearing on the merits from April 2022 to June 2022, providing Entergy Texas an opportunity to accelerate the determination and fixing of pricing for 60 days for the Orange County Advanced Power Station prior to the hearing. In May 2022, Entergy Texas obtained and provided to the parties an updated fixed pricing option of $1.58 billion, available until mid-July 2022. The hearing on the merits was held in June 2022, and post-hearing briefs were submitted in July 2022. In September 2022 the ALJs with the State Office of Administrative Hearings issued a proposal for decision recommending the PUCT approve Entergy Texas’s application for certification of Orange County Advanced Power Station subject to certain conditions, including a cap on cost recovery at $1.37 billion, the exclusion of investment associated with co-firing hydrogen, weatherization requirements, and customer receipt of any contractual benefits associated with the facility’s guaranteed heat rate. In October 2022 the parties in the proceeding filed exceptions and replies to exceptions to the proposal for decision. Also in October 2022, Entergy Texas filed with the PUCT information regarding a new fixed pricing option for an estimated project cost of approximately $1.55 billion associated with Entergy Texas’s issuance of limited notice to proceed by mid-November 2022. A final order by the PUCT is expected in the fourth quarter of 2022. Entergy Texas also is pursuing environmental permitting that is required prior to the commencement of construction. Subject to receipt of required regulatory approvals, permits, and other conditions, the facility is expected to be in service by the end of 2026.

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 October 2022 meeting, the Board declared a dividend of $1.07 per share, an increase from the previous $1.01 quarterly dividend per share that Entergy has paid since the third quarter 2021.


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Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Millions)
Cash and cash equivalents at beginning of period$443 $1,759 
Net cash provided by (used in):  
Operating activities1,809 2,011 
Investing activities(4,369)(3,862)
Financing activities3,120 1,092 
Net increase (decrease) in cash and cash equivalents560 (759)
Cash and cash equivalents at end of period$1,003 $1,000 

Operating Activities

Net cash flow provided by operating activities decreased $202 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•increased fuel costs. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•payments to vendors, including timing and an increase in Utility cost of operations;
•an increase of $66 million in storm spending primarily due to spending on Hurricane Ida in 2022, partially offset by decreased spending on Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” above and in the Form 10-K for discussion of storm restoration efforts;
•an increase of $41 million in interest paid; and
•lower cash from Entergy Wholesale Commodities plant operations in 2022. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of the exit of the Entergy Wholesale Commodities merchant power business.

The decrease was partially offset by:

•higher collections from Utility customers;
•a decrease of $178 million in pension contributions in 2022 as compared to the same period in 2021. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” herein and in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding;
•a decrease of $79 million in severance and retention payments in 2022 as compared to the same period in 2021. See Note 7 to the financial statements herein for a discussion of the severance and retention payments related to Entergy Wholesale Commodities. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” above for a discussion of the exit of the Entergy Wholesale Commodities merchant power business; and
•income tax refunds of $7 million in 2022 compared to income tax payments of $29 million in 2021. Entergy had income tax refunds in 2022 as a result of an overpayment on a prior year state income tax return. Entergy had net income tax payments in 2021 as a result of amended Mississippi state tax returns filed and other state income taxes paid, partially offset by federal income tax refunds received associated with the completion of the 2014-2015 IRS audit.

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Investing Activities

Net cash flow used in investing activities increased $507 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•net payments to storm reserve escrow accounts of $291 million in 2022 compared to net receipts from storm reserve escrow accounts of $83 million in 2021;
•an increase of $153 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022;
•the initial payment of approximately $105 million in May 2022 for the purchase of the Sunflower Solar facility by the Entergy Mississippi tax equity partnership. See Note 14 to the financial statements herein for discussion of the Sunflower Solar facility purchase;
•a decrease of $57 million in decommissioning trust fund investment activity;
•an increase of $47 million in information technology capital expenditures primarily due to increased spending on various technology projects in 2022; and
•cash collateral of $31 million posted in 2022 to support Entergy Texas’s obligations to MISO.

The increase was partially offset by a decrease of $268 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2022 and the purchase of the Hardin County Peaking Facility by Entergy Texas in June 2021 for approximately $37 million.

Financing Activities

Net cash flow provided by financing activities increased $2,028 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to proceeds from securitization of $3,164 million received by the storm trust at Entergy Louisiana in 2022 and an increase of $807 million in net issuances of commercial paper in 2022 compared to 2021. The increase was partially offset by:

•long-term debt activity providing approximately $318 million of cash in 2022 compared to providing approximately $2,222 million of cash in 2021; and
•an increase of $44 million in common stock dividends paid as a result of an increase in the dividend paid per share in 2022 compared to 2021.

See Note 2 to the financial statements herein for a discussion of the Entergy Louisiana securitization. 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.


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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

Entergy Wholesale Commodities Portfolio

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 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 September 30, 2022, based on power prices at that time, Entergy had liquidity exposure of $13 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $8 million of posted cash collateral.

Nuclear Matters

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

NRC Reactor Oversight Process

As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. All of the nuclear generating plants owned and operated by Entergy’s Utility business are currently in Column 1, except Waterford 3, which is in Column 2.

In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022; however, Waterford 3 is expected to remain in Column 2 until the NRC conducts a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2.

Critical Accounting Estimates

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


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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis


Qualified Pension and Other Postretirement Benefits

As discussed in the Form 10-K, Entergy sponsors qualified, defined benefit pension plans, 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 2022, Entergy assumed a long-term rate of return on its qualified pension plan assets of 6.75%. Through September 30, 2022, due to the decline in the equity markets, Entergy experienced a 24% loss on its qualified pension plan assets, which have declined in fair value from $7 billion at December 31, 2021 to $5 billion at September 30, 2022.

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 plan assets. The excess is amortized over the average remaining service period of active employees or the average remaining life expectancy of plan participants if almost all are inactive, as in the case of certain qualified pension plans in which the companies within the Entergy Wholesale Commodities segment participate. Also, with regard to pension and other postretirement costs, Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. In general, Entergy determines the MRV of its pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns and for its other postretirement benefit plan assets Entergy generally uses fair value.

Minimum required funding calculations as determined under Pension Protection Act guidance, as amended by the American Rescue Plan Act of 2021, 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 2022 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 fifteen-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 certain thresholds. For funding purposes, asset gains and losses are smoothed into 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.

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 Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands, Except Share Data)
OPERATING REVENUES
Electric$4,110,058 $3,159,969 $10,024,089 $8,339,764 
Natural gas46,548 31,254 166,917 121,420 
Competitive businesses62,009 162,309 300,731 559,256 
TOTAL4,218,615 3,353,532 10,491,737 9,020,440 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale1,366,811 737,785 2,685,694 1,865,016 
Purchased power415,066 311,332 1,255,318 943,438 
Nuclear refueling outage expenses39,707 43,309 119,625 130,747 
Other operation and maintenance793,145 700,595 2,249,674 2,188,498 
Asset write-offs, impairments, and related charges (credits)(143)(139)(163,464)345,226 
Decommissioning49,263 60,364 174,171 245,205 
Taxes other than income taxes190,056 182,347 542,448 494,960 
Depreciation and amortization453,288 421,745 1,337,019 1,257,809 
Other regulatory charges (credits) - net(43,283)68,324 689,355 45,464 
TOTAL3,263,910 2,525,662 8,889,840 7,516,363 
OPERATING INCOME 954,705 827,870 1,601,897 1,504,077 
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction20,245 17,180 49,685 48,629 
Interest and investment income (loss)2,966 75,112 (118,002)289,757 
Miscellaneous - net(10,462)(16,797)32,720 (140,571)
TOTAL12,749 75,495 (35,597)197,815 
INTEREST EXPENSE
Interest expense235,322 216,612 694,558 642,839 
Allowance for borrowed funds used during construction(7,862)(7,112)(18,710)(20,088)
TOTAL227,460 209,500 675,848 622,751 
INCOME BEFORE INCOME TAXES739,994 693,865 890,452 1,079,141 
Income taxes184,112 158,282 (109,034)205,808 
CONSOLIDATED NET INCOME555,882 535,583 999,486 873,333 
Preferred dividend requirements of subsidiaries and noncontrolling interest(4,707)4,580 2,794 13,739 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION$560,589 $531,003 $996,692 $859,594 
Earnings per average common share:
Basic$2.76 $2.64 $4.90 $4.28 
Diluted$2.74 $2.63 $4.88 $4.26 
Basic average number of common shares outstanding203,445,773 200,963,049 203,259,373 200,756,267 
Diluted average number of common shares outstanding204,578,013 202,003,329 204,357,916 201,568,508 
See Notes to Financial Statements.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)
Net Income $555,882 $535,583 $999,486 $873,333 
Other comprehensive income (loss)
Cash flow hedges net unrealized gain (loss) (net of tax benefit of $—, $—, $—, and ($7,935))
24 24 72 (29,778)
Pension and other postretirement liabilities (net of tax expense of $3,505, $2,596, $7,689, and $15,141)
11,867 8,838 26,240 53,903 
Net unrealized investment loss (net of tax expense (benefit) of $1,223, ($1,259), ($2,230), and ($26,867))
(1,223)(2,162)(7,154)(46,957)
Other comprehensive income (loss)10,668 6,700 19,158 (22,832)
Comprehensive Income 566,550 542,283 1,018,644 850,501 
Preferred dividend requirements of subsidiaries and noncontrolling interest(4,707)4,580 2,794 13,739 
Comprehensive Income Attributable to Entergy Corporation$571,257 $537,703 $1,015,850 $836,762 
See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Consolidated net income $999,486 $873,333 
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization1,667,756 1,696,323 
Deferred income taxes, investment tax credits, and non-current taxes accrued(76,672)280,193 
Asset write-offs, impairments, and related charges (credits)(163,464)345,200 
Changes in working capital:
Receivables(368,772)(245,082)
Fuel inventory19,433 46,951 
Accounts payable(59,787)362,529 
Taxes accrued89,554 19,611 
Interest accrued38,361 29,313 
Deferred fuel costs(821,386)(356,833)
Other working capital accounts(124,677)(94,791)
Changes in provisions for estimated losses297,842 (72,577)
Changes in other regulatory assets587,128 (631,172)
Changes in other regulatory liabilities(116,315)117,301 
Effect of securitization on regulatory asset(1,036,955)— 
Changes in pension and other postretirement liabilities(258,141)(422,028)
Other1,136,050 62,712 
Net cash flow provided by operating activities
1,809,441 2,010,983 
INVESTING ACTIVITIES
Construction/capital expenditures(3,853,121)(3,925,632)
Allowance for equity funds used during construction49,685 48,629 
Nuclear fuel purchases(125,619)(127,606)
Payment for purchase of plant or assets(106,193)(36,534)
Net proceeds (payments) from sale of assets (7,082)17,421 
Litigation proceeds from settlement agreement9,829 — 
Changes in securitization account1,224 13,862 
Payments to storm reserve escrow account(1,291,593)(23)
Receipts from storm reserve escrow account1,000,278 83,105 
Decrease (increase) in other investments(33,238)4,239 
Litigation proceeds for reimbursement of spent nuclear fuel storage costs32,367 49,236 
Proceeds from nuclear decommissioning trust fund sales1,377,304 4,475,142 
Investment in nuclear decommissioning trust funds(1,422,808)(4,463,814)
Net cash flow used in investing activities(4,368,967)(3,861,975)
See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt5,316,693 6,269,152 
Treasury stock31,802 5,613 
Common stock— 26,817 
Retirement of long-term debt(4,998,642)(4,046,791)
Changes in credit borrowings and commercial paper - net185,455 (621,168)
Capital contribution from noncontrolling interest9,595 — 
Proceeds from trust related to securitization3,163,572 — 
Other41,659 44,176 
Dividends paid:
Common stock(615,937)(572,131)
Preferred stock(13,739)(13,739)
Net cash flow provided by financing activities3,120,458 1,091,929 
Net increase (decrease) in cash and cash equivalents560,932 (759,063)
Cash and cash equivalents at beginning of period442,559 1,759,099 
Cash and cash equivalents at end of period$1,003,491 $1,000,036 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized$631,211 $590,581 
Income taxes($7,412)$29,454 
See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$80,695 $44,944 
Temporary cash investments922,796 397,615 
Total cash and cash equivalents1,003,491 442,559 
Accounts receivable:
Customer955,138 786,866 
Allowance for doubtful accounts(30,723)(68,608)
Other244,114 231,843 
Accrued unbilled revenues538,232 420,255 
Total accounts receivable1,706,761 1,370,356 
Deferred fuel costs1,138,041 324,394 
Fuel inventory - at average cost135,142 154,575 
Materials and supplies - at average cost1,129,485 1,041,515 
Deferred nuclear refueling outage costs141,012 133,422 
Prepayments and other255,873 156,774 
TOTAL5,509,805 3,623,595 
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds3,910,411 5,514,016 
Non-utility property - at cost (less accumulated depreciation)360,709 357,576 
Other446,664 159,455 
TOTAL4,717,784 6,031,047 
PROPERTY, PLANT, AND EQUIPMENT
Electric63,947,067 64,263,250 
Natural gas682,645 658,989 
Construction work in progress1,878,427 1,511,966 
Nuclear fuel526,773 577,006 
TOTAL PROPERTY, PLANT, AND EQUIPMENT67,034,912 67,011,211 
Less - accumulated depreciation and amortization25,316,065 24,767,051 
PROPERTY, PLANT, AND EQUIPMENT - NET41,718,847 42,244,160 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $291,283 as of September 30, 2022 and $49,579 as of December 31, 2021)
6,026,128 6,613,256 
Deferred fuel costs241,085 240,953 
Goodwill377,172 377,172 
Accumulated deferred income taxes89,848 54,186 
Other294,626 269,873 
TOTAL7,028,859 7,555,440 
TOTAL ASSETS$58,975,295 $59,454,242 
See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$1,584,037 $1,039,329 
Notes payable and commercial paper1,386,632 1,201,177 
Accounts payable1,744,246 2,610,132 
Customer deposits417,132 395,184 
Taxes accrued509,382 419,828 
Interest accrued229,512 191,151 
Deferred fuel costs— 7,607 
Pension and other postretirement liabilities65,916 68,336 
Current portion of unprotected excess accumulated deferred income taxes2,660 53,385 
Other215,358 204,613 
TOTAL6,154,875 6,190,742 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued4,677,276 4,706,797 
Accumulated deferred investment tax credits208,239 211,975 
Regulatory liability for income taxes - net1,225,190 1,255,692 
Other regulatory liabilities2,608,757 2,643,845 
Decommissioning and asset retirement cost liabilities4,224,934 4,757,084 
Accumulated provisions454,964 157,122 
Pension and other postretirement liabilities1,693,604 1,949,325 
Long-term debt (includes securitization bonds of $311,156 as of September 30, 2022 and $83,639 as of December 31, 2021)
24,635,942 24,841,572 
Other677,838 815,284 
TOTAL40,406,744 41,338,696 
Commitments and Contingencies
Subsidiaries' preferred stock without sinking fund219,410 219,410 
EQUITY
Preferred stock, no par value, authorized 1,000,000 shares in 2022 and 2021; issued shares in 2022 and 2021 - none
— — 
Common stock, $.01 par value, authorized 499,000,000 shares in 2022 and 2021; issued 271,965,510 shares in 2022 and 2021
2,720 2,720 
Paid-in capital6,765,113 6,766,239 
Retained earnings10,621,307 10,240,552 
Accumulated other comprehensive loss(313,370)(332,528)
Less - treasury stock, at cost (68,483,278 shares in 2022 and 69,312,326 shares in 2021)
4,979,419 5,039,699 
Total common shareholders' equity12,096,351 11,637,284 
Subsidiaries' preferred stock without sinking fund and noncontrolling interest97,915 68,110 
TOTAL12,194,266 11,705,394 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$58,975,295 $59,454,242 
See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2022
(Unaudited)
Common Shareholders’ Equity
Subsidiaries’ Preferred Stock and Noncontrolling InterestCommon
Stock		Treasury
Stock		Paid-in
Capital		Retained EarningsAccumulated Other Comprehensive LossTotal
(In Thousands)
Balance at December 31, 2021$68,110 $2,720 ($5,039,699)$6,766,239 $10,240,552 ($332,528)$11,705,394 
Consolidated net income (a)3,193 — — — 276,400 — 279,593 
Other comprehensive loss— — — — — (4,050)(4,050)
Common stock issuances related to stock plans
— — 36,612 (31,085)— — 5,527 
Common stock dividends declared— — — — (205,058)— (205,058)
Preferred dividend requirements of subsidiaries (a)
(4,580)— — — — — (4,580)
Balance at March 31, 2022$66,723 $2,720 ($5,003,087)$6,735,154 $10,311,894 ($336,578)$11,776,826 
Consolidated net income (a)4,308 — — — 159,703 — 164,011 
Other comprehensive income— — — — — 12,540 12,540 
Common stock issuances related to stock plans— — 18,927 15,214 — — 34,141 
Common stock dividends declared— — — — (205,408)— (205,408)
Beneficial interest in storm trust31,636 — — — — — 31,636 
Capital contributions from noncontrolling interest 9,595 — — — — — 9,595 
Distributions to noncontrolling interest(190)— — — — — (190)
Preferred dividend requirements of subsidiaries (a)(4,580)— — — — — (4,580)
Balance at June 30, 2022$107,492 $2,720 ($4,984,160)$6,750,368 $10,266,189 ($324,038)$11,818,571 
Consolidated net income (loss) (a)(4,707)— — — 560,589 — 555,882 
Other comprehensive income— — — — — 10,668 10,668 
Common stock issuances related to stock plans— — 4,741 14,745 — — 19,486 
Common stock dividends declared— — — — (205,471)— (205,471)
Distributions to noncontrolling interest(290)— — — — — (290)
Preferred dividend requirements of subsidiaries (a)(4,580)— — — — — (4,580)
Balance at September 30, 2022$97,915 $2,720 $(4,979,419)$6,765,113 $10,621,307 $(313,370)$12,194,266 
See Notes to Financial Statements.
(a) Consolidated net income (loss) and preferred dividend requirements of subsidiaries for first quarter 2022, second quarter 2022, and third quarter 2022 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2021
(Unaudited)
Common Shareholders’ Equity
Subsidiaries’ Preferred Stock and Noncontrolling InterestCommon
Stock		Treasury
Stock		Paid-in
Capital		Retained EarningsAccumulated Other Comprehensive LossTotal
(In Thousands)
Balance at December 31, 2020$35,000 $2,700 ($5,074,456)$6,549,923 $9,897,182 ($449,207)$10,961,142
Consolidated net income (a)4,580 — — — 334,565 — 339,145 
Other comprehensive loss— — — — — (51,300)(51,300)
Common stock issuances related to stock plans
— — 28,235 (29,871)— — (1,636)
Common stock dividends declared— — — — (190,595)— (190,595)
Preferred dividend requirements of subsidiaries (a)
(4,580)— — — — — (4,580)
Balance at March 31, 2021$35,000 $2,700 ($5,046,221)$6,520,052 $10,041,152 ($500,507)$11,052,176 
Consolidated net income (loss) (a)4,580 — — — (5,974)— (1,394)
Other comprehensive income— — — — — 21,768 21,768 
Common stock issuances and sales under the at the market equity distribution program— 3 — 28,213 — — 28,216 
Common stock issuance costs— — — (1,399)— — (1,399)
Common stock issuances related to stock plans— — 3,979 14,810 — — 18,789 
Common stock dividends declared— — — — (190,629)— (190,629)
Preferred dividend requirements of subsidiaries (a)(4,580)— — — — — (4,580)
Balance at June 30, 2021$35,000 $2,703 ($5,042,242)$6,561,676 $9,844,549 ($478,739)$10,922,947 
Consolidated net income (a)4,580 — — — 531,003 — 535,583 
Other comprehensive income— — — — — 6,700 6,700 
Common stock issuances related to stock plans— — 1,605 16,176 — — 17,781 
Common stock dividends declared— — — — (190,907)— (190,907)
Preferred dividend requirements of subsidiaries (a)(4,580)— — — — — (4,580)
Balance at September 30, 2021$35,000 $2,703 $(5,040,637)$6,577,852 $10,184,645 $(472,039)$11,287,524 
See Notes to Financial Statements.
(a) Consolidated net income (loss) and preferred dividend requirements of subsidiaries for first quarter 2021, second quarter 2021, and third quarter 2021 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.

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

Vidalia Purchased Power Agreement

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

ANO Damage, Outage, and NRC Reviews

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

Spent Nuclear Fuel Litigation

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.

In October 2021 the U.S. Court of Federal Claims issued a final judgment in the amount of $83 million in favor of Entergy Nuclear Indian Point 2, LLC and Entergy Nuclear Indian Point 3, LLC against the DOE in the Indian Point Unit 2 third round and Unit 3 second round combined damages case. Entergy received payment from the U.S. Treasury in January 2022. The effect of recording the judgment in October 2021 was a reduction to asset write-offs, impairments, and related charges (credits). The damages awarded included $32 million related to costs previously recorded as plant, $47 million related to costs previously recorded as other operation and maintenance expenses, and $4 million related to costs previously recorded as taxes other than income taxes.

Nuclear Insurance

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

Non-Nuclear Property Insurance

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


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

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

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

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

Grand Gulf - Related Agreements

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


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

Regulatory Assets and Regulatory Liabilities

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

Fuel and purchased power cost recovery

Entergy Arkansas

Energy Cost Recovery Rider

In March 2022, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.00959 per kWh to $0.01785 per kWh. The primary reason for the rate increase is a large under-recovered balance as a result of higher natural gas prices in 2021, particularly in the fourth quarter 2021. At the request of the APSC general staff, Entergy Arkansas deferred its request for recovery of $32 million from the under-recovery related to the 2021 February winter storms until the 2023 energy cost rate redetermination, unless a request for an interim adjustment to the energy cost recovery rider is necessary. This resulted in a redetermined rate of $0.016390 per kWh, which became effective with the first billing cycle in April 2022 through the normal operation of the tariff.

Entergy Louisiana

As discussed in the Form 10-K, in February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021, Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over five months beginning in April 2021. In April 2022 the LPSC staff issued a draft audit report regarding Entergy Louisiana’s fuel adjustment clause charges in February 2021 that did not recommend any financial disallowances, but included several prospective recommendations. Responsive testimony was filed by one intervenor and the parties agreed to suspend any procedural schedule and move toward settlement discussions to close the matter.

In May 2022 the LPSC staff issued an audit report regarding Entergy Louisiana’s purchased gas adjustment charges in February 2021 that did not propose any financial disallowances. The LPSC staff and Entergy Louisiana

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submitted a joint report on the audit report and draft order to the LPSC concluding that Entergy Louisiana’s gas distribution operations and fuel costs were not significantly adversely affected by the February 2021 winter storms and the resulting increase in natural gas prices. The LPSC issued an order approving the joint report in October 2022.

To mitigate high electric bills, primarily driven by high summer usage and elevated gas prices, Entergy Louisiana has deferred approximately $225 million of fuel expense incurred in April, May, June, July, August, and September 2022 (as reflected on June, July, August, September, October, and November 2022 bills). These deferrals were included in the over/under calculation of the fuel adjustment clause, which is intended to recover the full amount of the costs included on a rolling twelve-month basis.

Entergy Mississippi

See “Complaints Against System Energy - System Energy Settlement with the MPSC” below for discussion of the partial settlement agreement filed with the FERC in June 2022. The settlement, which is contingent upon FERC approval, provides for a refund of $235 million from System Energy to Entergy Mississippi. In July 2022 the MPSC directed the disbursement of settlement proceeds, ordering Entergy Mississippi to provide a one-time $80 bill credit to each of its approximately 460,000 retail customers to be effective during the September 2022 billing cycle, and to apply the remaining proceeds to Entergy Mississippi’s under-recovered deferred fuel balance. System Energy requested an order from the FERC by November 2022.

Entergy Mississippi had a deferred fuel balance of approximately $291.7 million under the energy cost recovery rider as of July 31, 2022, along with an over-recovery balance of $51.1 million under the power management rider. Without further action, Entergy Mississippi anticipated a year-end deferred fuel balance of approximately $200 million after application of a portion of the System Energy settlement proceeds, as discussed above. In September 2022, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider. Entergy Mississippi proposed five monthly incremental adjustments to the net energy cost factor designed to collect the under-recovered fuel balance as of July 31, 2022 and to reflect the recovery of a higher natural gas price. Entergy Mississippi also proposed five monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance as of July 31, 2022. In October 2022 the MPSC approved modified interim adjustments to Entergy Mississippi’s energy cost recovery rider and power management rider. The MPSC approved dividing the energy cost recovery rider interim adjustment into two components that would allow Entergy Mississippi to 1) recover a natural gas fuel rate that is better aligned with current prices and 2) recover the estimated under-recovered deferred fuel balance as of September 30, 2022 over a period of 20 months. The MPSC approved six monthly incremental adjustments to the net energy cost factor designed to reflect the recovery of a higher natural gas price. The MPSC also approved six monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance. Entergy Mississippi will not file its annual redetermination of the energy cost recovery rider or the power management rider in November 2022. Entergy Mississippi’s November 2023 annual redetermination will not reflect any part of the estimated under-recovered deferred fuel balance as of September 30, 2022; it will only reflect any over/under recovery that accumulates after September 2022. The November 2024 annual redetermination will include the total deferred fuel balance, including any over- or under-recovery of the deferred fuel balance as of September 30, 2022.

Entergy Texas

In May 2022, Entergy Texas filed an application with the PUCT to implement an interim fuel surcharge to collect the cumulative under-recovery of approximately $51.7 million, including interest, of fuel and purchased power costs incurred from May 1, 2020 through December 31, 2021. The under-recovery balance is primarily attributable to the impacts of Winter Storm Uri, including historically high natural gas prices, partially offset by settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas proposed that the interim fuel surcharge be assessed over a period of six months beginning with the first billing cycle after the PUCT

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issues a final order, but no later than the first billing cycle of September 2022. Also in May 2022, the PUCT referred the proceeding to the State Office of Administrative Hearings. In July 2022, Entergy Texas filed on behalf of the parties an unopposed settlement resolving all issues in the proceeding. In addition, Entergy Texas filed on behalf of the parties a motion to admit evidence, to approve interim rates as requested in the initial application, and to remand the proceeding to the PUCT to consider the unopposed settlement. In August 2022 the ALJ with the State Office of Administrative Hearings issued an order granting Entergy Texas’s motion, approving interim rates effective with the first billing cycle of September 2022, and remanding the case to the PUCT for final approval.

In September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the reconciliation period, Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. A PUCT decision is expected in September 2023.

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

2022 Formula Rate Plan Filing

In July 2022, Entergy Arkansas filed with the APSC its 2022 formula rate plan filing to set its formula rate for the 2023 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2023 and a netting adjustment for the historical year 2021. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2023 projected year is 7.40% resulting in a revenue deficiency of $104.8 million. The earned rate of return on common equity for the 2021 historical year was 8.38% resulting in a $15.2 million netting adjustment. The total proposed revenue change for the 2023 projected year and 2021 historical year netting adjustment is $119.9 million. 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 exceeded the constraint, the resulting increase is limited to $79.3 million. In October 2022 other parties filed their testimony recommending various adjustments to Entergy Arkansas’s overall proposed revenue deficiency, and Entergy Arkansas filed a response including an update to actual revenues through August 2022, which raised the constraint to $79.8 million. In November 2022, Entergy Arkansas filed with the APSC a settlement agreement reached with other parties resolving all issues in the proceeding. As a result of the settlement agreement, the total proposed revenue change is $102.8 million, including a $87.7 million increase for the 2023 projected year and a $15.2 million netting adjustment. Because Entergy Arkansas’s revenue requirement exceeded the constraint, the resulting increase is limited to $79.8 million. The APSC will rule on the settlement at a later date. A hearing is currently scheduled for November 2022.

COVID-19 Orders

See the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of September 30, 2022, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.


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Filings with the LPSC (Entergy Louisiana)

Retail Rates - Electric

2021 Formula Rate Plan Filing

In May 2022, Entergy Louisiana filed its formula rate plan evaluation report for its 2021 calendar year operations. The 2021 test year evaluation report produced an earned return on common equity of 8.33%, with a base formula rate plan revenue increase of $65.3 million. Other increases in formula rate plan revenue driven by reductions in Tax Cut and Jobs Act credits and additions to transmission and distribution plant in service reflected through the transmission recovery mechanism and distribution recovery mechanism are partly offset by an increase in net MISO revenues, leading to a net increase in formula rate plan revenue of $152.9 million. The effects of the changes to total formula rate plan revenue are different for each legacy company, primarily due to differences in the legacy companies’ capacity cost changes, including the effect of true-ups. Legacy Entergy Louisiana formula rate plan revenues will increase by $86 million and legacy Entergy Gulf States Louisiana formula rate plan revenues will increase by $66.9 million. In August 2022 the LPSC staff filed a list of objections/reservations, including outstanding issues from the test years 2017-2020 formula rate plan filings, utilizing the extraordinary cost mechanism to address one-time changes such as state tax rate changes, and failing to include an adjustment for revenues not received as a result of Hurricane Ida. Subject to refund and LPSC review, the resulting changes to formula rate plan revenues became effective for bills rendered during the first billing cycle of September 2022.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. 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 September 30, 2022, Entergy Louisiana had a regulatory asset of $47.8 million for costs associated with the COVID-19 pandemic.

Filings with the MPSC (Entergy Mississippi)

Retail Rates

2022 Formula Rate Plan Filing

In March 2022, Entergy Mississippi submitted its formula rate plan 2022 test year filing and 2021 look-back filing showing Entergy Mississippi’s earned return for the historical 2021 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2022 calendar year to be below the formula rate plan bandwidth. The 2022 test year filing shows a $69 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.70% return on rate base, within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $48.6 million. The 2021 look-back filing compares actual 2021 results to the approved benchmark return on rate base and reflects the need for a $34.5 million interim increase in formula rate plan revenues. In fourth quarter 2021, Entergy Mississippi recorded a regulatory asset of $19 million to reflect the then-current estimate in connection with the look-back feature of the formula rate plan. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2021 retail revenues, effective in April 2022.


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In June 2022, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2022 test year filing that resulted in a total rate increase of $48.6 million. Pursuant to the joint stipulation, Entergy Mississippi’s 2021 look-back filing reflected an earned return on rate base of 5.99% in calendar year 2021, which is below the look-back bandwidth, resulting in a $34.3 million increase in the formula rate plan revenues on an interim basis through June 2023. In July 2022 the MPSC approved the joint stipulation with rates effective in August 2022. In July 2022, Entergy Mississippi recorded regulatory credits of $22.6 million to reflect the effects of the joint stipulation. In August 2022 an intervenor filed a statutorily-authorized direct appeal to the Mississippi Supreme Court seeking review of the MPSC’s July 2022 order approving the joint stipulation confirming Entergy Mississippi’s 2022 formula rate plan filing. The rates that went into effect in August 2022 are not stayed or otherwise impacted while the appeal is pending.

In July 2022 the MPSC directed Entergy Mississippi to flow $14.1 million of the power management rider over-recovery balance to customers beginning in August 2022 through December 2022 to mitigate the bill impact of the increase in formula rate plan revenues.

Sunflower Solar

As discussed in the Form 10-K, 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. In July 2022, pursuant to the MPSC’s April 2020 order, Entergy Mississippi submitted a compliance filing to the MPSC with updated calculations of the impact of the Sunflower Solar facility on rate base and revenue requirement for the Sunflower Solar facility and benefits of the tax equity partnership. In November 2022 the MPSC approved Entergy Mississippi’s July 2022 compliance filing and authorized the recovery of the costs of the Sunflower Solar facility through the interim capacity rate adjustment mechanism in the formula rate plan with rates effective in December 2022. See Note 14 to the financial statements herein for discussion of Entergy Mississippi’s purchase of the Sunflower Solar facility.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. Entergy Mississippi began recovery of the bad debt expense deferral resulting from the COVID-19 pandemic over a three-year period with implementation of the interim formula rate plan rates in April 2022. As of September 30, 2022, Entergy Mississippi had a remaining regulatory asset of $10.9 million for costs associated with the COVID-19 pandemic.

Filings with the City Council (Entergy New Orleans)

Retail Rates

2022 Formula Rate Plan Filing

In April 2022, Entergy New Orleans submitted to the City Council its formula rate plan 2021 test year filing. The 2021 test year evaluation report, subsequently updated in a July 2022 filing, produced an earned return on equity of 6.88% compared to the authorized return on equity of 9.35%. Entergy New Orleans sought approval of a $42.1 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula results in an increase in authorized electric revenues of $34.1 million and an increase in authorized gas revenues of $3.3 million. Entergy New Orleans also sought to commence collecting $4.7 million in electric revenues that were previously approved by the City Council for collection through the formula rate plan. In July 2022 the City Council’s advisors issued a report seeking a reduction to Entergy New Orleans’s proposed increase of approximately $17.1 million in total for electric and gas revenues. Effective with the first billing cycle of September 2022, Entergy New Orleans implemented rates reflecting an amount agreed upon by Entergy New

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Orleans and the City Council including adjustments filed in the City Council’s advisors’ report, per the approved process for formula rate plan implementation. The total formula rate plan increase implemented was $24.7 million, which includes an increase of $18.2 million in electric revenues, $4.7 million in previously approved electric revenues, and an increase of $1.8 million in gas revenues. Additionally, credits of $13.9 million funded by certain regulatory liabilities currently held by Entergy New Orleans for customers will be issued over an eight-month period beginning September 2022.

COVID-19 Orders

As discussed in the Form 10-K, 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 September 30, 2022, Entergy New Orleans had a regulatory asset of $13.9 million for costs associated with the COVID-19 pandemic. As part of the agreed-upon terms of its 2022 formula rate plan filing, Entergy New Orleans will recover this regulatory asset over a five-year period beginning September 2023.

Filings with the PUCT and Texas Cities (Entergy Texas)

Retail Rates

2022 Base Rate Case

In July 2022, Entergy Texas filed a base rate case with the PUCT seeking a net increase in base rates of approximately $131.4 million. The base rate case was based on a 12-month test year ending December 31, 2021. Key drivers of the requested increase are changes in depreciation rates as the result of a depreciation study and an increase in the return on equity. In addition, Entergy Texas included capital additions placed into service for the period of January 1, 2018 through December 31, 2021, including those additions currently reflected in the distribution and transmission cost recovery factor riders and the generation cost recovery rider, all of which would be reset to zero as a result of this proceeding. In July 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In October 2022 intervenors filed direct testimony challenging and supporting various aspects of Entergy Texas’s rate case application. The key issues addressed included the appropriate return on equity, generation plant deactivations, depreciation rates, and proposed tariffs related to electric vehicles. In November 2022 the PUCT staff filed direct testimony addressing a similar set of issues and recommending a reduction of $50.7 million to Entergy Texas’s overall cost of service associated with the requested net increase in base rates of approximately $131.4 million. Entergy Texas will file rebuttal testimony in November 2022. A hearing on the merits is scheduled for December 2022. If a settlement is not reached, a final decision by the PUCT is expected in second quarter 2023.

Distribution Cost Recovery Factor (DCRF) Rider

As discussed in the Form 10-K, in August 2021, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The amended rider was designed to collect from Entergy Texas’s retail customers approximately $40.2 million annually, or $13.9 million in incremental annual revenues beyond Entergy Texas’s then-effective DCRF rider based on its capital invested in distribution between September 1, 2020 and June 30, 2021. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in December 2021. In December 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding, including a motion for interim rates to take effect for usage on and after January 24, 2022. Also, in December 2021, the ALJ with the State Office of Administrative Hearings issued an order granting the motion for interim rates, which went into effect in January 2022, admitting evidence, and remanding the proceeding to the PUCT to consider the settlement. In March 2022 the PUCT issued an order approving the settlement.


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Transmission Cost Recovery Factor (TCRF) Rider

As discussed in the Form 10-K, in October 2021, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The amended rider was designed to collect from Entergy Texas’s retail customers approximately $66.1 million annually, or $15.1 million in incremental annual revenues beyond Energy Texas’s then-effective TCRF rider based on its capital invested in transmission between September 1, 2020 and July 31, 2021 and changes in approved transmission charges. In January 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In February 2022 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2022. In February 2022 the ALJ granted the motion for interim rates, admitted evidence, and remanded the case to the PUCT for consideration of a final order at a future open meeting. In June 2022 the PUCT issued an order approving the settlement.

Generation Cost Recovery Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider to begin recovering a return of and on its generation capital investment in the Montgomery County Power Station through August 31, 2020, which was approved by the PUCT on an interim basis in January 2021. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include its generation capital investment in Montgomery County Power Station after August 31, 2020 and an unopposed settlement agreement filed on behalf of the parties by Entergy Texas in October 2021 was approved by the PUCT in January 2022. In February 2022, Entergy Texas filed a relate-back rider to collect over five months an additional approximately $5 million, which is the difference between the interim revenue requirement approved in January 2021 and the revenue requirement approved in January 2022 that reflects Entergy Texas’s full generation capital investment and ownership in Montgomery County Power Station on January 1, 2021, plus carrying costs from January 2021 through January 2022 when the updated revenue requirement took effect. In April 2022, Entergy Texas and the PUCT staff filed a joint proposed order that supports approval of Entergy Texas’s as-filed request. The PUCT approved the relate-back rider consistent with Entergy Texas’s as-filed request, and rates became effective over a five month period, in August 2022.

In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which closed in June 2021. Because Hardin was to be acquired in the future, the initial generation cost recovery rider rates proposed in the application represented no change from the generation cost recovery rider rates established in Entergy Texas’s previous generation cost recovery rider proceeding. In July 2021 the PUCT issued an order approving the application. In August 2021, Entergy Texas filed an update application to recover its actual investment in the acquisition of the Hardin County Peaking Facility. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in April 2022. In January 2022, Entergy Texas filed an update to its application to align the requested revenue requirement with the terms of the generation cost recovery rider settlement approved by the PUCT in January 2022. In March 2022, Entergy Texas filed on behalf of the parties an unopposed motion, which motion was granted by the ALJ with the State Office of Administrative Hearings, to abate the procedural schedule indicating that the parties had reached an agreement in principle. In April 2022, Entergy Texas filed on behalf of the parties a unanimous settlement agreement that would adjust its generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million, which is $4.5 million in incremental annual revenue above the $88.3 million approved in January 2022, related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility. Concurrently with filing of the unanimous settlement agreement, Entergy Texas submitted an agreed motion to admit evidence and remand the case to the PUCT for review and consideration of the settlement agreement, which motion was granted by the ALJ with the State Office of Administrative Hearings. The PUCT approved the settlement agreement and rates became effective in August 2022. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying

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costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect.

COVID-19 Orders

As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings, the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As of September 30, 2022, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022.

Entergy Arkansas Opportunity Sales Proceeding

See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of the opportunity sales payments made to the other Utility operating companies. In October 2020 the APSC filed a motion to dismiss Entergy Arkansas’s complaint. In March 2022 the court denied the APSC’s motion to dismiss and, in April 2022, issued a scheduling order including a trial date in February 2023. In June 2022, Entergy Arkansas filed a motion asserting that it is entitled to summary judgment because Entergy Arkansas’s position that the APSC’s order is pre-empted by the filed rate doctrine and violates the Dormant Commerce Clause is premised on facts that are not subject to genuine dispute. In July 2022, Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a motion to intervene and to hold Entergy Arkansas’s motion for summary judgment in abeyance pending a ruling on the motion to intervene. Entergy Arkansas filed a consolidated opposition to both motions. In August 2022 the APSC filed a motion for summary judgment arguing that there is no genuine issue as to any material fact and the APSC is entitled to judgment as a matter of law. In September 2022, Entergy Arkansas filed an opposition to the motion. In October 2022 the APSC filed a motion asking the court to hold further proceedings in abeyance pending a decision on the motions for summary judgment filed by Entergy Arkansas and the APSC. Also in October 2022, Entergy Arkansas filed an opposition to the motion, and the APSC filed a reply in support of its motion for summary judgment.

Complaints Against System Energy

See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. The following are updates to that discussion. See “System Energy Settlement with the MPSC” below for discussion of a partial settlement agreement and offer of settlement related to the pending proceedings before the FERC.

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity,

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based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $62 million, which includes interest through September 30, 2022, and the estimated resulting annual rate reduction would be approximately $34 million. The estimated refund will continue to accrue interest until a final FERC decision is issued.

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

In August 2022 the D.C. Circuit Court of Appeals issued an order addressing appeals of FERC’s Opinion No. 569 and 569-A, which established the methodology applied in the ALJ’s initial decision in the proceeding against System Energy discussed above. The appellate order addressed the methodology for determining the return on equity applicable to transmission owners in MISO. The D.C. Circuit found FERC’s use of the Risk Premium model as part of the methodology to be arbitrary and capricious, and remanded the case back to FERC. The remanded case is pending FERC action.

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

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through September 30, 2022 is approximately $422 million, plus interest, which is approximately $144 million through September 30, 2022. 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 $20 million, which includes interest through September 30, 2022.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before the FERC, which will review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in

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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 Additional Complaints

As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at the 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.

Unit Power Sales Agreement Complaint

The first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in September 2020. The first complaint raises two sets of rate allegations: violations of the filed rate and a corresponding request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales Agreement prospectively. In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of September 21, 2020, establishing hearing procedures, and holding those procedures in abeyance pending the FERC’s review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above. System Energy agreed that the hearing should be held in abeyance but sought rehearing of the FERC’s decision as related to matters set for hearing that were beyond the scope of the FERC’s jurisdiction or authority. The complainants sought rehearing of the FERC’s decision to hold the hearing in abeyance and filed a motion to proceed, which motion System Energy subsequently opposed. In June 2021, System Energy’s request for rehearing was denied by operation of law, and System Energy filed an appeal of the FERC’s orders in the Court of Appeals for the Fifth Circuit. The appeal was initially stayed for a period of 90 days, but the stay expired. In November 2021 the Fifth Circuit dismissed the appeal as premature.

In November 2021 the LPSC, the APSC, and the City Council filed direct testimony and requested the FERC to order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement. The LPSC’s refund claims include, among other things, allegations that: (1) System Energy should not have included certain sale-leaseback transaction costs in prepayments; (2) System Energy should have credited rate base to reflect the time value of money associated with the advance collection of lease payments; (3) System Energy incorrectly included refueling outage costs that were recorded in account 174 in rate base; and (4) System Energy should have excluded several accumulated deferred income tax balances in account 190 from rate base. The LPSC is also seeking a retroactive adjustment to retained earnings and capital structure in conjunction with the implementation of its proposed refunds. In addition, the LPSC seeks amendments to the Unit Power Sales Agreement going forward to address below-the-line costs, incentive compensation, the working capital allowance, litigation expenses, and the 2019 termination of the capital funds agreement. The APSC argues that: (1) System Energy should have included borrowings from the Entergy System money pool in its determination of short-term debt in its cost of capital; and (2) System Energy should credit customers with System Energy’s allocation of earnings on money pool investments. The City Council alleges that System Energy has maintained excess cash on hand in the money pool and that retention of excess cash was imprudent. Based on this allegation, the City Council’s witness recommends a refund of approximately $98.8 million for the period 2004-September 2021 or other alternative relief. The City Council further recommends that the FERC impose a hypothetical equity ratio such as 48.15% equity to capital on a prospective basis.

In January 2022, System Energy filed answering testimony arguing that the FERC should not order refunds for prior periods or any prospective amendments to the Unit Power Sales Agreement. In response to the LPSC’s refund claims, System Energy argues, among other things, that: (1) the inclusion of sale-leaseback transaction costs in prepayments was correct; (2) the filed rate doctrine bars the request for a retroactive credit to rate base for the time value of money associated with the advance collection of lease payments; (3) an accounting misclassification for deferred refueling outage costs has been corrected, caused no harm to customers, and requires no refunds; and (4) its accounting and ratemaking treatment of specified accumulated deferred income tax balances in account 190

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has been correct. System Energy further responds that no retroactive adjustment to retained earnings or capital structure should be ordered because there is no general policy requiring such a remedy and there was no showing that the retained earnings element of the capital structure was incorrectly implemented. Further, System Energy presented evidence that all of the costs that are being challenged were long known to the retail regulators and were approved by them for inclusion in retail rates, and the attempt to retroactively challenge these costs, some of which have been included in rates for decades, is unjust and unreasonable. In response to the LPSC’s proposed going-forward adjustments, System Energy presents evidence to show that none of the proposed adjustments are needed. On the issue of below-the-line expenses, during discovery procedures, System Energy identified a historical allocation error in certain months and agreed to provide a bill credit to customers to correct the error. In response to the APSC’s claims, System Energy argues that the Unit Power Sales Agreement does not include System Energy’s borrowings from the Entergy System money pool or earnings on deposits to the Entergy System money pool in the determination of the cost of capital; and accordingly, no refunds are appropriate on those issues. In response to the City Council’s claims, System Energy argues that it has reasonably managed its cash and that the City Council’s theory of cash management is defective because it fails to adequately consider the relevant cash needs of System Energy and it makes faulty presumptions about the operation of the Entergy System money pool. System Energy further points out that the issue of its capital structure is already subject to pending FERC litigation.

In March 2022 the FERC trial staff filed direct and answering testimony in response to the LPSC, the APSC, and the City Council’s direct testimony. In its testimony, the FERC trial staff recommends refunds for two primary reasons: (1) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with rate refunds; and (2) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005. The FERC trial staff recommends refunds of $84.1 million, exclusive of any tax gross-up or FERC interest. In addition, the FERC trial staff recommends the following prospective modifications to the Unit Power Sales Agreement: (1) inclusion of a rate base credit to recognize the time value of money associated with the advance collection of lease payments; (2) exclusion of executive incentive compensation costs for members of the Office of the Chief Executive and long-term performance unit costs where awards are based solely or primarily on financial metrics; and (3) exclusion of unvested, accrued amounts for stock options, performance units, and restricted stock awards. With respect to issues that ultimately concern the reasonableness of System Energy’s rate of return, the FERC trial staff states that it is unnecessary to consider such issues in this proceeding, in light of the pending case concerning System Energy’s return on equity and capital structure. On all other material issues raised by the LPSC, the APSC, and the City Council, the FERC trial staff recommends either no refunds or no modification to the Unit Power Sales Agreement.

In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations of refunds for the accumulated deferred income taxes issues and proposed modifications to the Unit Power Sales Agreement for the executive incentive compensation issues. In June 2022 the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005. Based on the testimony revisions, the FERC trial staff’s recommended refunds total $106.6 million, exclusive of any tax gross-up or FERC awarded interest. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the changes in the FERC trial staff’s testimony and oppose its revised recommendation.

In May 2022 the LPSC, the APSC, and the City Council filed rebuttal testimony. The LPSC’s testimony asserts new claims, including that: (1) certain of the sale-leaseback transaction costs may have been imprudently incurred; (2) accumulated deferred income taxes associated with sale-leaseback transaction costs should have been included in rate base; (3) accumulated deferred income taxes associated with federal investment tax credits should have been excluded from rate base; (4) monthly net operating loss accumulated deferred income taxes should have been excluded from rate base; and (5) several categories of proposed rate changes, including executive incentive compensation, air travel, industry dues, and legal costs, also warrant historical refunds. The LPSC’s rebuttal testimony argues that refunds for the alleged tariff violations and other claims must be calculated by rerunning the

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Unit Power Sales Agreement formula rate; however, it includes estimates of refunds associated with some, but not all, of its claims, totaling $286 million without interest. The City Council’s rebuttal testimony also proposes a new, alternate theory and claim for relief regarding System Energy’s participation in the Entergy System money pool, under which it calculates estimated refunds of approximately $51.7 million. The APSC’s rebuttal testimony agrees with the LPSC’s direct testimony that retained earnings should be adjusted in a comprehensive refund calculation. The testimony quantifies the estimated impacts of three issues: (1) a $1.5 million reduction in the revenue requirement under the Unit Power Sales Agreement if System Energy’s borrowings from the money pool are included in short-term debt; (2) a $1.9 million reduction in the revenue requirement if System Energy’s allocated share of money pool earnings are credited through the Unit Power Sales Agreement; and (3) a $1.9 million reduction in the revenue requirement for every $50 million of refunds ordered in a given year, without interest.

In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony, for the hearing to begin in September 2022, and for the initial decision to be issued in March 2023. In July 2022, System Energy filed responsive rebuttal testimony responding to the new claims in the LPSC’s and the City Council’s rebuttal testimony. Also in July 2022 the LPSC filed supplemental rebuttal testimony responding to System Energy’s revised cross-answering testimony, and System Energy filed responsive rebuttal testimony responding to that testimony. In August 2022 the LPSC filed responsive rebuttal testimony to System Energy’s responsive rebuttal testimony. The hearing commenced in September 2022.

LPSC Petition for Writ of Mandamus

In August 2022 the LPSC filed a petition for a writ of mandamus asking the Fifth Circuit Court of Appeals to order the FERC to act within ninety days on certain pending proceedings, including the Grand Gulf prudence complaint, the return on equity and capital structure complaints, and the Grand Gulf sale-leaseback renewal complaint. In September 2022 the FERC and System Energy filed oppositions to the LPSC’s petition, and the APSC and the City Council filed interventions in support of the petition. See Note 2 to the financial statements in the Form 10-K for further discussion of the complaints.

System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2020 Calendar Year Bills

System Energy’s Unit Power Sales Agreement includes formula rate protocols that provide for the disclosure of cost inputs, an opportunity for informal discovery procedures, and a challenge process. In February 2022, pursuant to the protocols procedures, the LPSC, the APSC, the MPSC, the City Council, and the Mississippi Public Utilities Staff filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2020. The formal challenge alleges: (1) that it was imprudent for System Energy to accept the IRS’s partial acceptance of a previously uncertain tax position; (2) that System Energy should have delayed recording the result of the IRS’s partial acceptance of the previously uncertain tax position until after internal tax allocation payments were made; (3) that the equity ratio charged in rates was excessive; (4) that sale-leaseback rental payments should have been excluded from rates; and (5) that all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2020 bills. While System Energy disagrees that any refunds are owed for the 2020 calendar year bills, the formal challenge estimates that the financial impact of the first through fourth allegations is approximately $53 million in refunds, excluding interest which will be calculated after a FERC order is issued; it does not provide an estimate of the financial impact of the fifth allegation.

In March 2022, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.


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System Energy Settlement with the MPSC

In June 2022, System Energy, Entergy Mississippi, and additional named Entergy parties involved in thirteen docketed proceedings before the FERC filed with the FERC a partial settlement agreement and offer of settlement. The settlement memorializes the Entergy parties’ agreement with the MPSC to globally resolve all actual and potential claims between the Entergy parties and the MPSC associated with those FERC proceedings and with System Energy’s past implementation of the Unit Power Sales Agreement. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. Entergy Mississippi purchases the greatest single amount, nearly 40% of System Energy’s share of Grand Gulf, after its additional purchases from affiliates are considered. The settlement therefore limits System Energy’s overall refund exposure associated with the identified proceedings because they will be resolved completely as between the Entergy parties and the MPSC.

The FERC proceedings that are resolved as between the Entergy parties and the MPSC include the return on equity and capital structure complaints, the Grand Gulf sale-leaseback renewal complaint and uncertain tax position rate base issue, the Unit Power Sales Agreement complaint, and the Grand Gulf prudence complaint, all of which are discussed in Note 2 to the financial statements in the Form 10-K, and updated above. They also include the proceedings concerning System Energy’s return of excess accumulated deferred income taxes after the Tax Cuts and Jobs Act and the proceedings established to address System Energy’s October 2020 and December 2020 Federal Power Act section 205 filings to provide credits to customers related to the IRS’s decision as to the uncertain decommissioning tax position, also as all discussed in Note 2 to the financial statements in the Form 10-K. The settlement also resolves the MPSC’s involvement in the formal challenge filed by the retail regulators of System Energy’s customers in connection with the implementation of the Unit Power Sales Agreement annual formula rate protocols for the 2020 test year, which is discussed above.

The settlement provides for a black-box refund of $235 million from System Energy to Entergy Mississippi, which will be paid within 120 days of the settlement’s effective date (either the date of the FERC approval of the settlement without material modification, or the date that all settling parties agree to accept modifications or otherwise modify the settlement in response to a proposed material modification by the FERC). In addition, beginning with the July 2022 service month, the settlement provides for Entergy Mississippi’s bills from System Energy to be adjusted to reflect: an authorized rate of return on equity of 9.65%, a capital structure not to exceed 52% equity, a rate base reduction for the advance collection of sale-leaseback rental costs, and the exclusion of certain long-term incentive plan performance unit costs from rates.

The settlement is expressly contingent upon the approval of the FERC and the MPSC. It was approved by the MPSC in June 2022. The remaining retail regulators of Entergy’s utility operating company purchasers under the Unit Power Sales Agreement (the APSC, the LPSC, and the City Council) may elect to join the settlement. If all of them elect to do so under the terms of the settlement, then the total black-box refund payment by System Energy would be $588.25 million, and the prospective rate adjustments would apply to all purchasers under the Unit Power Sales Agreement.

If the FERC approves the settlement in accordance with its terms, then it will become binding upon the Entergy parties and the MPSC even if no additional retail regulators elect to join the settlement. The settlement will have no effect on the rights of non-settling parties to the identified FERC proceedings.

System Energy previously recorded a provision and associated liability of $37 million for elements of the applicable litigation. In June 2022, System Energy recorded a regulatory charge of $551 million ($413 million net-of-tax), increasing the regulatory liability to $588 million, which consists of $235 million for the settlement with the MPSC and $353 million for potential future refunds to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. In August 2022 comments on the settlement were filed by the APSC, the LPSC, the City Council, and the FERC trial staff. The APSC, the LPSC, and the City Council do not intend to join the settlement, but they do not

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oppose its approval as between the MPSC and the Entergy parties. The FERC trial staff concludes that the settlement is fair, reasonable, and in the public interest. Reply comments were filed in August 2022. System Energy requested an order from the FERC by November 2022.

Storm Cost Recovery Filings with Retail Regulators

See Note 2 to the financial statements in the Form 10-K for discussion regarding storm cost recovery filings. The following are updates to that discussion.

Entergy Louisiana

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

As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages.

In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a supplemental filing updating the total restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by these storms were estimated to be approximately $2.06 billion, including approximately $1.68 billion in capital costs and approximately $380 million in non-capital costs. Including carrying costs through January 2022, Entergy Louisiana sought an LPSC determination that $2.11 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally, Entergy Louisiana requested that the LPSC determine that re-establishment of a storm escrow account to the previously authorized amount of $290 million was appropriate. In July 2021, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.

In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy Louisiana sought approval for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.


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After filing of testimony by the LPSC staff and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, the parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in February 2022. The settlement agreement contained the following key terms: $2.1 billion of restoration costs from Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and were eligible for recovery; carrying costs of $51 million were recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana was authorized to finance $3.186 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. The LPSC issued an order approving the settlement in March 2022. As a result of the financing order, Entergy Louisiana reclassified $1.942 billion from utility plant to other regulatory assets.

In May 2022 the securitization financing closed, resulting in the issuance of $3.194 billion principal amount of bonds by Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana legislature approved in 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust I (the storm trust).

Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust to purchase 31,635,718.7221 Class A preferred, non-voting membership interest units (the preferred interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2022 on the preferred interests issued to the storm trust. These annual dividends received by the storm trust will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust. Specifically, 1% of the annual dividends received by the storm trust will be distributed to the LURC, for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred interests have a stated annual cumulative cash dividend rate of 7% and a liquidation price of $100 per unit. The terms of the preferred interests include certain financial covenants to which Entergy Finance Company is subject.

Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of June 2022 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust is required to liquidate Entergy Finance Company preferred interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.

From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company distributed $1.4 billion to its parent, Entergy Holdings Company, LLC. Subsequently, Entergy Holdings Company liquidated, distributing the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and 2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana had acquired these preferred membership interests with proceeds from previous securitizations of storm restoration costs. Entergy Finance Company loaned the remaining $1.7 billion from the preferred membership interests proceeds to Entergy which used the cash to redeem $650 million of 4.00% Series senior notes due July 2022 and indirectly contributed $1 billion to Entergy Louisiana as a capital contribution.

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Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane Ida escrow account and subsequently withdrew the $1 billion from the escrow account. With a portion of the $1 billion withdrawn from the escrow account and the $1.4 billion from the Entergy Holdings Company liquidation, Entergy Louisiana deposited $290 million in a restricted escrow account as a storm damage reserve for future storms, used $1.2 billion to repay its unsecured term loan due June 2023, and used $435 million to redeem a portion of its 0.62% Series mortgage bonds due November 2023.

As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a reduction of income tax expense of approximately $290 million by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was partially offset by other tax charges resulting in a net reduction of income tax expense of $283 million. In recognition of obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded a $224 million ($165 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.

As discussed in Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In second quarter 2022, Entergy Louisiana recorded a charge of $31.6 million in other income to reflect the LURC’s beneficial interest in the trust.

In April 2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimated to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs of $57 million through December 2022, Entergy Louisiana is seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, is eligible for recovery from customers. As part of this filing, Entergy Louisiana also is seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount is exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana is requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, is eligible for recovery from customers. As discussed above, in March 2022 the LPSC approved financing of a $1 billion storm escrow account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. In October 2022 the LPSC staff recommended a finding that the requested storm restoration costs of $2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and are eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above. A procedural schedule has been established with a hearing in December 2022.

Entergy New Orleans

Hurricane Zeta

As discussed in the Form 10-K, in October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. In May 2021, Entergy New Orleans filed an application with the City Council requesting approval and certification that its system restoration costs associated with Hurricane Zeta of approximately $36 million, which included $7 million in estimated costs, were reasonable and necessary to

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enable Entergy New Orleans to restore electric service to its customers and Entergy New Orleans’s electric utility infrastructure. In May 2022 the City Council advisors issued a report recommending that the City Council find that Entergy New Orleans acted prudently in restoring service following Hurricane Zeta and approximately $33 million in storm restoration costs were prudently incurred and recoverable. Additionally, the advisors concluded that approximately $7 million of the $44 million withdrawn from its funded storm reserve was in excess of Entergy New Orleans’s costs and should be considered in Entergy New Orleans’s application for certification of costs related to Hurricane Ida. In September 2022 the City Council issued a resolution finding that Entergy New Orleans’s system restoration costs were reasonable and necessary, and that Entergy New Orleans acted prudently in restoring electricity following Hurricane Zeta. The City Council also found that approximately $33 million in storm costs were recoverable.

Hurricane Ida

As discussed in the Form 10-K, in August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. In June 2022, Entergy New Orleans filed an application with the City Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately $170 million, which included $11 million in estimated costs, were reasonable, necessary, and prudently incurred to enable Entergy New Orleans to restore electric service to its customers and to repair Entergy New Orleans’s electric utility infrastructure. In addition, estimated carrying costs through December 2022 related to Hurricane Ida restoration costs were $9 million. Also, Entergy New Orleans is requesting approval that the $39 million withdrawal from its funded storm reserve in September 2021 and $7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms are properly applied to Hurricane Ida storm restoration costs, the application of which reduces the amount to be recovered from Entergy New Orleans customers by $46 million.

Additionally, as discussed in the Form 10-K, in February 2022, Entergy New Orleans filed with the City Council a securitization application requesting that the City Council review Entergy New Orleans’s storm reserve and increase the storm reserve funding level to $150 million, to be funded through securitization. In August 2022 the City Council’s advisors recommended that the City Council authorize a single securitization bond issuance to fund Entergy New Orleans’s storm recovery reserves to an amount sufficient to: (1) allow recovery of all of Entergy New Orleans’s unrecovered storm recovery costs following Hurricane Ida, subject to City Council review and certification; (2) provide initial funding of storm recovery reserves for future storms to a level of $75 million; and (3) fund the storm recovery bonds’ upfront financing costs. In September 2022, Entergy New Orleans and the City Council’s advisors entered into an agreement in principle, which was approved by the City Council along with a financing order in October 2022, authorizing Entergy New Orleans to proceed with a single securitization bond issuance of $206 million, with $125 million interim recovery, subject to City Council review and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs; $75 million to provide for a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds’ upfront financing costs. In November 2022 the City Council adopted a procedural schedule regarding the certification of the Hurricane Ida storm restoration costs in which the hearing officer shall certify the record for City Council consideration no later than August 2023.

Entergy Texas

Hurricane Laura, Hurricane Delta, and Winter Storm Uri

As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to

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distribution and transmission infrastructure, and the loss of sales during the power outages. In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization in December 2021. In November 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022, Entergy Texas reclassified $153 million from utility plant to other regulatory assets.

In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured system restoration bonds (securitization bonds). With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas began cost recovery through the system restoration charge effective with the first billing cycle of May 2022 and the system restoration charge is expected to remain in place up to 15 years. See Note 4 to the financial statements herein for a discussion of the April 2022 issuance of the securitization bonds.


NOTE 3.  EQUITY (Entergy Corporation, Entergy Louisiana, and Entergy Mississippi)

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 September 30,
20222021
(In Millions, Except Per Share Data)
IncomeShares$/shareIncomeShares$/share
Basic earnings per share
Net income attributable to Entergy Corporation$560.6 203.4 $2.76 $531.0 201.0 $2.64 
Average dilutive effect of:
Stock options0.5 (0.01)0.4 — 
Other equity plans0.6 (0.01)0.6 (0.01)
Equity Forwards0.1 — — — 
Diluted earnings per share$560.6 204.6 $2.74 $531.0 202.0 $2.63 

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.9 million for the three months ended September 30, 2022 and approximately 1 million for the three months ended September 30, 2021.


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The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
For the Nine Months Ended September 30,
20222021
(In Millions, Except Per Share Data)
IncomeShares$/shareIncomeShares$/share
Basic earnings per share
Net income attributable to Entergy Corporation$996.7 203.3 $4.90 $859.6 200.8 $4.28 
Average dilutive effect of:
Stock options0.5 (0.01)0.4 (0.01)
Other equity plans0.5 (0.01)0.4 (0.01)
Equity forwards0.1 — — — 
Diluted earnings per share$996.7 204.4 $4.88 $859.6 201.6 $4.26 

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.9 million for the nine months ended September 30, 2022 and approximately 1 million for the nine months ended September 30, 2021.

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 $1.01 for the three months ended September 30, 2022 and $0.95 for the three months ended September 30, 2021. Dividends declared per common share were $3.03 for the nine months ended September 30, 2022 and $2.85 for the nine months ended September 30, 2021.

Equity Distribution Program

In January 2021, Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may enter into forward sale agreements for the sale of its common stock. Initially, the aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement could not exceed an aggregate gross sales price of $1 billion. In May 2022, Entergy increased the aggregate gross sales price authorized under the at the market equity distribution program by $1 billion. As of September 30, 2022, an aggregate gross sales price of approximately $1,077.8 million has been sold under the at the market equity distribution program. See Note 7 to the financial statements in the Form 10-K for discussion of the common stock issued and unsettled forward sale agreements entered into during 2021.

During the nine months ended September 30, 2022, there were no shares of common stock issued under the at the market equity distribution program. During the nine months ended September 30, 2021, Entergy Corporation issued 265,468 shares of common stock under the at the market equity distribution program. The net sales proceeds from these shares totaled $26.8 million, which includes the gross sales price of $28.2 million received by Entergy Corporation less $1.1 million of general issuance costs and $0.3 million of aggregate compensation to the agents with respect to such sales.

In June 2021, Entergy entered into a forward sale agreement for 416,853 shares of common stock. The forward sale agreement was amended in August 2022 to extend the duration of the forward sale agreement by one year. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur. The forward sale agreement requires Entergy to, at its election prior to September 30, 2023, either (i) physically settle the transactions by issuing the total of 416,853

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shares of its common stock to the investment bank in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially $106.87 per share) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 416,853 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled $45 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of approximately $0.5 million, which have not been deducted from the gross sales price. Entergy Corporation did not receive any proceeds from such sales of borrowed shares.

In August and October 2021, Entergy entered into forward sale agreements for 1,692,555 and 250,743 shares of common stock, respectively. The forward sale agreements were amended in August 2022 to extend the duration of the forward sale agreements by one year. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreements occur. In each case, the forward sale agreement requires Entergy to, at its election prior to September 30, 2023, either (i) physically settle the transactions by issuing the total of 1,692,555 and 250,743 shares, respectively, of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the respective forward sale agreement (initially approximately $111.16 and $100.35 per share, respectively) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the respective forward sale agreement. In connection with the forward sale agreements, the forward seller, or its affiliates, borrowed from third parties and sold 1,692,555 and 250,743 shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled $190.1 million and $25.4 million, respectively. In connection with the sales of these shares, Entergy paid the forward sellers fees of $1.9 million and $0.3 million, respectively, which have not been deducted from the gross sales prices. Entergy did not receive any proceeds from such sales of borrowed shares.

In March 2022, Entergy entered into a forward sale agreement for 1,538,010 shares of common stock. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur. The forward sale agreement requires Entergy to, at its election prior to September 29, 2023, either (i) physically settle the transactions by issuing the total of 1,538,010 shares of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially approximately $108.14 per share) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 1,538,010 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $168 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of approximately $1.7 million, which have not been deducted from the gross sales price. Entergy did not receive any proceeds from such sales of borrowed shares.

In June 2022, Entergy entered into a forward sale agreement for 2,124,086 shares of common stock. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur. The forward sale agreement requires Entergy to, at its election prior to December 29, 2023, either (i) physically settle the transactions by issuing the total of 2,124,086 shares of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially approximately $116.94 per share) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 2,124,086 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $250.9 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of

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approximately $2.5 million, which have not been deducted from the gross sales price. Entergy did not receive any proceeds from such sales of borrowed shares.

In September 2022, Entergy entered into a forward sale agreement for 1,666,172 shares of common stock. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur. The forward sale agreement requires Entergy to, at its election prior to December 29, 2023, either (i) physically settle the transactions by issuing the total of 1,666,172 shares of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially approximately $115.46 per share) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 1,666,172 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $194.2 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of approximately $1.9 million, which have not been deducted from the gross sales price. Entergy did not receive any proceeds from such sales of borrowed shares.

Until settlement of the forward sale agreements, earnings per share dilution resulting from the agreement, if any, will be determined under the treasury stock method. Share dilution occurs when the average market price of Entergy’s common stock is higher than the average forward sales price. For the nine months ended September 30, 2022, approximately 4.8 million shares under the forward sale agreements were not included in the calculation of diluted earnings per share because their effect would have been antidilutive.

Treasury Stock

During the nine months ended September 30, 2022, Entergy Corporation issued 829,048 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 nine months ended September 30, 2022.

Retained Earnings

On October 28, 2022, Entergy Corporation’s Board of Directors declared a common stock dividend of $1.07 per share, payable on December 1, 2022 to holders of record as of November 14, 2022.


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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 September 30, 2022 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, July 1, 2022($987)($324,274)$1,223 ($324,038)
Other comprehensive income (loss) before reclassifications(14)— (1,223)(1,237)
Amounts reclassified from accumulated other comprehensive income (loss)38 11,867 — 11,905 
Net other comprehensive income (loss) for the period24 11,867 (1,223)10,668 
Ending balance, September 30, 2022($963)($312,407)$— ($313,370)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the
three months ended September 30, 2021 by component:

Cash flow
hedges
net
unrealized
gain (loss)		Pension
and
other
postretirement
liabilities		Net
unrealized
investment
gain (loss)		Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, July 1, 2021($1,083)($489,511)$11,855 ($478,739)
Other comprehensive income (loss) before reclassifications(14)— (2,173)(2,187)
Amounts reclassified from accumulated other comprehensive income (loss)38 8,838 11 8,887 
Net other comprehensive income (loss) for the period24 8,838 (2,162)6,700 
Ending balance, September 30, 2021($1,059)($480,673)$9,693 ($472,039)


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The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2022 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, 2022($1,035)($338,647)$7,154 ($332,528)
Other comprehensive income (loss) before reclassifications(42)— (12,997)(13,039)
Amounts reclassified from accumulated other comprehensive income (loss)114 26,240 5,843 32,197 
Net other comprehensive income (loss) for the period72 26,240 (7,154)19,158 
Ending balance, September 30, 2022($963)($312,407)$— ($313,370)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2021 by component:

Cash flow
hedges
net
unrealized
gain (loss)		Pension
and
other
postretirement
liabilities		Net
unrealized
investment
gain (loss)		Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
Beginning balance, January 1, 2021$28,719 ($534,576)$56,650 ($449,207)
Other comprehensive income (loss) before reclassifications1,454 — (46,826)(45,372)
Amounts reclassified from accumulated other comprehensive income (loss)(31,232)53,903 (131)22,540 
Net other comprehensive income (loss) for the period(29,778)53,903 (46,957)(22,832)
Ending balance, September 30, 2021($1,059)($480,673)$9,693 ($472,039)


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The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended September 30, 2022 and 2021:

Pension and Other
Postretirement Liabilities
20222021
(In Thousands)
Beginning balance, July 1,$7,174 $4,508 
Amounts reclassified from accumulated other comprehensive income (loss)295 (131)
Net other comprehensive income (loss) for the period295 (131)
Ending balance, September 30,$7,469 $4,377 

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the nine months ended September 30, 2022 and 2021:
Pension and Other
Postretirement Liabilities
20222021
(In Thousands)
Beginning balance, January 1,$8,278 $4,327 
Amounts reclassified from accumulated other comprehensive income (loss)(809)50 
Net other comprehensive income (loss) for the period(809)50 
Ending balance, September 30,$7,469 $4,377 


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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended September 30, 2022 and 2021 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20222021
(In Thousands)
Cash flow hedges net unrealized gain (loss)
   Power contracts$— $— Competitive business operating revenues
   Interest rate swaps(48)(48)Miscellaneous - net
Total realized gain (loss) on cash flow hedges(48)(48)
Income taxes10 10 Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)($38)($38)
Pension and other postretirement liabilities
   Amortization of prior-service credit$3,837 $5,248 (a)
   Amortization of loss(4,870)(13,490)(a)
   Settlement loss(14,339)(3,192)(a)
Total amortization(15,372)(11,434)
Income taxes3,505 2,596 Income taxes
Total amortization (net of tax)($11,867)($8,838)
Net unrealized investment gain (loss)
Realized gain (loss)$— ($17)Interest and investment income
Income taxes— 6 Income taxes
Total realized investment gain (loss) (net of tax)$— ($11)
Total reclassifications for the period (net of tax)($11,905)($8,887)
(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 for the nine months ended September 30, 2022 and 2021 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20222021
(In Thousands)
Cash flow hedges net unrealized gain (loss)
   Power contracts$— $39,679 Competitive business operating revenues
   Interest rate swaps(145)(145)Miscellaneous - net
Total realized gain (loss) on cash flow hedges(145)39,534 
Income taxes31 (8,302)Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)($114)$31,232 
Pension and other postretirement liabilities
   Amortization of prior-service credit$11,511 $15,744 (a)
   Amortization of loss(29,774)(75,553)(a)
   Settlement loss(15,666)(9,235)(a)
Total amortization(33,929)(69,044)
Income taxes7,689 15,141 Income taxes
Total amortization (net of tax)($26,240)($53,903)
Net unrealized investment gain (loss)
Realized gain (loss)($9,245)$207 Interest and investment income
Income taxes3,402 (76)Income taxes
Total realized investment gain (loss) (net of tax)($5,843)$131 
Total reclassifications for the period (net of tax)($32,197)($22,540)

(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 September 30, 2022 and 2021 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20222021
(In Thousands)
Pension and other postretirement liabilities
   Amortization of prior-service credit$1,158 $1,230 (a)
   Amortization of loss(222)(519)(a)
   Settlement loss(1,340)(534)(a)
Total amortization(404)177 
Income taxes109 (46)Income taxes
Total amortization (net of tax)(295)131 
Total reclassifications for the period (net of tax)($295)$131 

(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 nine months ended September 30, 2022 and 2021 were as follows:
Amounts reclassified
from AOCI		Income Statement Location
20222021
(In Thousands)
Pension and other postretirement liabilities
   Amortization of prior-service credit$3,474 $3,690 (a)
   Amortization of loss(849)(1,824)(a)
   Settlement loss(1,518)(1,934)(a)
Total amortization1,107 (68)
Income taxes(298)18 Income taxes
Total amortization (net of tax)809 (50)
Total reclassifications for the period (net of tax)$809 ($50)

(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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Noncontrolling Interest

The dollar value of noncontrolling interest for Entergy Louisiana as of September 30, 2022 and December 31, 2021 is presented below:
20222021
(In Thousands)
Entergy Louisiana Noncontrolling Interest
Restoration Law Trust I (a)
$32,448 $— 
Total Noncontrolling Interest$32,448 $— 

(a)Restoration Law Trust I was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs, as well as to establish a storm reserve to fund a portion of Hurricane Ida storm restoration costs. Restoration Law Trust I holds preferred membership interests issued by Entergy Finance Company, and Entergy Finance Company is required to make annual distributions (dividends) on the preferred membership interests. These annual dividends paid on the Entergy Finance Company preferred membership interests will be distributed 1% to the LURC and 99% to Entergy Louisiana. Entergy Louisiana, as the primary beneficiary, consolidates Restoration Law Trust I and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the consolidated financial statements for Entergy Louisiana and Entergy. See Note 2 to the financial statements herein for a discussion of the Entergy Louisiana securitization.

The dollar value of noncontrolling interest for Entergy Mississippi as of September 30, 2022 and December 31, 2021 is presented below:
20222021
(In Thousands)
Entergy Mississippi Noncontrolling Interest
MS Sunflower Partnership, LLC (a)
$478 $— 
Total Noncontrolling Interest$478 $— 

(a)In May 2022, MS Sunflower Partnership, LLC, a tax equity partnership between Entergy Mississippi and a tax equity investor, made the initial payment for the purchase of the Sunflower Solar facility. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment of the purchase price is currently expected in fourth quarter 2022. Entergy Mississippi, as the managing member, consolidates MS Sunflower Partnership, LLC and the tax equity investor’s interest is shown as noncontrolling interest in the consolidated financial statements for Entergy Mississippi and Entergy. Entergy Mississippi uses the HLBV method of accounting for income or loss allocation to the tax equity investor’s noncontrolling interest. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC which is the basis for treatment of Entergy Mississippi’s investment in MS Sunflower Partnership, LLC.


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 June 2027.  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

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on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the nine months ended September 30, 2022 was 2.39% on the drawn portion of the facility.  As of September 30, 2022, amounts outstanding and capacity available under the $3.5 billion credit facility are:

Capacity BorrowingsLetters
of Credit		Capacity
Available
(In Millions)
$3,500$150$3$3,347

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 Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit facility’s maturity date may occur.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion.  As of September 30, 2022, Entergy Corporation had $1.387 billion of commercial paper outstanding.  The weighted-average interest rate for the nine months ended September 30, 2022 was 1.52%.

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of September 30, 2022 as follows:
CompanyExpiration
Date		Amount of
Facility		Interest Rate
(a)		Amount Drawn
as of
September 30, 2022		Letters of Credit
Outstanding as of
September 30, 2022
Entergy ArkansasApril 2023$25 million (b)4.37%$—$—
Entergy ArkansasJune 2027$150 million (c)4.26%$—$—
Entergy LouisianaJune 2027$350 million (c)4.38%$—$—
Entergy MississippiApril 2023$45 million (d)4.63%$—$—
Entergy MississippiApril 2023$40 million (d)4.63%$—$—
Entergy MississippiApril 2023$10 million (d)4.63%$—$—
Entergy MississippiJuly 2024$150 million3.97%$100 million$—
Entergy New OrleansJune 2024$25 million (c)4.74%$—$—
Entergy TexasJune 2027$150 million (c)4.38%$—$1.1 million

(a)The interest rate is the estimated interest rate as of September 30, 2022 that would have been applied to outstanding borrowings under the facility.
(b)Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
(d)Borrowings under the short-term 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 0.375% of the undrawn commitment amount for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas, and of the entire facility amount for Entergy New Orleans. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt

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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 an uncommitted standby letter of credit facility as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of September 30, 2022:
CompanyAmount of
Uncommitted Facility		Letter of Credit FeeLetters of Credit
Issued as of
September 30, 2022
(a) (b)
Entergy Arkansas$25 million0.78%$5.6 million
Entergy Louisiana$125 million 0.78%$21.0 million
Entergy Mississippi$65 million0.78%$9.7 million
Entergy New Orleans$15 million1.625%$1.0 million
Entergy Texas$80 million0.875%$9.7 million

(a)As of September 30, 2022, letters of credit posted with MISO covered financial transmission right exposure of $0.9 million for Entergy Louisiana, $0.8 million for Entergy Mississippi, $0.1 million for Entergy New Orleans, and $0.8 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of September 30, 2022, in addition to the $9.7 million MISO letters of credit, Entergy Mississippi had $1.0 million in 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 short-term borrowing limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are effective through October 2023. 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 September 30, 2022 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
 AuthorizedBorrowings
 (In Millions)
Entergy Arkansas$250$—
Entergy Louisiana $450 $—
Entergy Mississippi$200$19
Entergy New Orleans$150$—
Entergy Texas$200$—
System Energy$200$—

Vermont Yankee Credit Facility (Entergy Corporation)

In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Entergy Assets Management Operations, LLC (formerly Vermont Yankee Asset Retirement, LLC), Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in December 2023. The commitment fee is

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currently 0.20% of the undrawn commitment amount.  As of September 30, 2022, $139 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the nine months ended September 30, 2022 was 2.54% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.

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 also issue commercial paper, details of which follow as of September 30, 2022:
CompanyExpiration
Date 		Amount
of
Facility		Weighted
 Average Interest
 Rate on
 Borrowings (a)		Amount
Outstanding as of
September 30, 2022
(Dollars in Millions)
Entergy Arkansas VIEJune 2025$802.21%$—
Entergy Louisiana River Bend VIEJune 2025$1051.75%$15.1
Entergy Louisiana Waterford VIEJune 2025$1052.12%$72.2
System Energy VIEJune 2025$1202.15%$83.9

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

The commitment fees on the credit facilities are 0.100% 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. Each lessee is in compliance with this covenant.

The nuclear fuel company variable interest entities had notes payable that were included in debt on the respective balance sheets as of September 30, 2022 as follows:
CompanyDescriptionAmount
Entergy Arkansas VIE
3.17% Series M due December 2023
$40 million
Entergy Arkansas VIE
1.84% Series N due July 2026
$90 million
Entergy Louisiana River Bend VIE
2.51% Series V due June 2027
$70 million
Entergy Louisiana Waterford VIE
3.22% Series I due December 2023
$20 million
System Energy VIE
2.05% Series K due September 2027
$90 million

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

Entergy Arkansas, Entergy Louisiana, and System Energy each has obtained financing authorization from the FERC that extends through October 2023 for issuances by its nuclear fuel company variable interest entities.


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Debt Issuances and Retirements

(Entergy Corporation)

In June 2022, Entergy Corporation redeemed $650 million of 4.00% Series senior notes due July 2022.

(Entergy Arkansas)

In March 2022, Entergy Arkansas issued $200 million of 4.20% Series mortgage bonds due April 2049. Entergy Arkansas used the proceeds for general corporate purposes, including the repayment of borrowings from the Entergy System money pool.

(Entergy Louisiana)

In December 2021, Entergy Louisiana entered into a term loan credit agreement providing a $1.2 billion unsecured term loan due June 2023. The term loan bears interest at a variable interest rate based on an adjusted term Secured Overnight Financing Rate plus the applicable margin. The weighted average interest rate over the life of the loan was 1.18%. Entergy Louisiana received the funds in January 2022 and used the proceeds for general corporate purposes, including storm restoration costs related to Hurricane Ida. Entergy Louisiana repaid the full amount of the loan in June 2022.

In May 2022, Entergy Louisiana redeemed, prior to maturity, a portion of its 0.62% Series mortgage bonds due November 2023. Entergy Louisiana redeemed $435 million in aggregate principal amount of the bonds, leaving $665 million in aggregate principal amount outstanding.

In August 2022, Entergy Louisiana issued $500 million of 4.75% Series mortgage bonds due September 2052. Entergy Louisiana expects to use the proceeds, together with other funds, to repay on or prior to maturity its $200 million of 3.30% Series mortgage bonds due December 2022, to repay on or prior to maturity a portion of its $665 million of 0.62% Series mortgage bonds due November 2023, to repay a portion of the debt outstanding under its $350 million long-term revolving credit facility, and for general corporate purposes. Entergy Louisiana intends to allocate an amount equal to the net proceeds from the issuance to finance and/or refinance, in whole or in part, existing or new eligible green projects.

(Entergy Mississippi)

In June 2022, Entergy Mississippi entered into a term loan credit agreement providing a $150 million unsecured term loan due December 2023. The term loan bears interest at a variable interest rate based on an adjusted term Secured Overnight Financing Rate plus the applicable margin. The weighted average interest rate for the nine months ended September 30, 2022 was 3.30%. Entergy Mississippi used the funds for general corporate purposes.

(Entergy Texas)

In August 2022, Entergy Texas issued $325 million of 5.00% Series mortgage bonds due September 2052. Entergy Texas expects to use the proceeds for general corporate purposes.

(System Energy)

In May 2022, System Energy entered into a term loan credit agreement providing a $50 million term loan due November 2023. The term loan is secured by a series of first mortgage bonds and bears interest at a variable interest rate based on an adjusted term Secured Overnight Financing Rate plus the applicable margin. The weighted

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average interest rate for the nine months ended September 30, 2022 was 2.97%. System Energy used the funds for general corporate purposes.

Entergy Texas Securitization Bonds

In January 2022 the PUCT authorized the issuance of securitization bonds to recover $242.9 million of Entergy Texas’s Hurricane Laura, Hurricane Delta, and Winter Storm Uri restoration costs, plus carrying costs, plus approximately $13.3 million relating to a system restoration regulatory asset related to Hurricane Harvey, plus up-front qualified costs. In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured restoration bonds (securitization bonds), as follows:
Amount
(In Thousands)
Senior Secured Restoration Bonds:
Tranche A-1 (3.051%) due December 2028
$100,000 
Tranche A-2 (3.697%) due December 2036
190,850 
Total senior secured restoration bonds$290,850 

Although the principal amount of each tranche is not due until the dates given above, Entergy Texas Restoration Funding II expects to make principal payments on the securitization bonds over the next five years in the amounts of $12.3 million for 2022, $17.8 million for 2023, $18.3 million for 2024, $18.8 million for 2025, and $19.4 million for 2026. All of the expected principal payments for 2022-2026 are for Tranche A-1.

With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas expects to use the proceeds to reduce its outstanding debt. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding II, including the transition property, and the creditors of Entergy Texas Restoration Funding II do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Texas Restoration Funding II except to remit system restoration charge collections.

Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of September 30, 2022 were as follows:
Book Value
of Long-Term Debt		Fair Value
of Long-Term Debt (a)
(In Thousands)
Entergy$26,219,979 $22,567,380 
Entergy Arkansas$4,164,866 $3,570,817 
Entergy Louisiana$10,860,595 $9,509,010 
Entergy Mississippi$2,430,783 $1,998,266 
Entergy New Orleans$783,034 $709,965 
Entergy Texas$2,907,947 $2,445,550 
System Energy$788,961 $710,771 


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(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, 2021 were as follows:
Book Value
of Long-Term Debt		Fair Value
of Long-Term Debt (a)
(In Thousands)
Entergy$25,880,901 $27,061,171 
Entergy Arkansas$3,958,862 $4,176,577 
Entergy Louisiana$10,914,346 $11,492,650 
Entergy Mississippi$2,179,989 $2,346,230 
Entergy New Orleans$788,165 $765,538 
Entergy Texas$2,354,148 $2,483,995 
System Energy$741,296 $743,040 

(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 444,028 shares of its common stock under the 2019 Omnibus Incentive Plan during the first quarter 2022 with a fair value of $16.25 per option.  As of September 30, 2022, there were options on 2,789,088 shares of common stock outstanding with a weighted-average exercise price of $96.37.  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 September 30, 2022.  The aggregate intrinsic value of the stock options outstanding as of September 30, 2022 was $30.9 million.

The following table includes financial information for outstanding stock options for the three months ended September 30, 2022 and 2021:
20222021
(In Millions)
Compensation expense included in Entergy’s consolidated net income$0.9 $1.2 
Tax benefit recognized in Entergy’s consolidated net income$0.2 $0.3 
Compensation cost capitalized as part of fixed assets and materials and supplies$0.4 $0.4 


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The following table includes financial information for outstanding stock options for the nine months ended September 30, 2022 and 2021:
20222021
(In Millions)
Compensation expense included in Entergy’s consolidated net income$3.2 $3.2 
Tax benefit recognized in Entergy’s consolidated net income$0.8 $0.8 
Compensation cost capitalized as part of fixed assets and materials and supplies$1.2 $1.2 

Other Equity Awards

In January 2022 the Board approved and Entergy granted 328,849 restricted stock awards and 170,966 long-term incentive awards under the 2019 Omnibus Incentive Plan.  The restricted stock awards were made effective on January 27, 2022 and were valued at $109.59 per share, which was the closing price of Entergy’s common stock on that date.  Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the three-year vesting period. One-third of the restricted stock awards and accrued dividends will vest upon each anniversary of the grant date.  

In addition, long-term incentive awards were also granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned. To emphasize the importance of strong cash generation for the long-term health of its business, a credit measure – adjusted funds from operations/debt ratio – was selected for the 2022-2024 performance period. Performance will be measured based eighty percent on relative total shareholder return and twenty percent on the credit measure.  The performance units were granted on January 27, 2022 and eighty percent were valued at $138.99 per share based on various factors, primarily market conditions; and twenty percent were valued at $109.59 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 September 30, 2022 and 2021:
20222021
(In Millions)
Compensation expense included in Entergy’s consolidated net income$9.1 $10.6 
Tax benefit recognized in Entergy’s consolidated net income$2.3 $2.7 
Compensation cost capitalized as part of fixed assets and materials and supplies$3.9 $4.1 


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The following table includes financial information for other outstanding equity awards for the nine months ended September 30, 2022 and 2021:
20222021
(In Millions)
Compensation expense included in Entergy’s consolidated net income$31.1 $31.1 
Tax benefit recognized in Entergy’s consolidated net income$7.9 $7.9 
Compensation cost capitalized as part of fixed assets and materials and supplies$12.6 $12.1 


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 costs, including amounts capitalized, for the third quarters of 2022 and 2021, included the following components:
20222021
(In Thousands)
Service cost - benefits earned during the period$33,845 $38,531 
Interest cost on projected benefit obligation60,734 49,222 
Expected return on assets(100,203)(106,684)
Amortization of net loss42,367 69,386 
Settlement charges125,548 44,718 
Net pension costs$162,291 $95,173 

Entergy’s qualified pension costs, including amounts capitalized, for the nine months ended September 30, 2022 and 2021, included the following components:
20222021
(In Thousands)
Service cost - benefits earned during the period$108,482 $126,722 
Interest cost on projected benefit obligation164,529 142,702 
Expected return on assets(306,895)(318,437)
Amortization of net loss159,359 266,576 
Settlement charges148,201 156,266 
Net pension costs$273,676 $373,829 

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The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their employees for the third quarters of 2022 and 2021, included the following components:

2022Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$6,138 $8,261 $1,953 $690 $1,441 $1,891 
Interest cost on projected benefit obligation11,866 12,523 3,383 1,368 2,795 2,882 
Expected return on assets(18,731)(20,586)(5,006)(2,487)(4,551)(4,509)
Amortization of net loss10,283 10,156 2,941 1,208 2,130 2,641 
Settlement charges11,477 33,507 6,853 4,402 13,082 4,593 
Net pension cost$21,033 $43,861 $10,124 $5,181 $14,897 $7,498 

2021Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$6,966 $9,230 $2,197 $735 $1,680 $2,141 
Interest cost on projected benefit obligation9,396 10,270 2,735 1,156 2,213 2,379 
Expected return on assets(19,585)(22,466)(5,629)(2,678)(5,341)(4,853)
Amortization of net loss16,100 15,201 4,580 1,656 2,815 4,135 
Settlement charges7,238 13,209 3,685 1,107 1,634 4,086 
Net pension cost$20,115 $25,444 $7,568 $1,976 $3,001 $7,888 

The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their employees for the nine months ended September 30, 2022 and 2021, included the following components:

2022Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$19,695 $26,405 $6,158 $2,194 $4,652 $5,937 
Interest cost on projected benefit obligation30,944 33,706 8,857 3,646 7,242 7,614 
Expected return on assets(57,009)(62,779)(15,373)(7,517)(14,393)(13,718)
Amortization of net loss36,557 35,055 10,371 3,944 7,124 9,078 
Settlement charges22,973 37,968 9,061 4,402 15,547 6,616 
Net pension cost$53,160 $70,355 $19,074 $6,669 $20,172 $15,527 


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2021Entergy
Arkansas		Entergy
Louisiana		Entergy
 Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$21,640 $29,033 $6,865 $2,304 $5,237 $6,707 
Interest cost on projected benefit obligation26,488 29,695 7,769 3,264 6,215 6,757 
Expected return on assets(58,896)(67,521)(16,815)(7,941)(15,851)(14,436)
Amortization of net loss53,652 52,294 15,556 5,996 9,941 14,393 
Settlement charges31,624 48,201 11,447 4,691 8,261 8,725 
Net pension cost$74,508 $91,702 $24,822 $8,314 $13,803 $22,146 

Non-Qualified Net Pension Cost

Entergy recognized $5.9 million and $6.9 million in pension cost for its non-qualified pension plans in the third quarters of 2022 and 2021, respectively. Reflected in the pension cost for non-qualified pension plans in the third quarters of 2022 and 2021 were settlement charges of $1.4 million and $2.5 million, respectively, related to the payment of lump sum benefits out of the plan. Entergy recognized $23.3 million and $16 million in pension cost for its non-qualified pension plans for the nine months ended September 30, 2022 and 2021, respectively. Reflected in the pension cost for non-qualified pension plans for the nine months ended September 30, 2022 and 2021 were settlement charges of $9.2 million and $2.5 million, respectively, 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 third quarters of 2022 and 2021:

Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas
(In Thousands)
2022$69 $24 $80 $28 $961 
2021$86 $192 $91 $7 $115 

Reflected in Entergy Texas’ non-qualified pension costs in the third quarter of 2022 were settlement charges of $886 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Louisiana’s non-qualified pension costs in the third quarter of 2021 were settlement charges of $155 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs in the third quarter of 2021 were settlement charges of $3 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 nine months ended September 30, 2022 and 2021:

Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas
(In Thousands)
2022$212 $77 $241 $84 $1,264 
2021$266 $280 $283 $23 $345 


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Reflected in Entergy Mississippi’s non-qualified pension costs for the nine months ended September 30, 2022 were settlement charges of $2 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’ non-qualified pension costs for the nine months ended September 30, 2022 were settlement charges of $1 million related to the payment of lump sum benefits out of the plan. Reflected in Entergy Louisiana’s non-qualified pension costs for the nine months ended September 30, 2021 were settlement charges of $155 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs for the nine months ended September 30, 2021 were settlement charges of $3 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 income, including amounts capitalized, for the third quarters of 2022 and 2021, included the following components:
20222021
(In Thousands)
Service cost - benefits earned during the period$6,184 $6,645 
Interest cost on accumulated postretirement benefit obligation (APBO)6,827 5,320 
Expected return on assets(10,855)(10,805)
Amortization of prior service credit(6,388)(8,267)
Amortization of net loss1,083 713 
Net other postretirement benefit income($3,149)($6,394)

Entergy’s other postretirement benefit income, including amounts capitalized, for the nine months ended September 30, 2022 and 2021, included the following components:
 20222021
 (In Thousands)
Service cost - benefits earned during the period$18,552 $19,935 
Interest cost on accumulated postretirement benefit obligation (APBO)20,481 15,960 
Expected return on assets(32,565)(32,415)
Amortization of prior service credit(19,164)(24,801)
Amortization of net loss3,249 2,139 
Net other postretirement benefit income($9,447)($19,182)


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The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the third quarters of 2022 and 2021, included the following components:

2022Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$1,114 $1,408 $339 $99 $331 $310 
Interest cost on APBO1,263 1,443 350 174 399 279 
Expected return on assets(4,483)— (1,394)(1,499)(2,568)(791)
Amortization of prior service cost/(credit)471 (1,158)(443)(229)(1,093)(80)
Amortization of net (gain) loss218 (186)56 (225)162 30 
Net other postretirement benefit cost (income) ($1,417)$1,507 ($1,092)($1,680)($2,769)($252)

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

The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the nine months ended September 30, 2022 and 2021, included the following components:

2022Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$3,342 $4,224 $1,017 $297 $993 $930 
Interest cost on APBO3,789 4,329 1,050 522 1,197 837 
Expected return on assets(13,449)— (4,182)(4,497)(7,704)(2,373)
Amortization of prior service cost/(credit)1,413 (3,474)(1,329)(687)(3,279)(240)
Amortization of net (gain) loss654 (558)168 (675)486 90 
Net other postretirement benefit cost (income)($4,251)$4,521 ($3,276)($5,040)($8,307)($756)


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2021Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Service cost - benefits earned during the period$3,102 $4,632 $1,086 $327 $1,038 $1,005 
Interest cost on APBO2,796 3,390 834 390 951 660 
Expected return on assets(13,515)— (4,152)(4,314)(7,644)(2,367)
Amortization of prior service credit(840)(3,690)(1,332)(687)(2,808)(327)
Amortization of net (gain) loss147 (273)57 (534)300 45 
Net other postretirement benefit cost (income)($8,310)$4,059 ($3,507)($4,818)($8,163)($984)

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 third quarters of 2022 and 2021:

2022Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$— $4,014 ($177)$3,837 
Amortization of net loss(3,976)(596)(298)(4,870)
Settlement loss(14,263)— (76)(14,339)
($18,239)$3,418 ($551)($15,372)
Entergy Louisiana
Amortization of prior service credit$— $1,158 $— $1,158 
Amortization of net gain (loss)(407)186 (1)(222)
Settlement loss(1,340)— — (1,340)
($1,747)$1,344 ($1)($404)


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2021Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$— $5,288 ($40)$5,248 
Amortization of net loss(12,439)(496)(555)(13,490)
Settlement loss(2,731)— (461)(3,192)
($15,170)$4,792 ($1,056)($11,434)
Entergy Louisiana
Amortization of prior service credit$— $1,230 $— $1,230 
Amortization of net gain (loss)(609)91 (1)(519)
Settlement loss(528)— (6)(534)
($1,137)$1,321 ($7)$177 

Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the nine months ended September 30, 2022 and 2021:
2022Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$— $12,042 ($531)$11,511 
Amortization of net loss(26,921)(1,788)(1,065)(29,774)
Settlement loss(14,441)— (1,225)(15,666)
($41,362)$10,254 ($2,821)($33,929)
Entergy Louisiana
Amortization of prior service credit$— $3,474 $— $3,474 
Amortization of net gain (loss)(1,404)558 (3)(849)
Settlement loss(1,518)— — (1,518)
($2,922)$4,032 ($3)$1,107 


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2021Qualified
Pension
Costs		Other
Postretirement
Costs		Non-Qualified
Pension Costs		Total
(In Thousands)
Entergy
Amortization of prior service (cost) credit$— $15,864 ($120)$15,744 
Amortization of net loss(72,322)(1,486)(1,745)(75,553)
Settlement loss(8,774)— (461)(9,235)
($81,096)$14,378 ($2,326)($69,044)
Entergy Louisiana
Amortization of prior service credit$— $3,690 $— $3,690 
Amortization of net gain (loss)(2,093)273 (4)(1,824)
Settlement loss(1,928)— (6)(1,934)
($4,021)$3,963 ($10)($68)

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.

Qualified Pension Settlement Cost

Year-to-date lump sum benefit payments from the Entergy Corporation Retirement Plan for Bargaining Employees, the Entergy Corporation Retirement Plan for Non-Bargaining Employees, the Entergy Corporation Retirement Plan II for Bargaining Employees, and the Entergy Corporation Retirement Plan II for Non-Bargaining Employees exceeded the sum of the Plan’s 2022 service and interest cost, resulting in settlement costs. In accordance with accounting standards, settlement accounting requires immediate recognition of the portion of previously unrecognized losses associated with the settled portion of the plan’s pension liability. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy each participate in one or both of the Entergy Corporation Retirement Plan for Bargaining Employees and the Entergy Corporation Retirement Plan for Non-Bargaining Employees and incurred settlement costs. Similar to other pension costs, the settlement costs were included with employee labor costs and charged to expense and capital in the same manner that labor costs were charged. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans each received regulatory approval to defer the expense portion of the settlement costs, with future amortization of the deferred settlement expense over the period in which the expense otherwise would be recorded had the immediate recognition not occurred.

Entergy Texas Reserve

In September 2020, Entergy Texas elected to establish a reserve, in accordance with PUCT regulations, for the difference between the amount recorded for pension and other postretirement benefits expense under generally accepted accounting principles during 2019, the first year that rates from Entergy Texas’s last general rate proceeding were in effect, and the annual amount of actuarially determined pension and other postretirement benefits chargeable to Entergy Texas’s expense. The reserve amount will be evaluated in the base rate case that was filed with the PUCT in July 2022 and a reasonable amortization period will be determined by the PUCT. At September 30, 2022, the balance in this reserve was approximately $25.4 million.


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Employer Contributions

Based on current assumptions, Entergy expects to contribute $400 million to its qualified pension plans in 2022.  As of September 30, 2022, Entergy had contributed $170 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 2022:
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New Orleans		Entergy
Texas		System
Energy
(In Thousands)
Expected 2022 pension contributions$78,605 $41,641 $27,716 $922 $1,924 $26,376 
Pension contributions made through September 2022$44,300 $24,319 $15,685 $922 $1,632 $12,754 
Remaining estimated pension contributions to be made in 2022$34,305 $17,322 $12,031 $— $292 $13,622 


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

Entergy’s reportable segments as of September 30, 2022 were Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  See Note 13 to the financial statements in the Form 10-K and Note 14 to the financial statements herein for discussion of the shutdown and sale of each of the Entergy Wholesale Commodities nuclear power plants. With the sale of Palisades in June 2022, Entergy completed its multi-year strategy to exit the merchant nuclear power business. “All Other” includes the parent company, Entergy Corporation, and other business activity.

Entergy’s segment financial information for the third quarters of 2022 and 2021 were as follows:
UtilityEntergy
Wholesale
Commodities		All OtherEliminationsConsolidated
(In Thousands)
2022
Operating revenues$4,156,616 $62,009 $— ($10)$4,218,615 
Income taxes$178,088 $18,252 ($12,228)$— $184,112 
Consolidated net income (loss)$667,162 ($18,745)($37,125)($55,410)$555,882 
2021
Operating revenues$3,191,240 $162,275 $24 ($7)$3,353,532 
Income taxes$159,472 $8,836 ($10,026)$— $158,282 
Consolidated net income (loss)$574,399 $26,064 ($32,982)($31,898)$535,583 


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Entergy’s segment financial information for the nine months ended September 30, 2022 and 2021 were as follows:
UtilityEntergy
Wholesale
Commodities		All OtherEliminationsConsolidated
(In Thousands)
2022
Operating revenues$10,191,041 $300,720 $— ($24)$10,491,737 
Income taxes($118,257)$46,340 ($37,117)$— ($109,034)
Consolidated net income (loss)$1,166,866 $76,501 ($113,273)($130,608)$999,486 
Total assets as of September 30, 2022$61,784,169 $465,865 $603,672 ($3,878,411)$58,975,295 
2021
Operating revenues$8,461,241 $559,150 $77 ($28)$9,020,440 
Income taxes$290,566 ($47,299)($37,459)$— $205,808 
Consolidated net income (loss)$1,264,933 ($210,460)($85,445)($95,695)$873,333 
Total assets as of December 31, 2021$59,733,625 $1,242,675 $561,168 ($2,083,226)$59,454,242 

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

As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management implemented a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which included the shutdown and sale of all plants in its merchant nuclear fleet. With the sale of Palisades in June 2022, Entergy has exited the merchant nuclear power business. The decisions to shut down these plants and the related transactions resulted in asset impairments, employee retention and severance expenses and other benefits-related costs, and contracted economic development contributions.

Total restructuring charges for the third quarters of 2022 and 2021 were comprised of the following:
20222021
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 July 1,$40 $— $40 $33 $— $33 
Restructuring costs accrued— — — 2 — 2 
Cash paid out40 — 40 — — — 
Balance as of September 30,$— $— $— $35 $— $35 




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Total restructuring charges for the nine months ended September 30, 2022 and 2021 were comprised of the following:
20222021
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,$37 $— $37 $145 $14 $159 
Restructuring costs accrued3 — 3 9 1 10 
Cash paid out40 — 40 119 15 134 
Balance as of September 30,$— $— $— $35 $— $35 

In addition, Entergy Wholesale Commodities recorded a gain of $166 million in the nine months ended September 30, 2022 as a result of the sale of the Palisades plant, as well as $1 million of impairment and other related charges, and $345 million in the nine months ended September 30, 2021 of impairment and other related charges, including a $340 million loss as a result of the sale of the Indian Point Energy Center, associated with these strategic decisions and transactions.

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 was selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets.  In addition to its forward physical power and gas

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contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk.  When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow.

Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio.

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

Derivatives

Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions.  Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements.  Financially-settled cash flow hedges can include natural gas and electricity swaps and options.  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 entered 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 settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. 

Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed 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 contained provisions that required 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 was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date.  There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of

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September 30, 2022 and December 31, 2021. Cash collateral of $8 million was required to be posted by the Entergy subsidiary to its counterparties as of September 30, 2022 and December 31, 2021.

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 has executed natural gas swaps and options as of September 30, 2022 is 1.5 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of September 30, 2022 is 6 months, each, for Entergy Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of September 30, 2022 is 22,880,037 MMBtu for Entergy, including 10,960,000 MMBtu for Entergy Louisiana, 10,701,000 MMBtu for Entergy Mississippi, and 1,219,037 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2022 through May 31, 2023. 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 September 30, 2022 is 96,835 GWh for Entergy, including 22,176 GWh for Entergy Arkansas, 43,396 GWh for Entergy Louisiana, 10,515 GWh for Entergy Mississippi, 4,153 GWh for Entergy New Orleans, and 16,473 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 September 30, 2022 and December 31, 2021. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of September 30, 2022 and for Entergy Mississippi and Entergy Texas as of December 31, 2021.


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The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of September 30, 2022 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Business
(In Millions)
Derivatives not designated as hedging instruments
Assets:
Natural gas swaps and optionsPrepayments and other$22$—$22Utility
Natural gas swaps and optionsOther deferred debits and other assets$8$—$8Utility
Financial transmission rightsPrepayments and other$23($2)$21Utility and Entergy Wholesale Commodities

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.  
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Business
(In Millions)
Derivatives not designated as hedging instruments    
Assets:    
Natural gas swaps and optionsPrepayments and other$6$—$6Utility
Natural gas swaps and optionsOther deferred debits and other assets$5$—$5Utility
Financial transmission rightsPrepayments and other$4$—$4Utility and Entergy Wholesale Commodities
Liabilities:    
Natural gas swaps and optionsOther current liabilities$7$—$7Utility

(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 $8 million posted as of September 30, 2022 and December 31, 2021. Also excludes letters of credit in the amount of $3 million posted as of September 30, 2022.


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As discussed above, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. For the three months ended September 30, 2021, there were no effects resulting from Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements.

The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the nine months ended September 30, 2021 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)
Electricity swaps and options$2Competitive businesses operating revenues$40

(a)    Before taxes of $8 million for the nine months ended September 30, 2021

Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated 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 would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed 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 September 30, 2022 and 2021 were as follows:

InstrumentIncome Statement
location		Amount of gain (loss)
recorded in the income statement
(In Millions)
2022
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale(a)$42
Financial transmission rightsPurchased power expense(b)$30
2021
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale(a)$37
Financial transmission rightsPurchased power expense(b)$18
Electricity swaps and options (c)Competitive business operating revenues$—


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The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the nine months ended September 30, 2022 and 2021 were as follows:
InstrumentIncome Statement
location		Amount of gain (loss)
recorded in the income statement
(In Millions)
2022
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale(a)$120
Financial transmission rightsPurchased power expense(b)$90
2021
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale(a)$62
Financial transmission rightsPurchased power expense(b)$162
Electricity swaps and options (c)Competitive business operating revenues($2)

(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 prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021.


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The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of September 30, 2022 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 optionsPrepayments and other$20.1$—$20.1Entergy Louisiana
Natural gas swaps and optionsOther deferred debits and other assets$8.0$—$8.0Entergy Louisiana
Natural gas swapsPrepayments and other$2.0$—$2.0Entergy Mississippi
Financial transmission rightsPrepayments and other$9.6$—$9.6Entergy Arkansas
Financial transmission rightsPrepayments and other$10.0($0.6)$9.4Entergy Louisiana
Financial transmission rightsPrepayments and other$1.5$—$1.5Entergy Mississippi
Financial transmission rightsPrepayments and other$1.1$—$1.1Entergy New Orleans
Liabilities:
Natural gas swapsOther current liabilities$0.4$—$0.4
Entergy New Orleans
Financial transmission rightsOther current liabilities$0.9($1.3)($0.4)Entergy Texas


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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, 2021 were as follows:
InstrumentBalance Sheet LocationGross Fair Value (a)Offsetting Position (b)Net Fair Value (c) (d)Registrant
(In Millions)
Assets:
Natural gas swaps and optionsPrepayments and other $5.7$—$5.7Entergy Louisiana
Natural gas swaps and optionsOther deferred debits and other assets$5.3$—$5.3Entergy Louisiana
Financial transmission rightsPrepayments and other$2.3$—$2.3Entergy Arkansas
Financial transmission rightsPrepayments and other$0.6$—$0.6Entergy Louisiana
Financial transmission rightsPrepayments and other$0.3$—$0.3Entergy Mississippi
Financial transmission rightsPrepayments and other$0.1$—$0.1Entergy New Orleans
Financial transmission rightsPrepayments and other$0.8$—$0.8Entergy Texas
Liabilities:
Natural gas swapsOther current liabilities$6.7$—$6.7Entergy Mississippi
Natural gas swapsOther current liabilities$0.5$—$0.5Entergy 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 September 30, 2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.9 million for Entergy Louisiana, $0.8 million for Entergy Mississippi, $0.1 million for Entergy New Orleans, and $0.8 million for Entergy Texas. As of December 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi and $0.1 million for 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 three months ended September 30, 2022 and 2021 were as follows:

InstrumentIncome Statement LocationAmount of gain
(loss) recorded
in the income statement		Registrant
(In Millions)
2022
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale$17.9(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$24.4(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.2)(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$12.4(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$10.2(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$4.8(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$0.6(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$2.3(b)Entergy Texas
2021
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale$9.4(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$25.6(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$2.2(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$4.5(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$8.7(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$1.5(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$0.6(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$2.6(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 nine months ended September 30, 2022 and 2021 were as follows:
InstrumentIncome Statement LocationAmount of gain
(loss) recorded
in the income statement		Registrant
(In Millions)
2022
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale$37.7(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$81.9(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.7(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$35.8(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$35.7(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$8.0(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$3.0(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$7.2(b)Entergy Texas
2021
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale$16.1(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$44(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$2.2(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$34(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$26.8(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$9.4(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$2.6(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$85.3(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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Notes to Financial Statements
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 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.

Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in

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April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio.

The values for power contract assets or liabilities prior to expiration in April 2021 were 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 were classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities were 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 included: 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 was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Entergy Wholesale Commodities Accounting group performed 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 were based on the estimated amount that the contracts were 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 equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date.  These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business.  The fair values were 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 were recorded as derivative contract assets or liabilities.  For contracts that had unit contingent terms, a further discount was 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 were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes.  Inputs to the valuation included end of day forward market prices for the period when the transactions settled, 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 were reviewed and could be adjusted if it was determined that there was a better representation of fair value.  

On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options.  The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions.  Significant differences were 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 were 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 confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis.  The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities.  Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio.  In particular, the credit and liquidity effects were calculated for this analysis.  This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities.


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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 reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The 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 are accounted for at fair value on a recurring basis as of September 30, 2022 and December 31, 2021.  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.
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$923 $— $— $923 
Decommissioning trust funds (a):
Equity securities15 — — 15 
Debt securities (b)553 1,073 — 1,626 
Common trusts (c)2,269 
Securitization recovery trust account27 — — 27 
Escrow accounts332 — — 332 
Gas hedge contracts22 8 — 30 
Financial transmission rights— — 21 21 
$1,872 $1,081 $21 $5,243 

2021Level 1Level 2Level 3Total
(In Millions)
Assets:    
Temporary cash investments$398 $— $— $398 
Decommissioning trust funds (a):    
Equity securities132 — — 132 
Debt securities (b)770 1,407 — 2,177 
Common trusts (c)3,205 
Securitization recovery trust account29 — — 29 
Escrow accounts49 — — 49 
Gas hedge contracts6 5 — 11 
Financial transmission rights— — 4 4 
 $1,384 $1,412 $4 $6,005 
Liabilities:    
Gas hedge contracts$7 $— $— $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.
(b)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 on debt

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securities. 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 September 30, 2022 and 2021:

20222021
Financial transmission rightsFinancial transmission rights
(In Millions)
Balance as of July 1,$12 $15 
Total gains (losses) for the period
Included as a regulatory liability/asset39 11 
Settlements(30)(18)
Balance as of September 30,$21 $8 

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 nine months ended September 30, 2022 and 2021:
20222021
Financial transmission rightsPower ContractsFinancial transmission rights
(In Millions)
Balance as of January 1,$4 $38 $9 
Total gains (losses) for the period
Included in earnings— (2)— 
Included in other comprehensive income— 2 — 
Included as a regulatory liability/asset91 — 149 
Issuances of financial transmission rights16 — 12 
Settlements(90)(38)(162)
Balance as of September 30,$21 $— $8 

The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO.

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


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The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2022 and December 31, 2021.  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
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$76.9 $— $— $76.9 
Decommissioning trust funds (a):
Equity securities6.7 — — 6.7 
Debt securities134.4 326.7 — 461.1 
Common trusts (b)673.9 
Financial transmission rights— — 9.6 9.6 
$218.0 $326.7 $9.6 $1,228.2 

2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$4.8 $— $— $4.8 
Decommissioning trust funds (a):
Equity securities16.7 — — 16.7 
Debt securities119.5 406.8 — 526.3 
Common trusts (b)895.4 
Financial transmission rights— — 2.3 2.3 
$141.0 $406.8 $2.3 $1,445.5 

Entergy Louisiana
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$195.3 $— $— $195.3 
Decommissioning trust funds (a):
Equity securities5.4 — — 5.4 
Debt securities210.5 504.2 — 714.7 
Common trusts (b)962.4 
Escrow accounts291.2 — — 291.2 
Gas hedge contracts20.1 8.0 — 28.1 
Financial transmission rights— — 9.4 9.4 
$722.5 $512.2 $9.4 $2,206.5 


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2021Level 1Level 2Level 3Total
 (In Millions)
Assets:    
Temporary cash investments$18.4 $— $— $18.4 
Decommissioning trust funds (a):    
Equity securities20.2 — — 20.2 
Debt securities262.6 531.6 — 794.2 
Common trusts (b)1,300.1 
Gas hedge contracts5.7 5.3 — 11.0 
Financial transmission rights— — 0.6 0.6 
 $306.9 $536.9 $0.6 $2,144.5 

Entergy Mississippi
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Escrow accounts$41.1 $— $— $41.1 
Gas hedge contracts2.0 — — 2.0 
Financial transmission rights— — 1.5 1.5 
$43.1 $— $1.5 $44.6 

2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$47.6 $— $— $47.6 
Escrow accounts48.9 — — 48.9 
Financial transmission rights— — 0.3 0.3 
 $96.5 $— $0.3 $96.8 
Liabilities:
Gas hedge contracts$6.7 $— $— $6.7 

Entergy New Orleans
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$17.6 $— $— $17.6 
Securitization recovery trust account5.5 — — 5.5 
Financial transmission rights— — 1.1 1.1 
$23.1 $— $1.1 $24.2 
Liabilities:
Gas hedge contracts$0.4 $— $— $0.4 


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2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$42.8 $— $— $42.8 
Securitization recovery trust account2.0 — — 2.0 
Financial transmission rights— — 0.1 0.1 
$44.8 $— $0.1 $44.9 
Liabilities:
Gas hedge contracts$0.5 $— $— $0.5 

Entergy Texas
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$208.8 $— $— $208.8 
Securitization recovery trust account21.9 — — 21.9 
$230.7 $— $— $230.7 
Liabilities:
Financial transmission rights$— $— $0.4 $0.4 

2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Securitization recovery trust account$26.6 $— $— $26.6 
Financial transmission rights— — 0.8 0.8 
$26.6 $— $0.8 $27.4 

System Energy
2022Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$194.9 $— $— $194.9 
Decommissioning trust funds (a):
Equity securities2.9 — — 2.9 
Debt Securities208.5 242.2 — 450.7 
Common trusts (b)632.7 
$406.3 $242.2 $— $1,281.2 


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2021Level 1Level 2Level 3Total
(In Millions)
Assets:
Temporary cash investments$89.1 $— $— $89.1 
Decommissioning trust funds (a):
Equity securities12.9 — — 12.9 
Debt securities273.0 251.5 — 524.5 
Common trusts (b)847.9 
$375.0 $251.5 $— $1,474.4 

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

The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2022.

Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of July 1,$4.4 $4.7 $0.5 $0.6 $1.5 
Gains (losses) included as a regulatory liability/asset17.6 14.9 5.8 1.1 0.4 
Settlements(12.4)(10.2)(4.8)(0.6)(2.3)
Balance as of September 30,$9.6 $9.4 $1.5 $1.1 ($0.4)

The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2021.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of July 1,$3.8 $4.8 $2.1 $0.6 $3.8 
Gains (losses) included as a regulatory liability/asset3.1 6.5 — 0.3 0.5 
Settlements(4.5)(8.7)(1.5)(0.6)(2.6)
Balance as of September 30,$2.4 $2.6 $0.6 $0.3 $1.7 

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The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2022.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of January 1,$2.3 $0.6 $0.3 $0.1 $0.8 
Issuances of financial transmission rights5.4 5.3 0.8 0.8 3.9 
Gains (losses) included as a regulatory liability/asset37.7 39.2 8.4 3.2 2.1 
Settlements(35.8)(35.7)(8.0)(3.0)(7.2)
Balance as of September 30,$9.6 $9.4 $1.5 $1.1 ($0.4)

The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2021.
Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of January 1,$2.7 $4.2 $0.6 $0.1 $1.6 
Issuances of financial transmission rights2.8 4.1 1.7 0.4 2.7 
Gains (losses) included as a regulatory liability/asset30.9 21.1 7.7 2.4 82.7 
Settlements(34.0)(26.8)(9.4)(2.6)(85.3)
Balance as of September 30,$2.4 $2.6 $0.6 $0.3 $1.7 


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, and Grand Gulf. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.

As discussed in Note 14 to the financial statements herein, in June 2022, Entergy completed the sale of Palisades to Holtec. As part of the transaction, Entergy transferred the Palisades decommissioning trust fund to Holtec. The disposition-date fair value of the decommissioning trust fund was approximately $552 million.

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 did not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds were 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

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the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Generally, Entergy records 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 nine months ended September 30, 2022 on equity securities still held as of September 30, 2022 were ($120) million and ($767) 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.

The available-for-sale securities held as of September 30, 2022 and December 31, 2021 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2022
Debt Securities$1,626 $2 $232 
2021
Debt Securities$2,177 $65 $12 

The unrealized gains/(losses) above are reported before deferred taxes of $2 million as of December 31, 2021 for debt securities. As of September 30, 2022, there were no deferred taxes on unrealized gains/(losses). The amortized cost of available-for-sale debt securities was $1,856 million as of September 30, 2022 and $2,125 million as of December 31, 2021.  As of September 30, 2022, available-for-sale debt securities had an average coupon rate of approximately 2.98%, an average duration of approximately 6.31 years, and an average maturity of approximately 10.38 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 September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$1,211 $165 $770 $8 
More than 12 months339 67 99 4 
Total$1,550 $232 $869 $12 


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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 2022 and December 31, 2021 were as follows:
20222021
(In Millions)
Less than 1 year$77 $— 
1 year - 5 years526 473 
5 years - 10 years456 655 
10 years - 15 years111 389 
15 years - 20 years139 130 
20 years+317 530 
Total$1,626 $2,177 

During the three months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $119 million and $354 million, respectively.  During the three months ended September 30, 2022 and 2021, gross gains of $0.2 million and $8 million, respectively, and gross losses of $8 million and $2 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $755 million and $1,151 million, respectively.  During the nine months ended September 30, 2022 and 2021, gross gains of $2 million and $24 million, respectively, and gross losses of $36 million and $15 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair value of the Palisades decommissioning trust fund as of December 31, 2021 was $576 million. 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 September 30, 2022 and December 31, 2021 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2022
Debt Securities$461.1 $— $73.7 
2021
Debt Securities$526.3 $11.4 $4.7 

The amortized cost of available-for-sale debt securities was $534.8 million as of September 30, 2022 and $519.6 million as of December 31, 2021.  As of September 30, 2022, the available-for-sale debt securities had an average coupon rate of approximately 2.22%, an average duration of approximately 5.81 years, and an average maturity of approximately 7.16 years.

The unrealized gains/(losses) recognized during the three and nine months ended September 30, 2022 on equity securities still held as of September 30, 2022 were ($35.3) million and ($229.2) million, respectively. The

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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 September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$288.3 $40.5 $183.8 $2.9 
More than 12 months159.8 33.2 39.5 1.8 
Total$448.1 $73.7 $223.3 $4.7 

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 2022 and December 31, 2021 were as follows:
 20222021
 (In Millions)
Less than 1 year$40.5 $— 
1 year - 5 years156.7 91.7 
5 years - 10 years180.1 217.4 
10 years - 15 years34.5 146.0 
15 years - 20 years30.8 35.7 
20 years+18.5 35.5 
Total$461.1 $526.3 

During the three months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $17.2 million and $20.6 million, respectively.  During the three months ended September 30, 2022, there were no gross gains related to available-for-sale securities reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2021, gross gains of $0.7 million related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2022 and 2021, gross losses of $2 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $33.1 million and $46.7 million, respectively.  During the nine months ended September 30, 2022 and 2021, gross gains of $0.1 million and $2.3 million, respectively, and gross losses of $2.5 million and $0.3 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 September 30, 2022 and December 31, 2021 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2022
Debt Securities$714.7 $1.8 $86.6 
2021
Debt Securities$794.2 $31.3 $3.3 

The amortized cost of available-for-sale debt securities was $799.5 million as of September 30, 2022 and $766.3 million as of December 31, 2021.  As of September 30, 2022, the available-for-sale debt securities had an average coupon rate of approximately 3.67%, an average duration of approximately 6.65 years, and an average maturity of approximately 12.57 years.

The unrealized gains/(losses) recognized during the three and nine months ended September 30, 2022 on equity securities still held as of September 30, 2022 were ($51.6) million and ($322.9) 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.

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 September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$579.8 $68.8 $206.9 $1.4 
More than 12 months76.5 17.8 42.9 1.9 
Total$656.3 $86.6 $249.8 $3.3 


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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 2022 and December 31, 2021 were as follows:
20222021
(In Millions)
Less than 1 year$29.3 $— 
1 year - 5 years184.7 157.8 
5 years - 10 years152.6 173.0 
10 years - 15 years67.9 123.0 
15 years - 20 years80.5 80.2 
20 years+199.7 260.2 
Total$714.7 $794.2 

During the three months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $47.6 million and $20.5 million, respectively.  During the three months ended September 30, 2022 and 2021, gross gains of $0.2 million and $0.9 million, respectively, and gross losses of $2.8 million and $23.5 thousand, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $288.5 million and $191.4 million, respectively.  During the nine months ended September 30, 2022 and 2021, gross gains of $1.3 million and $5.6 million, respectively, and gross losses of $15 million and $3.4 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 September 30, 2022 and December 31, 2021 are summarized as follows:
Fair
Value		Total
Unrealized
Gains		Total
Unrealized
Losses
(In Millions)
2022
Debt Securities$450.7 $0.1 $71.2 
2021
Debt Securities$524.5 $11.8 $2.9 

The amortized cost of available-for-sale debt securities was $521.8 million as of September 30, 2022 and $515.6 million as of December 31, 2021.  As of September 30, 2022, the available-for-sale debt securities had an average coupon rate of approximately 2.67%, an average duration of approximately 6.30 years, and an average maturity of approximately 10.22 years.

The unrealized gains/(losses) recognized during the three and nine months ended September 30, 2022 on equity securities still held as of September 30, 2022 were ($33.2) million and ($215) 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 September 30, 2022 and December 31, 2021:
September 30, 2022December 31, 2021
Fair
Value		Gross
Unrealized
Losses		Fair
Value		Gross
Unrealized
Losses
(In Millions)
Less than 12 months$342.7 $55.2 $276.6 $2.3 
More than 12 months102.2 16.0 11.3 0.6 
Total$444.9 $71.2 $287.9 $2.9 

The fair value of available-for-sale debt securities, summarized by contractual maturities, as of September 30, 2022 and December 31, 2021 were as follows:
20222021
(In Millions)
Less than 1 year$7.7 $— 
1 year - 5 years184.4 156.8 
5 years - 10 years123.6 161.8 
10 years - 15 years9.0 58.6 
15 years - 20 years27.6 1.9 
20 years+98.4 145.4 
Total$450.7 $524.5 

During the three months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $54.6 million and $292.8 million, respectively.  During the three months ended September 30, 2022 and 2021, gross gains of $0.02 million and $5.9 million, respectively, and gross losses of $3 million and $2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the nine months ended September 30, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $158.6 million and $468.5 million, respectively.  During the nine months ended September 30, 2022 and 2021, gross gains of $0.2 million and $9 million, respectively, and gross losses of $8.3 million and $3.8 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Allowance for expected credit losses

Entergy estimates the expected credit losses for its available-for-sale securities based on the current credit rating and remaining life of the securities.  To the extent an individual security is determined to be uncollectible, it is written off against this allowance.  Entergy’s available-for-sale securities are held in trusts managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Specifically, available-for-sale securities are subject to credit worthiness restrictions, with requirements for both the average credit rating of the portfolio and minimum credit ratings for individual debt securities.  As of September 30, 2022, Entergy did not have an allowance for expected credit losses related to available-for-sale securities. As of December 31, 2021, Entergy’s allowance for expected credit losses related to available-for-sale securities was $0.4 million. Entergy did not record any impairments of available-for-sale debt securities for the three months ended September 30, 2022. Entergy recorded $1.5 million in impairments

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of available-for-sale debt securities for the nine months ended September 30, 2022. Entergy did not record any impairments of available-for-sale debt securities for the three and nine months ended September 30, 2021.


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, the Registrant Subsidiaries began returning unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders and other means approved by their respective regulatory authorities. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This manner of regulatory accounting affects the effective tax rate for the period as compared to the statutory tax rate. The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows:

Three Months
Ended September 30,		Nine Months
Ended September 30,
2022202120222021
(In Millions)
Entergy$16 $17 $50 $72 
Entergy Arkansas$— $— $— $8 
Entergy Louisiana$6 $8 $25 $24 
Entergy New Orleans$— $— $1 $— 
Entergy Texas$10 $9 $24 $22 
System Energy$— $— $— $18 

Income Tax Audits

As a result of income tax audit adjustments proposed by the Arkansas Department of Finance and Administration, an Entergy Wholesale Commodities subsidiary recorded a provision in third quarter 2022 for uncertain tax positions of approximately $21 million, which includes interest expense.

Other Tax Matters

As described in Note 2 to the financial statements herein, Entergy Louisiana implemented a securitization authorized under Act 293 of the Louisiana legislature. Act 293 provides that the LURC contribute the net bond proceeds to a LURC-sponsored trust. Over the 15-year term of the Act 293 bonds, the storm trust will make distributions to Entergy Louisiana, a beneficiary of the storm trust, that will not be taxable to Entergy Louisiana. Additionally, Entergy Louisiana will not include the receipt of the system restoration charges in taxable income because the right to receive the system restoration charges has been granted directly to the LURC, and Entergy Louisiana only acts as an agent to collect those charges on behalf of the LURC.

Accordingly, the securitization provides for a tax accounting permanent difference resulting in a net reduction of income tax expense in second quarter 2022 of approximately $290 million, after taking into account a

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provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $283 million, after taking into account a provision for uncertain tax positions.

In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in second quarter 2022 a $224 million ($165 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana securitization.


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 September 30, 2022 were $354 million for Entergy, $62.2 million for Entergy Arkansas, $155.6 million for Entergy Louisiana, $22.6 million for Entergy Mississippi, $6.7 million for Entergy New Orleans, $37.8 million for Entergy Texas, and $29.9 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2021 were $723 million for Entergy, $35.6 million for Entergy Arkansas, $507.9 million for Entergy Louisiana, $26.5 million for Entergy Mississippi, $73.1 million for Entergy Texas, and $23.4 million for System Energy.


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

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

Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, is a variable interest entity and Entergy Texas is the primary beneficiary. In April 2022, Entergy Texas Restoration Funding II issued senior secured system restoration bonds (securitization bonds) to finance Entergy Texas’s Hurricane Laura, Hurricane Delta, and Winter Storm Uri restoration costs. With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding II, including the transition property, and the creditors of Entergy Texas Restoration Funding II do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Texas Restoration Funding II except to remit system restoration charges. See Note 4 to the financial statements herein for additional details regarding the securitization bonds.

Restoration Law Trust I (the storm trust), a trust consolidated by Entergy Louisiana, is a variable interest entity and Entergy Louisiana is the primary beneficiary. The storm trust was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs, as well as to establish a storm reserve to fund a portion of Hurricane Ida storm restoration costs. Entergy Louisiana is the primary beneficiary of the storm trust because it was created to facilitate the financing of Entergy Louisiana’s storm restoration costs and Entergy Louisiana is entitled to receive a majority of the proceeds received by the storm trust. As of September 30, 2022, the primary asset held by the storm trust is the $3.2 billion of outstanding Entergy Finance Company preferred membership interests, which is reflected as an investment in

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affiliate preferred membership interests on the consolidated balance sheet of Entergy Louisiana. The holders of the securitization bonds do not have recourse to the assets or revenues of the trust or to any Entergy affiliate and the bonds are not reflected in the consolidated balance sheets of Entergy or Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust is presented as noncontrolling interest in the consolidated balance sheets of Entergy and Entergy Louisiana. See Note 2 to the financial statements herein for additional discussion of the securitization bonds and the preferred membership interests.

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 $17.2 million in each of the nine months ended September 30, 2022 and the nine months ended September 30, 2021.

AR Searcy Partnership, LLC, is a tax equity partnership that qualifies as a variable interest entity, which Entergy Arkansas is required to consolidate as it is the primary beneficiary. See Note 14 to the financial statements in the Form 10-K for additional discussion on the establishment of AR Searcy Partnership, LLC and the acquisition of the Searcy Solar facility. The entity is a VIE because the membership interests do not give Entergy Arkansas or the third party tax equity investor substantive kick out rights typical of equity owners. Entergy Arkansas is the primary beneficiary of the partnership because it is the managing member and has the right to a majority of the operating income of the partnership. See Note 1 to the financial statements in the Form 10-K for discussion on the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC. As of September 30, 2022, AR Searcy Partnership, LLC recorded assets equal to $136 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $108.8 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.

MS Sunflower Partnership, LLC, is a tax equity partnership that qualifies as a variable interest entity, which Entergy Mississippi is required to consolidate as it is the primary beneficiary. See Note 14 to the financial statements herein for additional discussion on the establishment of MS Sunflower Partnership, LLC and the acquisition of the Sunflower Solar facility. The entity is a VIE because the membership interests do not give Entergy Mississippi or the third party tax equity investor substantive kick out rights typical of equity owners. Entergy Mississippi is the primary beneficiary of the partnership because it is the managing member and has the right to a majority of the operating income of the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC which is the basis for treatment of Entergy Mississippi’s investment in MS Sunflower Partnership, LLC. As of September 30, 2022, MS Sunflower Partnership, LLC recorded assets equal to $105.2 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Mississippi’s ownership interest in the partnership was approximately $104.9 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.



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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 September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Utility:
Residential$1,570,940 $1,291,645 
Commercial940,604 756,903 
Industrial1,109,245 814,685 
Governmental84,649 66,167 
    Total billed retail3,705,438 2,929,400 
Sales for resale (a)311,479 135,220 
Other electric revenues (b)83,679 81,343 
    Revenues from contracts with customers4,100,596 3,145,963 
Other revenues (c)9,462 14,006 
    Total electric revenues4,110,058 3,159,969 
Natural gas46,548 31,254 
Entergy Wholesale Commodities:
Competitive businesses sales from contracts with customers (a)61,898 158,608 
Other revenues (c)111 3,701 
    Total competitive businesses revenues62,009 162,309 
    Total operating revenues$4,218,615 $3,353,532 



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Entergy’s total revenues for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Utility:
Residential$3,592,025 $3,114,084 
Commercial2,290,893 1,958,284 
Industrial2,731,075 2,169,295 
Governmental209,044 184,576 
    Total billed retail8,823,037 7,426,239 
Sales for resale (a)689,473 459,425 
Other electric revenues (b)420,710 348,683 
    Revenues from contracts with customers9,933,220 8,234,347 
Other revenues (c)90,869 105,417 
    Total electric revenues10,024,089 8,339,764 
Natural gas166,917 121,420 
Entergy Wholesale Commodities:
Competitive businesses sales from contracts with customers (a)294,432 537,402 
Other revenues (c)6,299 21,854 
    Total competitive businesses revenues300,731 559,256 
    Total operating revenues$10,491,737 $9,020,440 


The Utility operating companies’ total revenues for the three months ended September 30, 2022 and 2021 were as follows:

2022Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$323,767 $618,056 $206,708 $116,968 $305,441 
Commercial165,609 402,027 150,137 75,083 147,748 
Industrial175,304 693,445 50,931 10,973 178,592 
Governmental6,104 28,022 14,837 27,406 8,280 
    Total billed retail670,784 1,741,550 422,613 230,430 640,061 
Sales for resale (a)157,008 191,664 56,162 33,158 9,149 
Other electric revenues (b)35,478 61,549 (21,997)(900)10,895 
Revenues from contracts with customers863,270 1,994,763 456,778 262,688 660,105 
Other revenues (c)1,232 8,246 2,354 216 (549)
    Total electric revenues864,502 2,003,009 459,132 262,904 659,556 
Natural gas— 17,789 — 28,759 — 
    Total operating revenues$864,502 $2,020,798 $459,132 $291,663 $659,556 


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2021Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$294,797 $477,025 $184,479 $85,974 $249,370 
Commercial149,952 300,255 131,472 57,563 117,661 
Industrial155,714 477,439 40,671 8,574 132,287 
Governmental5,747 21,448 13,110 20,016 5,846 
    Total billed retail606,210 1,276,167 369,732 172,127 505,164 
Sales for resale (a)76,576 98,830 35,199 23,290 25,329 
Other electric revenues (b)33,120 27,790 13,689 (3,258)11,355 
Revenues from contracts with customers715,906 1,402,787 418,620 192,159 541,848 
Other revenues (c)6,777 4,950 1,699 787 (216)
    Total electric revenues722,683 1,407,737 420,319 192,946 541,632 
Natural gas— 12,971 — 18,283 — 
    Total operating revenues$722,683 $1,420,708 $420,319 $211,229 $541,632 


The Utility operating companies’ total revenues for the nine months ended September 30, 2022 and 2021 were as follows:

2022Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$750,762 $1,372,538 $503,351 $256,110 $709,264 
Commercial406,078 949,680 379,075 179,456 376,604 
Industrial420,788 1,681,628 133,826 26,462 468,371 
Governmental15,702 68,880 39,449 62,617 22,396 
    Total billed retail1,593,330 4,072,726 1,055,701 524,645 1,576,635 
Sales for resale (a)384,175 422,596 121,328 96,523 44,927 
Other electric revenues (b)136,870 185,405 29,665 17,936 54,874 
Revenues from contracts with customers2,114,375 4,680,727 1,206,694 639,104 1,676,436 
Other revenues (c)6,022 57,461 6,926 2,530 20,193 
    Total electric revenues2,120,397 4,738,188 1,213,620 641,634 1,696,629 
Natural gas— 64,367 — 102,550 — 
    Total operating revenues$2,120,397 $4,802,555 $1,213,620 $744,184 $1,696,629 

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2021Entergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
(In Thousands)
Residential$703,081 $1,153,428 $449,576 $212,586 $595,413 
Commercial367,556 787,255 331,052 156,454 315,967 
Industrial373,410 1,299,633 111,195 23,391 361,666 
Governmental14,538 61,611 34,526 54,708 19,193 
    Total billed retail1,458,585 3,301,927 926,349 447,139 1,292,239 
Sales for resale (a)256,411 253,600 119,559 40,796 118,944 
Other electric revenues (b)125,912 127,444 54,029 2,894 42,461 
Revenues from contracts with customers1,840,908 3,682,971 1,099,937 490,829 1,453,644 
Other revenues (c)15,435 59,008 6,041 1,026 (1,358)
    Total electric revenues1,856,343 3,741,979 1,105,978 491,855 1,452,286 
Natural gas— 53,971 — 67,449 — 
    Total operating revenues$1,856,343 $3,795,950 $1,105,978 $559,304 $1,452,286 
(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.
(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market, unbilled revenue, and certain customer credits as directed by regulators.
(c)Other revenues include the equity component of carrying costs related to securitization, 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 2020 in its allowance for doubtful accounts. The following tables set forth a reconciliation of changes in the allowance for doubtful accounts for the nine months ended September 30, 2022 and 2021.
EntergyEntergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of December 31, 2021$68.6 $13.1 $29.2 $7.2 $13.3 $5.8 
Provisions (a)28.8 12.1 8.3 1.5 4.0 2.9 
Write-offs(95.1)(27.3)(38.1)(9.8)(11.7)(8.2)
Recoveries28.4 8.4 10.5 3.2 3.8 2.5 
Balance as of September 30, 2022$30.7 $6.3 $9.9 $2.1 $9.4 $3.0 

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EntergyEntergy
Arkansas		Entergy
Louisiana		Entergy
Mississippi		Entergy
New
Orleans		Entergy
Texas
 (In Millions)
Balance as of December 31, 2020$117.7 $18.3 $45.7 $19.5 $17.4 $16.8 
Provisions (b)43.4 20.0 17.7 2.1 2.0 1.6 
Write-offs(72.5)(21.4)(28.3)(11.8)(1.3)(9.7)
Recoveries7.5 2.1 3.0 1.6 0.5 0.3 
Balance as of September 30, 2021$96.1 $19.0 $38.1 $11.4 $18.6 $9.0 
(a)Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from the COVID-19 pandemic of ($6.4) million for Entergy, $6.4 million for Entergy Arkansas, ($8.5) million for Entergy Louisiana, ($3.0) million for Entergy New Orleans, and ($1.3) million for Entergy Texas that have been deferred as regulatory assets. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the COVID-19 orders issued by retail regulators.
(b)Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from the COVID-19 pandemic of $23.8 million for Entergy, $14.0 million for Entergy Arkansas, $10.4 million for Entergy Louisiana, ($0.1) million for Entergy Mississippi, and ($0.5) million for Entergy New Orleans that have been deferred as regulatory assets. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the COVID-19 orders issued by retail regulators.

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, there were increases in customer write-offs beginning in second quarter 2021 primarily resulting from the effects of the COVID-19 pandemic. Management monitors the current condition of individual customer accounts to manage collections and ensure bad debt expense is recorded in a timely manner.


NOTE 14.  ACQUISITIONS AND DISPOSITIONS (Entergy Corporation and Entergy Mississippi)

Acquisitions

Sunflower Solar

In November 2018, Entergy Mississippi entered into an agreement for the purchase of an approximately 100 MW solar photovoltaic facility to be sited on approximately 1,000 acres in Sunflower County, Mississippi. The project, Sunflower Solar facility, was being built by Sunflower County Solar Project, LLC, an indirect subsidiary of Recurrent Energy, LLC. In December 2018, Entergy Mississippi filed a joint petition with Sunflower County Solar Project with the MPSC for Sunflower County Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility. In March 2020, Entergy Mississippi filed supplemental testimony addressing questions and observations raised in August 2019 by consultants retained by the Mississippi Public Utilities Staff and proposing an alternative structure for the transaction that would reduce its cost. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar facility, subject to certain conditions, including: (i) that Entergy Mississippi pursue a tax equity 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. In April 2022, Entergy Mississippi confirmed mechanical completion of the Sunflower Solar facility. Pursuant to the MPSC’s April 2020 order, MS Sunflower Partnership, LLC was formed for the tax equity partnership with Entergy Mississippi as its managing member. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that

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were then used to make an initial payment of $105 million for acquisition of the facility. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment is currently expected in fourth quarter 2022. Commercial operation at the Sunflower Solar facility commenced in September 2022.

Dispositions

Palisades

In July 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site. In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. The NRC issued an order approving the application in December 2021. Palisades was shut down in May 2022 and defueled in June 2022. The Palisades transaction closed in June 2022 for a purchase price of $1,000 (subject to adjustment for net liabilities and other amounts). The sale included the transfer of the Palisades nuclear decommissioning trust and the asset retirement obligation for spent fuel management and plant decommissioning. The transaction resulted in a gain of $166 million ($130 million net-of-tax) in the second quarter 2022. The disposition-date fair value of the nuclear decommissioning trust fund was approximately $552 million and the disposition-date fair value of the asset retirement obligation was approximately $708 million. The transaction also included property, plant, and equipment with a net book value of zero and materials and supplies.


NOTE 15.  ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. The following are updates to that discussion.

Nuclear Plant Decommissioning

In the third quarter 2022, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $5.4 million reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement obligation cost asset that will be depreciated over the remaining life of the unit.

Coal Combustion Residuals

In the third quarter 2022, revisions to the Big Cajun 2 coal combustion residuals asset retirement obligations were made as a result of revised closure and post-closure cost estimates. The revised estimates resulted in increases of $2.8 million at Entergy Louisiana and $2.1 million at Entergy Texas in decommissioning cost liabilities, along with corresponding increases in related asset retirement obligations cost assets that will be depreciated over the remaining useful life of the unit.
________________

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

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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.

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 September 30, 2022, 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 September 30, 2022 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.




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MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2022 Compared to Third Quarter 2021

Net income decreased $5.5 million primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expenses, partially offset by higher retail electric price and higher volume/weather.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Net income decreased $26.5 million primarily due to higher other operation and maintenance expenses, the reversal in 2021 of the remaining $38.8 million regulatory liability for the formula rate plan 2019 historical year netting adjustment, and higher depreciation and amortization expenses, partially offset by higher retail electric price and higher volume/weather.

Operating Revenues

Third Quarter 2022 Compared to Third Quarter 2021

Following is an analysis of the change in operating revenues comparing the third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues$722.7 
Fuel, rider, and other revenues that do not significantly affect net income110.2 
Retail electric price19.2 
Volume/weather12.4 
2022 operating revenues$864.5 

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 retail electric price variance is primarily due to an increase in formula rate plan rates effective January 2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2021 formula rate plan filing.

The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales, partially offset by a decrease in weather-adjusted residential usage.


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Total electric energy sales for Entergy Arkansas for the three months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential2,395 2,298 4 
Commercial1,709 1,649 4 
Industrial2,361 2,391 (1)
Governmental65 66 (2)
  Total retail 6,530 6,404 2 
Sales for resale:
  Associated companies482 642 (25)
  Non-associated companies1,938 1,569 24 
Total8,950 8,615 4 

See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
Amount
(In Millions)
2021 operating revenues$1,856.3 
Fuel, rider, and other revenues that do not significantly affect net income172.1 
Retail electric price56.5 
Volume/weather27.5 
Return of unprotected excess accumulated deferred income taxes to customers8.0 
2022 operating revenues$2,120.4 

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 retail electric price variance is primarily due to increases in formula rate plan rates effective May 2021 and January 2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2020 formula rate plan filing and the 2021 formula rate plan filing.

The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales and an increase in demand charges as a result of a new contract with an industrial customer in the primary metals industry, partially offset by a decrease in weather-adjusted residential usage.

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. For the nine months ended September 30, 2021, $8 million was returned to customers. There is no effect on net

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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.

Total electric energy sales for Entergy Arkansas for the nine months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential6,307 6,241 1 
Commercial4,398 4,284 3 
Industrial6,468 6,463 — 
Governmental175 176 (1)
  Total retail 17,348 17,164 1 
Sales for resale:
  Associated companies1,418 1,763 (20)
  Non-associated companies5,339 5,300 1 
Total24,105 24,227 (1)

See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.

Other Income Statement Variances

Third Quarter 2022 Compared to Third Quarter 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $12.3 million in power delivery expenses primarily due to higher vegetation maintenance costs and higher reliability costs;
•an increase of $6.2 million in nuclear generation expenses primarily due to higher nuclear labor costs and a higher scope of work performed in 2022 as compared to 2021;
•an increase of $5.7 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•an increase of $2.8 million in energy efficiency expenses primarily due to the timing of recovery from customers, partially offset by lower energy efficiency costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Searcy Solar facility, which was placed in service in December 2021.

Other regulatory charges (credits) - net includes a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.

Other income decreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of the ANO 1 and ANO 2 decommissioning trust funds in 2021.

Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Searcy Solar facility under HLBV accounting. Entergy Arkansas recorded a regulatory charge of $0.8 million in third quarter 2022 to defer the difference between

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the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $12.7 million in nuclear generation expenses primarily due to a higher scope of work performed in 2022 as compared to 2021 and higher nuclear labor costs;
•an increase of $11.7 million in power delivery expenses primarily due to higher reliability costs, higher vegetation maintenance costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;
•an increase of $7.1 million in non-nuclear generation expenses primarily due to a higher scope of work, including during plant outages, performed in 2022 as compared to 2021;
•an increase of $5.9 million in energy efficiency expenses due to the timing of recovery from customers, partially offset by lower energy efficiency costs;
•an increase of $5 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•an increase of $4 million in customer service center support costs primarily due to higher contract costs.

Taxes other than income taxes increased primarily due to increases in franchise taxes, increases in employment taxes, and increases in ad valorem taxes resulting from higher assessments.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Searcy Solar facility, which was placed in service in December 2021.

Other regulatory charges (credits) - net includes the reversal in 2021 of the remaining $38.8 million regulatory liability for the 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2020 formula rate plan filing. In addition, Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.

Other income decreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of the ANO 1 and ANO 2 decommissioning trust funds in 2021.

Interest expense increased primarily due to the issuance of $200 million of 4.20% Series mortgage bonds in March 2022 and the issuance of $400 million of 3.35% Series mortgage bonds in March 2021, partially offset by the repayment of $350 million of 3.75% Series mortgage bonds in February 2021.

Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Searcy Solar facility under HLBV accounting. Entergy Arkansas recorded a regulatory charge of $3 million for the nine months ended September 30, 2022 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.


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Income Taxes

The effective income tax rates were 24.4% for the third quarter 2022 and 23.4% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were 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 24.5% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 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 21.7% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 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 and the amortization of excess accumulated deferred 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 of 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 for discussion of the Inflation Reduction Act of 2022.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
 20222021
 (In Thousands)
Cash and cash equivalents at beginning of period$12,915 $192,128 
Net cash provided by (used in):
Operating activities675,357 453,077 
Investing activities(579,122)(546,953)
Financing activities(30,019)(915)
Net increase (decrease) in cash and cash equivalents66,216 (94,791)
Cash and cash equivalents at end of period$79,131 $97,337 

Operating Activities

Net cash flow provided by operating activities increased $222.3 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•higher collections from customers;
•the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements herein for a discussion of fuel and purchased power cost recovery;
•a decrease in spending of $25.7 million on nuclear refueling outages in 2022; and

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•a decrease of $20.4 million in pension contributions in 2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” herein and 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 increase was partially offset by payments to vendors, including timing and increase in cost of operations.

Investing Activities

Net cash flow used in investing activities increased $32.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•an increase of $55.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2022 and increased investment in the reliability and infrastructure of Entergy Arkansas’s distribution system, partially offset by lower spending in 2022 on advanced metering infrastructure; and
•an increase of $13.4 million in decommissioning trust fund investment activity.

The increase was partially offset by a decrease of $36.5 million as a result of fluctuations in nuclear fuel activity primarily 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.

Financing Activities

Net cash flow used in financing activities increased $29.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•the issuance of $400 million of 3.35% Series mortgage bonds in March 2021;
•money pool activity;
•an increase of $61 million in common equity distributions paid in 2022 as compared to 2021 in order to maintain Entergy Arkansas’s capital structure; and
•lower prepaid deposits of $41.3 million related to contributions-in-aid-of-construction reimbursement agreements in 2022 as compared to 2021.

The increase was partially offset by:

•the repayment, at maturity, of $350 million of 3.75% Series mortgage bonds in February 2021;
•the issuance of $200 million of 4.20% Series mortgage bonds in March 2022; and
•the repayment, at maturity, of $45 million of 2.375% Series governmental bonds in January 2021.

Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased $139.9 million for the nine months ended September 30, 2022. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

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.


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Capital Structure

Entergy Arkansas’s debt to capital ratio is shown in the following table.
September 30,
2022		December 31,
2021
Debt to capital52.6 %52.6 %
Effect of subtracting cash(0.5 %)— %
Net debt to net capital52.1 %52.6 %

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 ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition.  Entergy Arkansas also 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 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 is developing its capital investment plan for 2023 through 2025 and currently anticipates making $3.8 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Arkansas’s portfolio, including Walnut Bend Solar, West Memphis Solar, and Driver Solar; investments in ANO 1 and 2; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

While Entergy Arkansas is still assessing the effect on its planned solar projects, the investigation by the U.S. Department of Commerce into potential circumvention of duties and tariffs may result in increased duties or tariffs on imported solar panels and has exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
September 30,
2022		December 31,
2021		September 30,
2021		December 31,
2020
(In Thousands)
$1,808($139,904)$7,301$3,110

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 June 2027. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2023. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing

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capacity of the facility. As of September 30, 2022, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2022, $5.6 million in letters of credit were outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for further 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 June 2025.  As of September 30, 2022, there were no loans outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for further discussion of the nuclear fuel company variable interest entity credit facility.

Walnut Bend Solar

As discussed in the Form 10-K, the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing was expected to occur in 2022. The counter-party notified Entergy Arkansas that it was terminating the project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.

West Memphis Solar

As discussed in the Form 10-K, in October 2021 the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. In April 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in 2023. The counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.

Driver Solar

In April 2022, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the 250 MW Driver Solar facility is in the public interest and requested cost recovery through the formula rate plan rider. The APSC established a procedural schedule with a hearing scheduled in June 2022, but the parties later agreed to waive the hearing and submit the matter to the APSC for a decision consistent with the filed record. In August 2022 the APSC granted Entergy Arkansas’s petition and approved the acquisition of Driver Solar and cost recovery through the formula rate plan rider. In addition, the APSC directed Entergy Arkansas to inform the APSC as to the status of a tax equity partnership once construction is commenced. The parties are evaluating the effects of certain matters related to the Inflation Reduction Act of 2022, including with respect to the viability of a tax equity partnership. The facility is expected to be in service by the end of 2024.

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.


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Retail Rates

2022 Formula Rate Plan Filing

In July 2022, Entergy Arkansas filed with the APSC its 2022 formula rate plan filing to set its formula rate for the 2023 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2023 and a netting adjustment for the historical year 2021. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2023 projected year is 7.40% resulting in a revenue deficiency of $104.8 million. The earned rate of return on common equity for the 2021 historical year was 8.38% resulting in a $15.2 million netting adjustment. The total proposed revenue change for the 2023 projected year and 2021 historical year netting adjustment is $119.9 million. 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 exceeded the constraint, the resulting increase is limited to $79.3 million. In October 2022 other parties filed their testimony recommending various adjustments to Entergy Arkansas’s overall proposed revenue deficiency, and Entergy Arkansas filed a response including an update to actual revenues through August 2022, which raised the constraint to $79.8 million. In November 2022, Entergy Arkansas filed with the APSC a settlement agreement reached with other parties resolving all issues in the proceeding. As a result of the settlement agreement, the total proposed revenue change is $102.8 million, including a $87.7 million increase for the 2023 projected year and a $15.2 million netting adjustment. Because Entergy Arkansas’s revenue requirement exceeded the constraint, the resulting increase is limited to $79.8 million. The APSC will rule on the settlement at a later date. A hearing is currently scheduled for November 2022.

Energy Cost Recovery Rider

In March 2022, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.00959 per kWh to $0.01785 per kWh. The primary reason for the rate increase is a large under-recovered balance as a result of higher natural gas prices in 2021, particularly in the fourth quarter 2021. At the request of the APSC general staff, Entergy Arkansas deferred its request for recovery of $32 million from the under-recovery related to the 2021 February winter storms until the 2023 energy cost rate redetermination, unless a request for an interim adjustment to the energy cost recovery rider is necessary. This resulted in a redetermined rate of $0.016390 per kWh, which became effective with the first billing cycle in April 2022 through the normal operation of the tariff.

Opportunity Sales Proceeding

As discussed in the Form 10-K, in September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of the opportunity sales payments made to the other Utility operating companies. In October 2020 the APSC filed a motion to dismiss Entergy Arkansas’s complaint. In March 2022 the court denied the APSC’s motion to dismiss and, in April 2022, issued a scheduling order including a trial date in February 2023. In June 2022, Entergy Arkansas filed a motion asserting that it is entitled to summary judgment because Entergy Arkansas’s position that the APSC’s order is pre-empted by the filed rate doctrine and violates the Dormant Commerce Clause is premised on facts that are not subject to genuine dispute. In July 2022, Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a motion to intervene and to hold Entergy Arkansas’s motion for summary judgment in abeyance pending a ruling on the motion to intervene. Entergy Arkansas filed a consolidated opposition to both motions. In August 2022 the APSC filed a motion for summary judgement arguing that there is no genuine issue as to any material fact and the APSC is entitled to judgement as a matter of law. In September 2022, Entergy Arkansas filed an opposition to the motion. In October 2022 the APSC filed a motion asking the court to hold further proceedings in abeyance pending a decision on the motions for summary judgment filed by Entergy Arkansas and the APSC. Also in October 2022, Entergy Arkansas filed an opposition to the motion, and the APSC filed a reply in support of its motion for summary judgment.


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Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 allows 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 initiated proceedings for this purpose. Because of the size and number of customers eligible under this new law, there is a risk of loss of load and the shifting of costs to customers. A hearing was held in December 2019, with utilities, including Entergy Arkansas, cooperatives, the Arkansas Attorney General, and industrial customers advocating the need for establishment of a reasonable rate structure that takes into account impacts to non-net metering customers; an additional hearing was conducted in February 2020 for purposes of public comment only. The APSC issued an order in June 2020, and in July 2020 several parties, including Entergy Arkansas, filed for rehearing on multiple grounds, including for the reasons that it imposes an unreasonable rate structure and allows facilities to net meter that do not meet the statutory definition of net metering facilities. After granting the rehearing requests, the APSC issued an order in September 2020 largely upholding its June 2020 order. In October 2020, Entergy Arkansas and several other parties filed an appeal of the APSC’s September 2020 order. In January 2021, Entergy Arkansas, pursuant to an APSC order, filed an updated net metering tariff, which was approved in February 2021. In May 2021, Entergy Arkansas filed a motion to dismiss its pending judicial appeal of the APSC’s September 2020 order on rehearing in the proceeding addressing its net metering rules. In June 2021 the Arkansas Court of Appeals granted the motion and dismissed Entergy Arkansas’s appeal, although other appeals of the September 2020 APSC order remained before the court. In May 2022 the court issued an order affirming the APSC’s decision in part and reversing in part. In June 2022 the APSC sought rehearing from the court with respect to the court’s ruling on a grid charge, which the court of appeals denied in July 2022. One of the cooperative appellants filed a further appeal to the Arkansas Supreme Court in July 2022, which the court decided not to hear.

In September 2022 the APSC opened a rulemaking concerning proposed amendments to the net metering rules to address the expiration on December 31, 2022 of the automatic grandfathering of the existing net metering rate structure. Entergy Arkansas and other utility parties filed initial briefs and comments setting forth that the statute imposing the expiration of the automatic grandfathering is not ambiguous and that the APSC does not have the authority to extend the grandfathering period, and the hearing was held in October 2022. Also in September 2022 the APSC opened another proceeding to investigate the issue of potential cost shifting arising as a result of net metering. Investor owned utilities and some cooperatives were required to make and did make filings in October 2022 with supporting documentation as to the amount and extent of cost shifting and the manner in which they would design tariffs to recover those costs on behalf of non-net metering customers. Responses to the utility and cooperative filings are due in January 2023.

Green Promise Renewable Tariff

As discussed in the Form 10-K, in July 2021, Entergy Arkansas filed a proposed green tariff designed to help participating customers meet their renewable and sustainability goals and to enhance economic development efforts in Arkansas. The total proposed amount of solar capacity requested to be available under this tariff was up to 200 MW. In May 2022 the APSC found Entergy Arkansas’s proposal for the tariff to be just and reasonable for an initial offering of 100 MW of solar capacity, and in June 2022 the APSC approved Entergy Arkansas’s compliance tariff filing.


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COVID-19 Orders

See the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of September 30, 2022, Entergy Arkansas had a regulatory asset of $39 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 Arkansas’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.

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 Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$864,502 $722,683 $2,120,397 $1,856,343 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale210,099 94,580 499,119 295,317 
Purchased power74,941 74,579 182,621 206,248 
Nuclear refueling outage expenses14,259 13,207 42,539 39,389 
Other operation and maintenance204,199 175,236 548,775 503,242 
Decommissioning20,731 19,567 61,288 57,847 
Taxes other than income taxes39,545 36,892 104,819 96,741 
Depreciation and amortization96,746 90,887 288,904 269,442 
Other regulatory charges (credits) - net(27,054)31,988 (69,114)(27,649)
TOTAL633,466 536,936 1,658,951 1,440,577 
OPERATING INCOME231,036 185,747 461,446 415,766 
OTHER INCOME
Allowance for equity funds used during construction4,811 4,113 11,786 10,714 
Interest and investment income4,284 53,661 13,444 78,809 
Miscellaneous - net(6,356)(4,805)(16,640)(15,968)
TOTAL2,739 52,969 8,590 73,555 
INTEREST EXPENSE
Interest expense38,123 35,452 111,622 104,862 
Allowance for borrowed funds used during construction(1,912)(1,793)(4,684)(4,655)
TOTAL36,211 33,659 106,938 100,207 
INCOME BEFORE INCOME TAXES197,564 205,057 363,098 389,114 
Income taxes48,217 50,166 85,074 84,593 
NET INCOME149,347 154,891 278,024 304,521 
Net loss attributable to noncontrolling interest(724)— (2,640)— 
EARNINGS APPLICABLE TO MEMBER'S EQUITY$150,071 $154,891 $280,664 $304,521 
See Notes to Financial Statements.











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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Net income$278,024 $304,521 
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization403,929 380,481 
Deferred income taxes, investment tax credits, and non-current taxes accrued85,012 105,147 
Changes in assets and liabilities:
Receivables(129,679)(107,075)
Fuel inventory7,430 26,521 
Accounts payable77,849 15,485 
Taxes accrued(4,838)(19,899)
Interest accrued32,360 25,616 
Deferred fuel costs(27,724)(113,004)
Other working capital accounts13,963 (26,618)
Provisions for estimated losses(1,840)(1,266)
Other regulatory assets(54,449)74,022 
Other regulatory liabilities(305,972)(46,061)
Pension and other postretirement liabilities(58,966)(81,913)
Other assets and liabilities360,258 (82,880)
Net cash flow provided by operating activities675,357 453,077 
INVESTING ACTIVITIES
Construction expenditures(552,919)(495,203)
Allowance for equity funds used during construction11,786 10,714 
Payment for purchase of assets(1,044)— 
Nuclear fuel purchases(56,984)(72,528)
Proceeds from sale of nuclear fuel37,198 16,239 
Proceeds from nuclear decommissioning trust fund sales174,893 434,674 
Investment in nuclear decommissioning trust funds(190,244)(436,658)
Changes in money pool receivable - net(1,808)(4,191)
Net cash flow used in investing activities(579,122)(546,953)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt225,625 708,126 
Retirement of long-term debt(21,316)(717,214)
Distributions to noncontrolling interest(480)— 
Change in money pool payable - net(139,904)— 
Common equity distributions paid(86,000)(25,000)
Other(7,944)33,173 
Net cash flow used in financing activities(30,019)(915)
Net increase (decrease) in cash and cash equivalents66,216 (94,791)
Cash and cash equivalents at beginning of period12,915 192,128 
Cash and cash equivalents at end of period$79,131 $97,337 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: 
Cash paid during the period for:
Interest - net of amount capitalized$77,625 $77,434 
See Notes to Financial Statements.

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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$2,237 $8,155 
Temporary cash investments76,894 4,760 
Total cash and cash equivalents79,131 12,915 
Accounts receivable:
Customer182,061 154,412 
Allowance for doubtful accounts(6,328)(13,072)
Associated companies49,565 29,587 
Other100,389 51,064 
Accrued unbilled revenues129,454 101,663 
Total accounts receivable455,141 323,654 
Deferred fuel costs136,454 108,862 
Fuel inventory - at average cost43,462 50,892 
Materials and supplies - at average cost275,879 247,980 
Deferred nuclear refueling outage costs30,985 65,318 
Prepayments and other28,604 14,863 
TOTAL1,049,656 824,484 
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds1,141,672 1,438,416 
Other789 947 
TOTAL1,142,461 1,439,363 
UTILITY PLANT
Electric13,834,015 13,578,297 
Construction work in progress458,037 241,127 
Nuclear fuel147,202 182,055 
TOTAL UTILITY PLANT14,439,254 14,001,479 
Less - accumulated depreciation and amortization5,682,785 5,472,296 
UTILITY PLANT - NET8,756,469 8,529,183 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets1,744,127 1,689,678 
Deferred fuel costs68,883 68,751 
Other15,581 13,660 
TOTAL1,828,591 1,772,089 
TOTAL ASSETS$12,777,177 $12,565,119 
See Notes to Financial Statements.

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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$250,000 $— 
Accounts payable:
Associated companies101,051 217,310 
Other299,400 190,476 
Customer deposits100,085 92,511 
Taxes accrued84,752 89,590 
Interest accrued49,468 17,108 
Other53,134 38,901 
TOTAL937,890 645,896 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued1,506,970 1,416,201 
Accumulated deferred investment tax credits28,398 29,299 
Regulatory liability for income taxes - net436,733 431,655 
Other regulatory liabilities432,264 743,314 
Decommissioning1,451,698 1,390,410 
Accumulated provisions75,244 77,084 
Pension and other postretirement liabilities126,722 185,789 
Long-term debt3,914,866 3,958,862 
Other98,993 110,754 
TOTAL8,071,888 8,343,368 
Commitments and Contingencies
EQUITY
Member's equity3,737,409 3,542,745 
Noncontrolling interest29,990 33,110 
TOTAL3,767,399 3,575,855 
TOTAL LIABILITIES AND EQUITY$12,777,177 $12,565,119 
See Notes to Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Noncontrolling InterestMember's EquityTotal
(In Thousands)
Balance at December 31, 2020$— $3,276,169 $3,276,169 
Net income— 93,037 93,037 
Balance at March 31, 2021— 3,369,206 3,369,206 
Net income— 56,593 56,593 
Balance at June 30, 2021— 3,425,799 3,425,799 
Net income— 154,891 154,891 
Common equity distributions— (25,000)(25,000)
Balance at September 30, 2021$— $3,555,690 $3,555,690 
Balance at December 31, 2021$33,110 $3,542,745 $3,575,855 
Net income (loss)(1,387)66,954 65,567 
Balance at March 31, 202231,723 3,609,699 3,641,422 
Net income (loss)(529)63,639 63,110 
Common equity distributions— (36,000)(36,000)
Distributions to noncontrolling interest(190)— (190)
Balance at June 30, 202231,004 3,637,338 3,668,342 
Net income (loss)(724)150,071 149,347 
Common equity distributions— (50,000)(50,000)
Distributions to noncontrolling interest(290)— (290)
Balance at September 30, 2022$29,990 $3,737,409 $3,767,399 
See Notes to Financial Statements.

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2022 Compared to Third Quarter 2021

Net income increased $49.9 million primarily due to higher volume/weather, higher retail electric price, and higher other income, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expense.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Net income increased $206.9 million primarily due to the net effects of Entergy Louisiana’s storm cost securitization, including a $290 million reduction in income tax expense, partially offset by a $224.4 million ($165.4 million net-of-tax) regulatory charge to reflect its obligation to share the benefits of the securitization with customers. Also contributing to the net income increase was higher volume/weather and higher retail electric price, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, higher interest expense, and higher taxes other than income taxes. See Note 2 to the financial statements herein for further discussion of the securitization.

Operating Revenues

Third Quarter 2022 Compared to Third Quarter 2021

Following is an analysis of the change in operating revenues comparing the third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues$1,420.7 
Fuel, rider, and other revenues that do not significantly affect net income509.3 
Volume/weather51.6 
Retail electric price39.2 
2022 operating revenues$2,020.8 

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 an increase of 1,587 GWh, or 11%, in electricity usage across all customer classes, including the effects of Hurricane Ida in third quarter 2021. The increase in industrial usage was primarily due to an increase in demand from expansion projects, primarily in the chemicals, petroleum refining, and transportation industries, an increase in demand from small industrial customers, and an increase in demand from cogeneration customers. The increase was partially offset by a decrease in demand from existing customers, primarily in the chemicals industry as a result of supply issues and in the petroleum refining industry as a

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result of a permanent plant shutdown due to Hurricane Ida. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021. The increased usage from these industrial and commercial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.

The retail electric price variance is primarily due to increases in formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021 and September 2022. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.

Total electric energy sales for Entergy Louisiana for the three months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential4,284 3,904 10 
Commercial3,186 2,802 14 
Industrial8,265 7,470 11 
Governmental220 192 15 
  Total retail 15,955 14,368 11 
Sales for resale:
  Associated companies1,449 1,397 4 
  Non-associated companies1,310 803 63 
Total18,714 16,568 13 

See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
Amount
(In Millions)
2021 operating revenues$3,795.9 
Fuel, rider, and other revenues that do not significantly affect net income798.2 
Volume/weather96.1 
Retail electric price74.9 
Storm restoration carrying costs37.5 
2022 operating revenues$4,802.6 

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 an increase of 3,057 GWh, or 7.4%, in electricity usage across all customer classes, including the effect of more favorable weather on residential sales. The increase in

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weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in 2021. The increase in industrial usage was primarily due to an increase in demand from expansion projects, primarily in the chemicals, petroleum refining, and transportation industries, an increase in demand from cogeneration customers, an increase in demand from small industrial customers, and an increase in demand from existing customers, primarily in the chemicals and pulp and paper industries as a result of prior year temporary plant shutdowns, partially offset by a decrease in demand in the petroleum refining industry as a result of a permanent plant shutdown due to Hurricane Ida. The increased usage from these industrial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.

The retail electric price variance is primarily due to increases in formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021 and September 2022. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.

Storm restoration carrying costs represent the equity component of storm restoration carrying costs, recorded in second quarter 2022, recognized as part of the securitization of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida restoration costs in May 2022. See Note 2 to the financial statements herein for a discussion of the securitization.

Total electric energy sales for Entergy Louisiana for the nine months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential11,177 10,500 6 
Commercial8,486 7,838 8 
Industrial24,018 22,314 8 
Governmental619 591 5 
  Total retail 44,300 41,243 7 
Sales for resale:
  Associated companies4,105 3,523 17 
  Non-associated companies2,632 1,741 51 
Total51,037 46,507 10 

See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.

Other Income Statement Variances

Third Quarter 2022 Compared to Third Quarter 2021

Other operation and maintenance expenses increased primarily due to:

•a gain of $14.8 million, recorded in the third quarter 2021, on the sale of a pipeline;
•an increase of $12.8 million in nuclear generation expenses primarily due to a higher scope of work performed in 2022 as compared to prior year and higher nuclear labor costs;
•an increase of $9.1 million in power delivery expenses primarily due to higher reliability costs and higher vegetation maintenance costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;

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•an increase of $8.5 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•an increase of $6.1 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic; and
•several individually insignificant items.

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

Other income increased primarily due to an increase of $23.5 million in affiliated dividend income resulting from the storm trust’s investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The increase was partially offset by changes in decommissioning trust fund activity. See Note 2 to the financial statements herein for discussion of the securitization.

Interest expense increased primarily due to the issuance of $500 million of 4.75% Series mortgage bonds in August 2022 and the issuance of $1 billion of 0.95% Series mortgage bonds in October 2021.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $25.6 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems;
•an increase of $17.5 million in nuclear generation expenses primarily due to a higher scope of work performed and higher nuclear labor costs in 2022, partially offset by spending in 2021 on sanitation and social distancing protocols as a result of the COVID-19 pandemic;
•a gain of $14.8 million, recorded in the third quarter 2021, on the sale of a pipeline;
•an increase of $9.0 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $8.4 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•an increase of $6.6 million in customer service center support costs primarily due to higher contract costs;
•an increase of $3.6 million in energy efficiency expenses due to the timing of recovery from customers, partially offset by lower energy efficiency costs;
•an increase of $2.3 million in loss provisions; and
•several individually insignificant items.

The increase was partially offset by a decrease of $2.7 million in non-nuclear generation expenses primarily due to a lower scope of work performed during plant outages in 2022 as compared to the same period in 2021.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments, increases in franchise taxes, and increases in employment taxes.

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

Other regulatory charges (credits) - net includes a regulatory charge of $224 million, recorded in second quarter 2022, to reflect Entergy Louisiana’s obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta,

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Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the securitization.

Other income increased primarily due to:

•an increase of $34.8 million in affiliated dividend income resulting from the storm trust’s investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs; and
•an increase of $12.1 million due to the recognition of storm restoration carrying costs, primarily related to Hurricane Ida.

The increase was partially offset by:

•a $31.6 million charge for the LURC’s 1% beneficial interest in the storm trust established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization; and
•changes in decommissioning trust fund activity, including portfolio rebalancing of the Waterford 3 decommissioning trust fund in the first quarter of 2021 partially offset by portfolio rebalancing of the River Bend decommissioning trust fund in the second quarter of 2022.

See Note 2 to the financial statements herein for discussion of the securitization.

Interest expense increased primarily due to:

•the issuance of $1 billion of 0.95% Series mortgage bonds in October 2021;
•the $1.2 billion unsecured term loan proceeds received in January 2022. The term loan was repaid in June 2022;
•the issuances of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021; and
•the issuance of $500 million of 4.75% Series mortgage bonds in August 2022.

The increase was partially offset by the repayment of $200 million of 4.8% Series mortgage bonds in May 2021.

Income Taxes

The effective income tax rate was 20.7% for the third quarter 2022. The difference in the effective income tax rate for the third quarter 2022 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, certain book and tax differences related to utility plant items, and the amortization of excess accumulated deferred income taxes, 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (38.2%) for the nine months ended September 30, 2022. The difference in the effective income tax rate for the nine months ended September 30, 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, 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 Notes 2 and 10 to the financial statements herein for a discussion of the securitization under Act 293. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial

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statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rates were 20.1% for the third quarter 2021 and 18.4% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 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 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 of 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 for discussion of the Inflation Reduction Act of 2022.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Cash and cash equivalents at beginning of period$18,573 $728,020 
Net cash provided by (used in):
    Operating activities621,457 1,047,987 
    Investing activities(4,197,993)(2,224,730)
    Financing activities3,753,660 715,416 
Net increase (decrease) in cash and cash equivalents177,124 (461,327)
Cash and cash equivalents at end of period$195,697 $266,693 

Operating Activities

Net cash flow provided by operating activities decreased $426.5 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•increased fuel costs. See Note 2 to the financial statements herein for a discussion of fuel and purchased power cost recovery;
•an increase of $100.7 million in storm spending, primarily due to Hurricane Ida restoration efforts in 2022, partially offset by Hurricane Laura, Hurricane Delta, and Hurricane Zeta restoration efforts in 2021;
•an increase of $18.6 million in interest paid in 2022 as compared to 2021;
•an increase of $18.5 million in spending on nuclear refueling outages; and
•payments to vendors, including timing and increase in cost of operations.

The decrease was partially offset by higher collections from customers and a decrease of $35.1 million in pension contributions in 2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical

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Accounting Estimates” herein and in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

Investing Activities

Net cash flow used in investing activities increased $1,973.3 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•an increase in investments in affiliates due to the $3,164 million purchase by the storm trust of preferred membership interests issued by an Entergy affiliate, partially offset by the $1,391 million redemption of preferred membership interests. See Note 2 to the financial statements herein for a discussion of the securitization;
•an increase of $291.2 million in net payments to storm reserve escrow accounts;
•an increase of $94.7 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022 and higher capital expenditures for storm restoration in 2022;
•an increase of $64.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2022, higher capital expenditures as a result of increased development in Entergy Louisiana’s service area, and increased investment in the reliability and infrastructure of Entergy Louisiana’s distribution system, partially offset by lower spending in 2022 on advanced metering infrastructure;
•an increase of $27.2 million in non-nuclear generation construction expenditures primarily due to a higher scope of work on projects performed in 2022 as compared to 2021, including during plant outages;
•an increase of $21.5 million in information technology capital expenditures primarily due to increased spending on various technology projects in 2022; and
•the sale of a pipeline for $15 million in 2021.

The increase was partially offset by:

•a decrease of $239.7 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2022. The decrease in storm restoration spending is primarily due to Hurricane Laura restoration efforts in 2021;
•a decrease of $29.7 million in nuclear decommissioning trust fund activity as a result of a lump sum contribution in 2021 for amounts collected over a 17-month period. See Note 2 to the financial statements in the Form 10-K for a discussion of nuclear decommissioning expense recovery;
•money pool activity; and
•a decrease of $15.2 million as a result of fluctuations in nuclear fuel activity, primarily 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.

Decreases in Entergy Louisiana’s receivables from the money pool are a source of cash flow, and Entergy Louisiana’s receivable from the money pool decreased $9.8 million for the nine months ended September 30, 2022 compared to increasing by $6.6 million for the nine months ended September 30, 2021. 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 $3,038.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•proceeds from securitization of $3.2 billion received by the storm trust;

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•a capital contribution of $1 billion received indirectly from Entergy Corporation in May 2022 to finance the establishment of the storm escrow account for Hurricane Ida costs;
•the issuance of $500 million of 4.75% Series mortgage bonds in August 2022;
•the repayment, at maturity, of $200 million of 4.80% Series mortgage bonds in May 2021;
•the repayment, at maturity, of Entergy Louisiana Waterford VIE’s $40 million of 3.92% Series H secured notes in February 2021; and
•higher prepaid deposits of $27.9 million related to contributions-in-aid-of-construction reimbursement agreements in 2022 as compared to 2021.

The increase was partially offset by:

•the issuance of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021;
•the repayment, prior to maturity, in May 2022 of $435 million, a portion of the outstanding principal, of 0.62% Series mortgage bonds due November 2023;
•an increase of $314.5 million in common equity distributions in 2022 primarily to return to Entergy Corporation the $125 million capital contribution received in December 2021 to assist in paying for costs associated with Hurricane Ida and to maintain Entergy Louisiana’s targeted capital structure;
•net repayments of $125 million in 2022 on Entergy Louisiana’s revolving credit facility; and
•a decrease in net long-term borrowings of $39.3 million on the nuclear fuel company variable interest entities’ credit facilities.

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. See Note 2 to the financial statements herein for a discussion of the securitization.

Capital Structure

Entergy Louisiana’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy Louisiana is primarily due to the $1.0 billion capital contribution received indirectly from Entergy Corporation in May 2022.
September 30,
 2022		December 31,
2021
Debt to capital53.2 %57.2 %
Effect of subtracting cash(0.5 %)0.0 %
Net debt to net capital52.7 %57.2 %

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 Louisiana uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition. Entergy Louisiana also 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 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.


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Entergy Louisiana is developing its capital investment plan for 2023 through 2025 and currently anticipates making $5.6 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Louisiana’s portfolio, including St. Jacques Louisiana Solar; investments in River Bend and Waterford 3; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

While Entergy Louisiana is still assessing the effect on its planned solar projects, the investigation by the U.S. Department of Commerce into potential circumvention of duties and tariffs may result in increased duties or tariffs on imported solar panels and has exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.

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

September 30,
 2022		December 31,
2021		September 30,
 2021		December 31,
2020
(In Thousands)
$4,782$14,539$20,061$13,426

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 June 2027.  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 September 30, 2022, 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 September 30, 2022, $21 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 June 2025.  As of September 30, 2022, $15.1 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of September 30, 2022, $72.2 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 had $291.2 million in its storm reserve escrow account at September 30, 2022.

2021 Solar Certification and the Geaux Green Option

As discussed in the Form 10-K, in November 2021, Entergy Louisiana filed an application with the LPSC seeking certification of and approval for the addition of four new solar photovoltaic resources with a combined nameplate capacity of 475 megawatts (the 2021 Solar Portfolio) and the implementation of a new green tariff, the Geaux Green Option (Rider GGO). These resources, all of which would be constructed in Louisiana, include (i) Vacherie Solar Energy Center, a 150 megawatt resource in St. James Parish; (ii) Sunlight Road Solar, a 50 megawatt resource in Washington Parish; (iii) St. Jacques Louisiana Solar, a 150 megawatt resource in St. James Parish; and (iv) Elizabeth Solar facility, a 125 megawatt resource in Allen Parish. St. Jacques Louisiana Solar would be acquired through a build-own-transfer agreement; the remaining resources involve power purchase

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agreements. Sunlight Road Solar and Elizabeth Solar facility have estimated in service dates in 2024, and Vacherie Solar Energy Center and St. Jacques Louisiana Solar have estimated in service dates in 2025. In March 2022 direct testimony from Walmart, the Louisiana Energy Users Group (LEUG), and the LPSC staff was filed. Each party recommended that the LPSC approve the resources proposed in Entergy Louisiana’s application, and the LPSC staff witness indicated that the process through which Entergy Louisiana solicited or obtained the proposals for the resources complied with applicable LPSC orders. The LPSC staff and LEUG’s witnesses made recommendations to modify the proposed Rider GGO and Entergy Louisiana’s proposed rate relief. In April 2022 the LPSC staff and LEUG filed cross-answering testimony concerning the other party’s proposed modifications to Rider GGO and the proposed rate recovery. Entergy Louisiana filed rebuttal testimony in June 2022. In August 2022 the parties reached a settlement certifying the 2021 Solar Portfolio and approving implementation of Rider GGO. In September 2022 the LPSC approved the settlement.

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

As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages.

In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a supplemental filing updating the total restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by these storms were estimated to be approximately $2.06 billion, including approximately $1.68 billion in capital costs and approximately $380 million in non-capital costs. Including carrying costs through January 2022, Entergy Louisiana sought an LPSC determination that $2.11 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally, Entergy Louisiana requested that the LPSC determine that re-establishment of a storm escrow account to the previously authorized amount of $290 million was appropriate. In July 2021, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.

In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy Louisiana sought approval for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.

After filing of testimony by the LPSC staff and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, the parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in February 2022. The settlement agreement contained the following key terms: $2.1 billion of restoration costs from Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and were eligible for recovery; carrying costs of $51 million were recoverable; a $290 million cash storm reserve should

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be re-established; a $1 billion reserve should be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana was authorized to finance $3.186 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. The LPSC issued an order approving the settlement in March 2022. As a result of the financing order, Entergy Louisiana reclassified $1.942 billion from utility plant to other regulatory assets.

In May 2022 the securitization financing closed, resulting in the issuance of $3.194 billion principal amount of bonds by Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana legislature approved in 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust I (the storm trust).

Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust to purchase 31,635,718.7221 Class A preferred, non-voting membership interest units (the preferred interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2022 on the preferred interests issued to the storm trust. These annual dividends received by the storm trust will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust. Specifically, 1% of the annual dividends received by the storm trust will be distributed to the LURC, for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred interests have a stated annual cumulative cash dividend rate of 7% and a liquidation price of $100 per unit. The terms of the preferred interests include certain financial covenants to which Entergy Finance Company is subject.

Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of June 2022 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust is required to liquidate Entergy Finance Company preferred interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.

From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company distributed $1.4 billion to its parent, Entergy Holdings Company, LLC. Subsequently, Entergy Holdings Company liquidated, distributing the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and 2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana had acquired these preferred membership interests with proceeds from previous securitizations of storm restoration costs. Entergy Finance Company loaned the remaining $1.7 billion from the preferred membership interests proceeds to Entergy which used the cash to redeem $650 million of 4.00% Series senior notes due July 2022 and indirectly contributed $1 billion to Entergy Louisiana as a capital contribution.

Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane Ida escrow account and subsequently withdrew the $1 billion from the escrow account. With a portion of the $1 billion withdrawn from the escrow account and the $1.4 billion from the Entergy Holdings Company liquidation, Entergy Louisiana deposited $290 million in a restricted escrow account as a storm damage reserve for future storms, used $1.2 billion to repay

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its unsecured term loan due June 2023, and used $435 million to redeem a portion of its 0.62% Series mortgage bonds due November 2023.

As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a reduction of income tax expense of approximately $290 million by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was partially offset by other tax charges resulting in a net reduction of income tax expense of $283 million. In recognition of obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded a $224 million ($165 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.

As discussed in Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In second quarter 2022, Entergy Louisiana recorded a charge of $31.6 million in other income to reflect the LURC’s beneficial interest in the trust.

In April 2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimated to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs of $57 million through December 2022, Entergy Louisiana is seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, is eligible for recovery from customers. As part of this filing, Entergy Louisiana also is seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount is exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana is requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, is eligible for recovery from customers. As discussed above, in March 2022 the LPSC approved financing of a $1 billion storm escrow account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. In October 2022 the LPSC staff recommended a finding that the requested storm restoration costs of $2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and are eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above. A procedural schedule has been established with a hearing in December 2022.

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

2021 Formula Rate Plan Filing

In May 2022, Entergy Louisiana filed its formula rate plan evaluation report for its 2021 calendar year operations. The 2021 test year evaluation report produced an earned return on common equity of 8.33%, with a base formula rate plan revenue increase of $65.3 million. Other increases in formula rate plan revenue driven by reductions in Tax Cut and Jobs Act credits and additions to transmission and distribution plant in service reflected through the transmission recovery mechanism and distribution recovery mechanism are partly offset by an increase

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in net MISO revenues, leading to a net increase in formula rate plan revenue of $152.9 million. The effects of the changes to total formula rate plan revenue are different for each legacy company, primarily due to differences in the legacy companies’ capacity cost changes, including the effect of true-ups. Legacy Entergy Louisiana formula rate plan revenues will increase by $86 million and legacy Entergy Gulf States Louisiana formula rate plan revenues will increase by $66.9 million. In August 2022 the LPSC staff filed a list of objections/reservations, including outstanding issues from the test years 2017-2020 formula rate plan filings, utilizing the extraordinary cost mechanism to address one-time changes such as state tax rate changes, and failing to include an adjustment for revenues not received as a result of Hurricane Ida. Subject to refund and LPSC review, the resulting changes to formula rate plan revenues became effective for bills rendered during the first billing cycle of September 2022.

Fuel and purchased power recovery

As discussed in the Form 10-K, in February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021, Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over five months beginning in April 2021. In April 2022 the LPSC staff issued a draft audit report regarding Entergy Louisiana’s fuel adjustment clause charges in February 2021 that did not recommend any financial disallowances, but included several prospective recommendations. Responsive testimony was filed by one intervenor and the parties agreed to suspend any procedural schedule and move toward settlement discussions to close the matter.

In May 2022 the LPSC staff issued an audit report regarding Entergy Louisiana’s purchased gas adjustment charges in February 2021 that did not propose any financial disallowances. The LPSC staff and Entergy Louisiana submitted a joint report on the audit report and draft order to the LPSC concluding that Entergy Louisiana’s gas distribution operations and fuel costs were not significantly adversely affected by the February 2021 winter storms and the resulting increase in natural gas prices. The LPSC issued an order approving the joint report in October 2022.

To mitigate high electric bills, primarily driven by high summer usage and elevated gas prices, Entergy Louisiana has deferred approximately $225 million of fuel expense incurred in April, May, June, July, August, and September 2022 (as reflected on June, July, August, September, October, and November 2022 bills). These deferrals were included in the over/under calculation of the fuel adjustment clause, which is intended to recover the full amount of the costs included on a rolling twelve-month basis.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. 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 September 30, 2022, Entergy Louisiana had a regulatory asset of $47.8 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.


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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. Following is an update to that discussion.

As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. River Bend is currently in Column 1, and Waterford 3 is currently in Column 2.

In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022; however, Waterford 3 is expected to remain in Column 2 until the NRC conducts a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2.

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, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.

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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CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$2,003,009 $1,407,737 $4,738,188 $3,741,979 
Natural gas17,789 12,971 64,367 53,971 
TOTAL2,020,798 1,420,708 4,802,555 3,795,950 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale833,885 421,464 1,449,464 922,060 
Purchased power251,582 176,473 848,328 573,030 
Nuclear refueling outage expenses18,966 11,932 40,942 37,407 
Other operation and maintenance298,710 239,132 846,457 752,214 
Decommissioning18,137 17,250 53,736 51,108 
Taxes other than income taxes60,346 63,428 180,527 167,880 
Depreciation and amortization176,403 165,469 517,205 489,343 
Other regulatory charges (credits) - net(9,959)(1,920)172,605 7,560 
TOTAL1,648,070 1,093,228 4,109,264 3,000,602 
OPERATING INCOME372,728 327,480 693,291 795,348 
OTHER INCOME
Allowance for equity funds used during construction8,280 7,247 17,865 20,183 
Interest and investment income (loss)(8,861)7,327 (93,241)75,502 
Interest and investment income - affiliated55,363 31,898 130,464 95,695 
Miscellaneous - net6,835 (8,924)59,338 (79,595)
TOTAL61,617 37,548 114,426 111,785 
INTEREST EXPENSE
Interest expense92,020 87,295 278,559 260,731 
Allowance for borrowed funds used during construction(3,518)(3,278)(7,762)(9,105)
TOTAL88,502 84,017 270,797 251,626 
INCOME BEFORE INCOME TAXES345,843 281,011 536,920 655,507 
Income taxes71,453 56,536 (204,989)120,479 
NET INCOME274,390 224,475 741,909 535,028 
Net income attributable to noncontrolling interest554 — 812 — 
EARNINGS APPLICABLE TO MEMBER'S EQUITY$273,836 $224,475 $741,097 $535,028 
See Notes to Financial Statements.


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
Net Income$274,390 $224,475 $741,909 $535,028 
Other comprehensive income (loss)
Pension and other postretirement liabilities (net of tax expense (benefit) of $109, ($46), ($298), and $18)
295 (131)(809)50 
Other comprehensive income (loss)295 (131)(809)50 
Comprehensive Income274,685 224,344 741,100 535,078 
Net income attributable to noncontrolling interest554 — 812 — 
Comprehensive Income Applicable to Member’s Equity$274,131 $224,344 $740,288 $535,078 
See Notes to Financial Statements.






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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Net income$741,909 $535,028 
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization633,124 607,299 
Deferred income taxes, investment tax credits, and non-current taxes accrued(84,719)159,723 
Changes in working capital:
Receivables(193,374)(91,771)
Fuel inventory1,920 5,763 
Accounts payable(117,199)450,064 
Taxes accrued(9,415)94,751 
Interest accrued3,244 4,464 
Deferred fuel costs(272,259)(49,786)
Other working capital accounts(161,058)(41,769)
Changes in provisions for estimated losses292,013 (764)
Changes in other regulatory assets741,131 (938,646)
Changes in other regulatory liabilities(92,554)92,138 
Effect of securitization on regulatory asset(1,190,338)— 
Changes in pension and other postretirement liabilities(29,538)(68,132)
Other358,570 289,625 
Net cash flow provided by operating activities621,457 1,047,987 
INVESTING ACTIVITIES
Construction expenditures(2,099,909)(2,147,096)
Allowance for equity funds used during construction17,865 20,183 
Proceeds from sale of assets— 15,000 
Nuclear fuel purchases(84,606)(75,349)
Proceeds from the sale of nuclear fuel37,634 13,201 
Receipts from storm reserve escrow account1,000,228 — 
Payments to storm reserve escrow account(1,291,431)— 
Purchase of preferred membership interests of affiliate (3,163,572)— 
Redemption of preferred membership interests of affiliate1,390,587 — 
Changes to securitization account— (2,815)
Proceeds from nuclear decommissioning trust fund sales520,412 505,840 
Investment in nuclear decommissioning trust funds(540,653)(555,749)
Changes in money pool receivable - net9,757 (6,635)
Litigation proceeds from settlement agreement5,695 — 
Litigation proceeds for reimbursement of spent nuclear fuel storage costs— 8,690 
Net cash flow used in investing activities(4,197,993)(2,224,730)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt2,673,246 2,404,102 
Retirement of long-term debt(2,734,524)(1,628,383)
Proceeds from trust related to securitization3,163,572 — 
Capital contribution from parent1,000,000 — 
Common equity distributions paid(374,500)(60,000)
Other25,866 (303)
Net cash flow provided by financing activities3,753,660 715,416 
Net increase (decrease) in cash and cash equivalents177,124 (461,327)
Cash and cash equivalents at beginning of period18,573 728,020 
Cash and cash equivalents at end of period$195,697 $266,693 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$266,522 $247,878 
See Notes to Financial Statements.

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$390 $195 
Temporary cash investments195,307 18,378 
Total cash and cash equivalents195,697 18,573 
Accounts receivable:
Customer435,725 355,265 
Allowance for doubtful accounts(9,945)(29,231)
Associated companies120,203 96,539 
Other50,104 36,674 
Accrued unbilled revenues221,545 174,768 
Total accounts receivable817,632 634,015 
Deferred fuel costs317,633 45,374 
Fuel inventory41,038 42,958 
Materials and supplies - at average cost531,444 485,325 
Deferred nuclear refueling outage costs69,738 39,582 
Prepayments and other148,498 44,187 
TOTAL2,121,680 1,310,014 
OTHER PROPERTY AND INVESTMENTS
Investment in affiliate preferred membership interests3,163,572 1,390,587 
Decommissioning trust funds1,682,479 2,114,523 
Storm reserve escrow account291,203 — 
Non-utility property - at cost (less accumulated depreciation)344,935 337,247 
Other14,098 13,744 
TOTAL5,496,287 3,856,101 
UTILITY PLANT
Electric27,323,620 28,055,038 
Natural gas297,638 285,006 
Construction work in progress785,673 847,924 
Nuclear fuel191,908 209,418 
TOTAL UTILITY PLANT28,598,839 29,397,386 
Less - accumulated depreciation and amortization10,204,546 9,860,252 
UTILITY PLANT - NET18,394,293 19,537,134 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets2,035,535 2,776,666 
Deferred fuel costs168,122 168,122 
Other35,811 27,801 
TOTAL2,239,468 2,972,589 
TOTAL ASSETS$28,251,728 $27,675,838 
See Notes to Financial Statements.

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$525,000 $200,000 
Accounts payable:
Associated companies146,002 183,172 
Other680,238 1,481,902 
Customer deposits158,440 150,697 
Taxes accrued54,833 64,248 
Interest accrued96,296 93,052 
Current portion of unprotected excess accumulated deferred income taxes— 24,291 
Other81,448 68,995 
TOTAL1,742,257 2,266,357 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued2,363,961 2,433,854 
Accumulated deferred investment tax credits99,048 102,588 
Regulatory liability for income taxes - net302,760 313,693 
Other regulatory liabilities985,267 1,042,597 
Decommissioning1,718,635 1,653,198 
Accumulated provisions316,503 24,490 
Pension and other postretirement liabilities498,744 528,213 
Long-term debt10,335,595 10,714,346 
Other310,188 415,930 
TOTAL16,930,701 17,228,909 
Commitments and Contingencies
EQUITY
Member's equity9,538,853 8,172,294 
Accumulated other comprehensive income7,469 8,278 
Noncontrolling interest32,448 — 
TOTAL9,578,770 8,180,572 
TOTAL LIABILITIES AND EQUITY$28,251,728 $27,675,838 
See Notes to Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Noncontrolling InterestMember’s
Equity		Accumulated
Other
Comprehensive
Income		Total
(In Thousands)
Balance at December 31, 2020$— $7,453,361 $4,327 $7,457,688 
Net income— 166,626 — 166,626 
Other comprehensive loss— — (407)(407)
Other— (16)— (16)
Balance at March 31, 2021— 7,619,971 3,920 7,623,891 
Net income— 143,927 — 143,927 
Other comprehensive income— — 588 588 
Other— (12)— (12)
Balance at June 30, 2021— 7,763,886 4,508 7,768,394 
Net income— 224,475 — 224,475 
Other comprehensive loss— — (131)(131)
Distributions declared on common equity— (60,000)— (60,000)
Other— (11)— (11)
Balance at September 30, 2021$— $7,928,350 $4,377 $7,932,727 
Balance at December 31, 2021$— $8,172,294 $8,278 $8,180,572 
Net income— 150,860 — 150,860 
Other comprehensive loss— — (613)(613)
Common equity distributions — (125,000)— (125,000)
Other— (13)— (13)
Balance at March 31, 2022— 8,198,141 7,665 8,205,806 
Net income258 316,401 — 316,659 
Other comprehensive loss— — (491)(491)
Capital contribution from parent— 1,000,000 — 1,000,000 
Beneficial interest in storm trust31,636 — — 31,636 
Other— (13)— (13)
Balance at June 30, 202231,894 9,514,529 7,174 9,553,597 
Net income554 273,836 — 274,390 
Other comprehensive income— — 295 295 
Common equity distributions— (249,500)— (249,500)
Other— (12)— (12)
Balance at September 30, 2022$32,448 $9,538,853 $7,469 $9,578,770 
See Notes to Financial Statements.

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MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2022 Compared to Third Quarter 2021

Net income increased $12.3 million primarily due to regulatory credits recorded in the third quarter 2022 to reflect the effects of the joint stipulation reached in the 2022 formula rate plan proceeding and higher retail electric price, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expense.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Net income increased $14.2 million primarily due to higher retail electric price, regulatory credits recorded in the third quarter 2022 to reflect the effects of the joint stipulation reached in the 2022 formula rate plan proceeding, and higher volume/weather, partially offset by regulatory credits recorded in the second quarter 2021 to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding, higher depreciation and amortization expenses, higher other operation and maintenance expenses, and higher interest expense.

Operating Revenues

Third Quarter 2022 Compared to Third Quarter 2021

Following is an analysis of the change in operating revenues comparing the third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues$420.3 
Fuel, rider, and other revenues that do not significantly affect net income57.9 
Retail electric price17.3 
Volume/weather0.3 
Retail one-time bill credit(36.7)
2022 operating revenues$459.1 

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 April 2022 and August 2022. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.

The volume/weather variance is insignificant and primarily due to an increase in industrial usage. The increase in industrial usage was primarily due to an increase in demand from small industrial customers.

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The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided to retail customers, effective during the September 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.

Total electric energy sales for Entergy Mississippi for the three months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential1,766 1,725 2 
Commercial1,352 1,337 1 
Industrial654 631 4 
Governmental119 118 1 
  Total retail 3,891 3,811 2 
Sales for resale:
  Non-associated companies936 1,134 (17)
Total4,827 4,945 (2)

See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
Amount
(In Millions)
2021 operating revenues$1,106.0 
Fuel, rider, and other revenues that do not significantly affect net income89.5 
Retail electric price44.2 
Volume/weather10.6 
Retail one-time bill credit(36.7)
2022 operating revenues$1,213.6 

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 April 2021, July 2021, April 2022, and August 2022. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.


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The volume/weather variance is primarily due to the effect of more favorable weather on residential sales, partially offset by a decrease in weather-adjusted residential usage.

The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided to retail customers, effective during the September 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds.

Total electric energy sales for Entergy Mississippi for the nine months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential4,480 4,355 3 
Commercial3,539 3,449 3 
Industrial1,808 1,742 4 
Governmental320 315 2 
  Total retail 10,147 9,861 3 
Sales for resale:
  Non-associated companies2,148 4,230 (49)
Total12,295 14,091 (13)

See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.

Other Income Statement Variances

Third Quarter 2022 Compared to Third Quarter 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $3.8 million in power delivery expenses primarily due to higher vegetation maintenance costs;
•$2.2 million in amortization of the bad debt expense deferral resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $1.4 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year;
•an increase of $1.4 million in energy efficiency expenses primarily due to higher energy efficiency costs; and
•several individually insignificant items.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and millage rate increases.

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


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Other regulatory charges (credits) - net includes:

•a regulatory credit of $36.7 million, recorded in the third quarter 2022, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill cycle. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds; and
•regulatory credits of $22.6 million, recorded in third quarter 2022, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2022 formula rate plan filing.

Interest expense increased primarily due to the issuance of $200 million of 2.55% Series mortgage bonds in November 2021, the $150 million unsecured term loan proceeds received in June 2022, and borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility.

Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $9 million in third quarter 2022 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Other operation and maintenance expenses increased primarily due to:

•$2.2 million in amortization of the bad debt expense deferral resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $2.1 million in customer service center support costs primarily due to higher contract costs;
•an increase of $2 million in energy efficiency expenses primarily due to higher energy efficiency costs;
•an increase of $1.8 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•an increase of $1.4 million in power delivery expenses primarily due to higher vegetation maintenance costs.

The increase was partially offset by a decrease of $1.9 million in non-nuclear generation expenses primarily due to a lower scope of work performed during plant outages in 2022 as compared to prior year.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and millage rate increases.

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

Other regulatory charges (credits) - net includes:

•a regulatory credit of $36.7 million, recorded in the third quarter 2022, to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenues from the bill credits provided to customers in the September bill cycle. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds;

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•regulatory credits of $22.6 million, recorded in third quarter 2022, to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2022 formula rate plan filing; and
•regulatory credits of $19.9 million, recorded in the second quarter 2021, to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2021 formula rate plan filing.

Other income increased primarily due to higher interest income from carrying costs related to the deferred fuel balance.

Interest expense increased primarily due to:

•the issuance of $200 million of 2.55% Series mortgage bonds in November 2021;
•the issuance of $200 million of 3.50% Series mortgage bonds in March 2021;
•the $150 million unsecured term loan proceeds received in June 2022; and
•the borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility.

Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $9 million for the nine months ended September 30, 2022 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.

Income Taxes

The effective income tax rates were 23.8% for the third quarter 2022 and 22.6% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rates were 22.9% for the third quarter 2021 and 22.4% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to state income taxes, partially offset by 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.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Inflation Reduction Act of 2022.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Cash and cash equivalents at beginning of period$47,627 $18 
Net cash provided by (used in):
Operating activities101,591 249,768 
Investing activities(428,776)(468,198)
Financing activities282,455 218,440 
Net increase (decrease) in cash and cash equivalents(44,730)10 
Cash and cash equivalents at end of period$2,897 $28 

Operating Activities

Net cash flow provided by operating activities decreased $148.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•increased fuel costs and timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements herein for a discussion of fuel and purchased power cost recovery;
•payments to vendors, including timing and increase in cost of operations;
•a one-time bill credit in 2022 for the disbursement of settlement proceeds as directed by the MPSC. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and the MPSC directive; and
•income tax refunds of $8 million received in 2021 in accordance with an intercompany income tax allocation agreement.

The decrease was partially offset by higher collections from customers and a decrease of $16.5 million in storm spending in 2022, primarily due to Winter Storm Uri restoration efforts in 2021.

Investing Activities

Net cash flow used in investing activities decreased $39.4 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•a decrease of $90.1 million in distribution construction expenditures primarily due to a lower scope of work performed in 2022 as compared to 2021, lower capital expenditures for storm restoration in 2022, and lower spending in 2022 on advanced metering infrastructure;
•money pool activity; and
•a decrease of $35.4 million in transmission construction expenditures primarily due to a lower scope of work performed in 2022 as compared to 2021.

The decrease was partially offset by the initial payment of approximately $105.1 million in May 2022 for the purchase of the Sunflower Solar facility by a consolidated tax equity partnership and an increase of $9.2 million in information technology capital expenditures primarily due to increased spending on various technology projects in 2022. See Note 14 to the financial statements herein for discussion of the Sunflower Solar facility purchase.

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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 $40.5 million for the nine months ended September 30, 2022. The money pool is an inter-company borrowing arrangement designed to reduce the Utility’s subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $64 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•proceeds received in June 2022 from a $150 million unsecured term loan due December 2023;
•borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility; and
•a capital contribution of $9.6 million received in May 2022 from the noncontrolling tax equity investor in MS Sunflower Partnership, LLC and used by the partnership for the initial payment in the acquisition of the Sunflower Solar facility. See Note 14 to the financial statements herein for discussion of the Sunflower Solar facility purchase.

The increase was partially offset by the issuance of $200 million of 3.50% Series mortgage bonds in March 2021.

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.
September 30,
 2022		December 31,
2021
Debt to capital54.9 %54.3 %
Effect of subtracting cash— %(0.5 %)
Net debt to net capital54.9 %53.8 %

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 also 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 is developing its capital investment plan for 2023 through 2025 and currently anticipates making $1.6 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Mississippi’s portfolio; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission

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spending to drive reliability and resilience while also supporting renewables expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
September 30,
 2022		December 31,
2021		September 30,
 2021		December 31,
2020
(In Thousands)
($19,319)$40,456($34,603)($16,516)

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 $95 million scheduled to expire in April 2023. As of September 30, 2022, there were no cash borrowings outstanding under these credit facilities. Also, Entergy Mississippi has a credit facility in the amount of $150 million scheduled to expire in July 2024. As of September 30, 2022, there was $100 million in cash borrowings outstanding under the credit facility. 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 September 30, 2022, $9.7 million in MISO letters of credit and $1 million in 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 had $33.3 million in its storm reserve escrow account at September 30, 2022.

Sunflower Solar

As discussed in the Form 10-K, 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. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that were then used to make an initial payment of $105 million for acquisition of the facility. In July 2022, pursuant to the MPSC’s April 2020 order, Entergy Mississippi submitted a compliance filing to the MPSC with updated calculations of the impact of the Sunflower Solar facility on rate base and revenue requirement for the Sunflower Solar facility and benefits of the tax equity partnership. In November 2022 the MPSC approved Entergy Mississippi’s July 2022 compliance filing and authorized the recovery of the costs of the Sunflower Solar facility through the interim capacity rate adjustment mechanism in the formula rate plan with rates effective in December 2022. Substantial completion of the Sunflower Solar facility was accepted by Entergy Mississippi in September 2022. A final payment is currently expected in fourth quarter 2022. Commercial operation at the Sunflower Solar facility commenced in September 2022. See Note 14 to the financial statements herein for discussion of Entergy Mississippi’s purchase of the Sunflower Solar facility.

State and Local Rate Regulation and Fuel-Cost Recovery

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

Fuel and purchased power cost recovery

See “Complaints Against System Energy - System Energy Settlement with the MPSC” in Note 2 to the financial statements herein for discussion of the partial settlement agreement filed with the FERC in June 2022. The settlement, which is contingent upon FERC approval, provides for a refund of $235 million from System

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Energy to Entergy Mississippi. In July 2022 the MPSC directed the disbursement of settlement proceeds, ordering Entergy Mississippi to provide a one-time $80 bill credit to each of its approximately 460,000 retail customers to be effective during the September 2022 billing cycle, and to apply the remaining proceeds to Entergy Mississippi’s under-recovered deferred fuel balance. System Energy requested an order from the FERC by November 2022.

Entergy Mississippi had a deferred fuel balance of approximately $291.7 million under the energy cost recovery rider as of July 31, 2022, along with an over-recovery balance of $51.1 million under the power management rider. Without further action, Entergy Mississippi anticipated a year-end deferred fuel balance of approximately $200 million after application of a portion of the System Energy settlement proceeds, as discussed above. In September 2022, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider. Entergy Mississippi proposed five monthly incremental adjustments to the net energy cost factor designed to collect the under-recovered fuel balance as of July 31, 2022 and to reflect the recovery of a higher natural gas price. Entergy Mississippi also proposed five monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance as of July 31, 2022. In October 2022 the MPSC approved modified interim adjustments to Entergy Mississippi’s energy cost recovery rider and power management rider. The MPSC approved dividing the energy cost recovery rider interim adjustment into two components that would allow Entergy Mississippi to 1) recover a natural gas fuel rate that is better aligned with current prices and 2) recover the estimated under-recovered deferred fuel balance as of September 30, 2022 over a period of 20 months. The MPSC approved six monthly incremental adjustments to the net energy cost factor designed to reflect the recovery of a higher natural gas price. The MPSC also approved six monthly incremental adjustments to the power management adjustment factor designed to flow through to customers the over-recovered power management rider balance. Entergy Mississippi will not file its annual redetermination of the energy cost recovery rider or the power management rider in November 2022. Entergy Mississippi’s November 2023 annual redetermination will not reflect any part of the estimated under-recovered deferred fuel balance as of September 30, 2022; it will only reflect any over/under recovery that accumulates after September 2022. The November 2024 annual redetermination will include the total deferred fuel balance, including any over- or under-recovery of the deferred fuel balance as of September 30, 2022.

Retail Rates

2022 Formula Rate Plan Filing

In March 2022, Entergy Mississippi submitted its formula rate plan 2022 test year filing and 2021 look-back filing showing Entergy Mississippi’s earned return for the historical 2021 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2022 calendar year to be below the formula rate plan bandwidth. The 2022 test year filing shows a $69 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.70% return on rate base, within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $48.6 million. The 2021 look-back filing compares actual 2021 results to the approved benchmark return on rate base and reflects the need for a $34.5 million interim increase in formula rate plan revenues. In fourth quarter 2021, Entergy Mississippi recorded a regulatory asset of $19 million to reflect the then-current estimate in connection with the look-back feature of the formula rate plan. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2021 retail revenues, effective in April 2022.

In June 2022, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2022 test year filing that resulted in a total rate increase of $48.6 million. Pursuant to the joint stipulation, Entergy Mississippi’s 2021 look-back filing reflected an earned return on rate base of 5.99% in calendar year 2021, which is below the look-back bandwidth, resulting in a $34.3 million increase in the formula rate plan revenues on an interim basis through June 2023. In July 2022 the MPSC approved the joint stipulation with rates effective in August 2022. In July 2022, Entergy Mississippi recorded regulatory credits of $22.6 million to reflect the effects of the joint stipulation. In August 2022 an intervenor filed a statutorily-authorized direct appeal to the

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Mississippi Supreme Court seeking review of the MPSC’s July 2022 order approving the joint stipulation confirming Entergy Mississippi’s 2022 formula rate plan filing. The rates that went into effect in August 2022 are not stayed or otherwise impacted while the appeal is pending.

In July 2022 the MPSC directed Entergy Mississippi to flow $14.1 million of the power management rider over-recovery balance to customers beginning in August 2022 through December 2022 to mitigate the bill impact of the increase in formula rate plan revenues.

Net Metering Rulemaking

Pursuant to a mandatory reopener provision in its net metering rule, the MPSC opened a docket to review the efficacy and fairness of its existing net metering rule. In July 2022 the MPSC issued an order adopting revisions to its net metering rule. Among other things, the amended rule requires utilities to calculate avoided cost using daytime energy production, grandfathers a 2.5 cents per kWh distributed generation benefits adder for 25 years, and expands eligibility for the 2 cents per kWh low-income benefits adder to households up to 250% of the federal poverty level and grandfathers that adder for 25 years. The amended rule expands meter aggregation to include systems up to 3 MW alternating current and to any additional meters within the same electric utility service territory. The amended rule also increases the 3% net metering participation cap to 4% and requires that utilities seek MPSC approval prior to refusing additional net generation requests. The MPSC also directs utilities to make rate filings implementing rebates for distributed generation facilities. Because of the size and number of customers eligible under this new rule, there is a risk of loss of load and the shifting of costs to customers. In August 2022, Entergy Mississippi filed a motion for rehearing on the proposed net metering rule, which the MPSC granted. A hearing on the proposed rule was held in September 2022. In October 2022 the MPSC adopted an amended rule, which will now be known as the Distributed Generation Rule. In the Distributed Generation Rule, all provisions permitting meter aggregation were struck. The Distributed Generation Rule maintains the 3% net metering participation cap. The Distributed Generation Rule grandfathers a 2.5 cents per kWh distributed generation benefits adder for 25 years, and expands eligibility for the 2 cents per kWh low-income benefits adder to households up to 225% of the federal poverty level and grandfathers that adder for 25 years. The Distributed Generation Rule also directs utilities to make rate filings implementing up-front incentives for distributed generating systems and demand response battery systems, and to establish a public K-12 solar for schools program.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. Entergy Mississippi began recovery of the bad debt expense deferral resulting from the COVID-19 pandemic over a three-year period with implementation of the interim formula rate plan rates in April 2022. As of September 30, 2022, Entergy Mississippi had a remaining regulatory asset of $10.9 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.


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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, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.

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 AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$459,132 $420,319 $1,213,620 $1,105,978 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale86,145 54,505 197,093 180,315 
Purchased power84,653 85,247 235,211 217,730 
Other operation and maintenance82,698 72,523 223,407 214,253 
Taxes other than income taxes37,045 25,911 102,259 78,886 
Depreciation and amortization61,921 57,130 182,623 168,324 
Other regulatory charges (credits) - net(11,470)25,810 16,290 12,309 
TOTAL340,992 321,126 956,883 871,817 
OPERATING INCOME118,140 99,193 256,737 234,161 
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction1,606 2,006 4,179 5,703 
Interest and investment income136 1 234 50 
Miscellaneous - net181 (1,844)17 (6,362)
TOTAL1,923 163 4,430 (609)
INTEREST EXPENSE
Interest expense22,473 19,024 63,910 55,559 
Allowance for borrowed funds used during construction(753)(849)(1,876)(2,378)
TOTAL21,720 18,175 62,034 53,181 
INCOME BEFORE INCOME TAXES98,343 81,181 199,133 180,371 
Income taxes23,454 18,586 44,935 40,388 
NET INCOME 74,889 62,595 154,198 139,983 
Net loss attributable to noncontrolling interest(9,117)— (9,117)— 
EARNINGS APPLICABLE TO MEMBER'S EQUITY$84,006 $62,595 $163,315 $139,983 
See Notes to Financial Statements.



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CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Net income$154,198 $139,983 
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization182,623 168,324 
Deferred income taxes, investment tax credits, and non-current taxes accrued45,811 53,629 
Changes in assets and liabilities:
Receivables(50,712)(36,754)
Fuel inventory(2,856)5,564 
Accounts payable34,776 48,413 
Taxes accrued(12,542)(30,881)
Interest accrued11,171 4,632 
Deferred fuel costs(214,459)(95,310)
Other working capital accounts(23,012)(40,911)
Provisions for estimated losses(461)(8,087)
Other regulatory assets(53,830)(15,366)
Other regulatory liabilities31,682 49,036 
Pension and other postretirement liabilities(18,489)(17,454)
Other assets and liabilities17,691 24,950 
Net cash flow provided by operating activities101,591 249,768 
INVESTING ACTIVITIES
Construction expenditures(368,151)(473,956)
Allowance for equity funds used during construction4,179 5,703 
Changes in money pool receivable - net40,456 — 
Payment for purchase of assets(105,149)— 
Other(111)55 
Net cash flow used in investing activities(428,776)(468,198)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt249,298 200,539 
Capital contribution from noncontrolling interest9,595 — 
Changes in money pool payable - net19,319 18,087 
Other4,243 (186)
Net cash flow provided by financing activities282,455 218,440 
Net increase (decrease) in cash and cash equivalents(44,730)10 
Cash and cash equivalents at beginning of period47,627 18 
Cash and cash equivalents at end of period$2,897 $28 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized$50,719 $49,080 
Income taxes$— ($8,045)
See Notes to Financial Statements.

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ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
 20222021
 (In Thousands)
CURRENT ASSETS  
Cash and cash equivalents:  
Cash$2,896 $29 
Temporary cash investments1 47,598 
Total cash and cash equivalents2,897 47,627 
Accounts receivable:  
Customer91,178 84,048 
Allowance for doubtful accounts(2,069)(7,209)
Associated companies11,625 42,994 
Other31,311 14,609 
Accrued unbilled revenues68,687 56,034 
Total accounts receivable200,732 190,476 
Deferred fuel costs336,337 121,878 
Fuel inventory - at average cost13,167 10,311 
Materials and supplies - at average cost84,495 69,639 
Prepayments and other11,519 6,394 
TOTAL649,147 446,325 
OTHER PROPERTY AND INVESTMENTS  
Non-utility property - at cost (less accumulated depreciation)4,516 4,527 
Escrow accounts41,147 48,886 
TOTAL45,663 53,413 
UTILITY PLANT  
Electric6,922,046 6,613,109 
Construction work in progress175,629 95,452 
TOTAL UTILITY PLANT7,097,675 6,708,561 
Less - accumulated depreciation and amortization2,242,272 2,127,590 
UTILITY PLANT - NET4,855,403 4,580,971 
DEFERRED DEBITS AND OTHER ASSETS  
Regulatory assets:  
Other regulatory assets516,262 462,432 
Other19,881 14,248 
TOTAL536,143 476,680 
TOTAL ASSETS$6,086,356 $5,557,389 
See Notes to Financial Statements.  

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CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
 20222021
 (In Thousands)
CURRENT LIABILITIES  
Currently maturing long-term debt$250,000 $— 
Accounts payable:  
Associated companies80,635 42,929 
Other126,364 113,000 
Customer deposits89,084 86,167 
Taxes accrued93,731 106,273 
Interest accrued28,454 17,283 
Other23,160 36,731 
TOTAL691,428 402,383 
NON-CURRENT LIABILITIES  
Accumulated deferred income taxes and taxes accrued773,775 720,097 
Accumulated deferred investment tax credits11,599 10,913 
Regulatory liability for income taxes - net204,353 212,445 
Other regulatory liabilities89,087 49,313 
Asset retirement cost liabilities10,750 10,315 
Accumulated provisions37,567 38,028 
Pension and other postretirement liabilities40,402 59,065 
Long-term debt2,180,783 2,179,989 
Other43,250 35,273 
TOTAL3,391,566 3,315,438 
Commitments and Contingencies  
EQUITY  
Member's equity2,002,884 1,839,568 
Noncontrolling interest478 — 
TOTAL2,003,362 1,839,568 
TOTAL LIABILITIES AND EQUITY$6,086,356 $5,557,389 
See Notes to Financial Statements.  

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
 Noncontrolling InterestMember's EquityTotal
 (In Thousands)
Balance at December 31, 2020$— $1,672,734 $1,672,734 
Net income— 25,972 25,972 
Balance at March 31, 2021— 1,698,706 1,698,706 
Net income— 51,416 51,416 
Balance at June 30, 2021— 1,750,122 1,750,122 
Net income— 62,595 62,595 
Balance at September 30, 2021$— $1,812,717 $1,812,717 
Balance at December 31, 2021$— $1,839,568 $1,839,568 
Net income— 30,355 30,355 
Balance at March 31, 2022— 1,869,923 1,869,923 
Net income— 48,955 48,955 
Capital contribution from noncontrolling interest9,595 — 9,595 
Balance at June 30, 20229,595 1,918,878 1,928,473 
Net income (loss)(9,117)84,006 74,889 
Balance at September 30, 2022$478 $2,002,884 $2,003,362 
See Notes to Financial Statements.

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MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2022 Compared to Third Quarter 2021

Net income increased $10.9 million primarily due to higher retail electric price and higher volume/weather, partially offset by higher other operation and maintenance expenses.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Net income increased $39.2 million primarily due to higher retail electric price and higher volume/weather, partially offset by higher interest expense, higher depreciation and amortization expense, and higher other operation and maintenance expenses.

Operating Revenues

Third Quarter 2022 Compared to Third Quarter 2021

Following is an analysis of the change in operating revenues comparing the third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues$211.2 
Fuel, rider, and other revenues that do not significantly affect net income61.4 
Retail electric price13.6 
Volume/weather5.5 
2022 operating revenues$291.7 

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 rate increases effective November 2021 and September 2022, each in accordance with the terms of the 2021 and 2022 formula rate plan filings. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.

The volume/weather variance is primarily due to increases in weather-adjusted residential and commercial usage, partially offset by the effect of less favorable weather on residential and commercial sales. The increase in weather-adjusted residential usage was primarily due to the effect of Hurricane Ida in third quarter 2021. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021.

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Total electric energy sales for Entergy New Orleans for the three months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential702 655 7 
Commercial561 545 3 
Industrial109 114 (4)
Governmental222 203 9 
  Total retail 1,594 1,517 5 
Sales for resale:
  Non-associated companies499 653 (24)
Total2,093 2,170 (4)

See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
Amount
(In Millions)
2021 operating revenues$559.3 
Fuel, rider, and other revenues that do not significantly affect net income129.8 
Retail electric price33.9 
Volume/weather21.2 
2022 operating revenues$744.2 

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 a rate increase effective November 2021 in accordance with the terms of the 2021 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

The volume/weather variance is primarily due to an increase in weather-adjusted residential usage, an increase in commercial usage, and the effect of more favorable weather on residential sales. The increase in weather-adjusted residential usage was primarily due to the effect of Hurricane Ida in 2021. The increase in commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in 2021.


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Total electric energy sales for Entergy New Orleans for the nine months ended September 30, 2022 and 2021 are as follows:
20222021% Change
(GWh)
Residential1,909 1,755 9 
Commercial1,569 1,498 5 
Industrial318 319 — 
Governmental606 574 6 
  Total retail 4,402 4,146 6 
Sales for resale:
  Non-associated companies1,820 1,271 43 
Total6,222 5,417 15 

See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.

Other Income Statement Variances

Third Quarter 2022 Compared to Third Quarter 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $4.7 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;
•an increase of $3.4 million in power delivery expenses primarily due to higher reliability costs and higher vegetation maintenance costs; and
•an increase of $1.9 million in loss provisions.

The increase was partially offset by a decrease of $5 million in non-nuclear generation expenses primarily due to a lower scope of work performed in 2022 as compared to the same period in 2021.

Taxes other than income taxes decreased primarily due to decreases in ad valorem taxes resulting from lower assessments and decreases in local franchise taxes.

Interest expense increased primarily due to the issuance of $90 million of 4.19% Series mortgage bonds and the issuance of $70 million of 4.51% Series mortgage bonds, each in November 2021.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $4.9 million in bad debt expense, including the deferral in 2021 of bad debt expense and increased write-offs of bad debt in 2022, each resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic;

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•an increase of $4.1 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher safety and training costs, and higher reliability costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems; and
•an increase of $2.8 million in loss provisions.

The increase was partially offset by a decrease of $8 million in non-nuclear generation expenses primarily due to a lower scope of work performed in 2022, including during plant outages, as compared to the same period in 2021 and a decrease of $1.9 million in energy efficiency expenses due to the timing of recovery from customers.

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

Interest expense increased primarily due to the issuance of $90 million of 4.19% Series mortgage bonds and the issuance of $70 million of 4.51% Series mortgage bonds, each in November 2021.

Income Taxes

The effective income tax rate was 27.1% for third quarter 2022. The difference in the effective income tax rate for third quarter 2022 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 25.1% for the nine months ended September 30, 2022. The difference in the effective income tax rate for the nine months ended September 30, 2022 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 and the amortization of excess accumulated deferred 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rates were 26% for third quarter 2021 and 27.1% for the nine months ended September 30, 2021. The differences in the effective income tax rates for third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to state income taxes and the provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Inflation Reduction Act of 2022.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Cash and cash equivalents at beginning of period$42,862 $26 
Net cash provided by (used in):
Operating activities96,194 77,450 
Investing activities(130,584)(59,423)
Financing activities9,509 8,335 
Net increase (decrease) in cash and cash equivalents(24,881)26,362 
Cash and cash equivalents at end of period$17,981 $26,388 

Operating Activities

Net cash flow provided by operating activities increased $18.7 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•higher collections from customers; and
•a decrease of $4.5 million in pension contributions in 2022 as compared to prior period. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” herein and 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 increase was partially offset by:

•increased fuel costs, including the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•payments to vendors, including timing and increase in cost of operations; and
•an increase of $11.2 million in storm spending in 2022, primarily due to Hurricane Ida restoration efforts. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K and Note 2 to the financial statements herein for a discussion of storm restoration efforts.

Investing Activities

Net cash flow used in investing activities increased $71.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•$83 million in receipts from storm reserve escrow accounts in 2021; and
•an increase of $32 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2022 and increased investment in the reliability and infrastructure of Entergy New Orleans’s distribution system, partially offset by lower spending in 2022 on advanced metering infrastructure. The increase in storm restoration spending is primarily due to Hurricane Ida restoration efforts. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K and Note 2 to the financial statements herein for a discussion of storm restoration efforts.

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Management's Financial Discussion and Analysis


The increase was partially offset by money pool activity and a decrease of $9.7 million in non-nuclear generation construction expenditures primarily due to a lower scope of work performed during plant outages in 2022.

Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $36 million for the nine months ended September 30, 2022 compared to increasing by $2 million for the nine months ended September 30, 2021. 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 $1.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to a $15 million advance received in 2022 in anticipation of Entergy New Orleans’s construction of a New Orleans Sewerage and Water Board substation and money pool activity. The increase was partially offset by long-term credit borrowings of $25 million in 2021.

Decreases in Entergy New Orleans’s payable to the money pool are a use of cash flow, and Entergy New Orleans’s payable to the money pool decreased $10.2 million for the nine months ended September 30, 2021.

Capital Structure

Entergy New Orleans’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due an increase in equity resulting from retained earnings in 2022.
September 30,
2022		December 31,
2021
Debt to capital52.9 %55.4 %
Effect of excluding securitization bonds (0.7 %)(1.0 %)
Debt to capital, excluding securitization bonds (a)52.2 %54.4 %
Effect of subtracting cash(0.6 %)(1.4 %)
Net debt to net capital, excluding securitization bonds (a)51.6 %53.0 %

(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.


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Uses and Sources of Capital

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

Entergy New Orleans is developing its capital investment plan for 2023 through 2025 and currently anticipates making $555 million in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy New Orleans’s portfolio; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
September 30,
2022		December 31,
2021		September 30,
2021		December 31,
2020
(In Thousands)
$433$36,410$1,995($10,190)

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 June 2024. 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 September 30, 2022, there were no cash borrowings and no letters of credit outstanding under the credit 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 September 30, 2022, 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.

Hurricane Zeta

As discussed in the Form 10-K, in October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. In May 2021, Entergy New Orleans filed an application with the City Council requesting approval and certification that its system restoration costs associated with Hurricane Zeta of approximately $36 million, which included $7 million in estimated costs, were reasonable and necessary to enable Entergy New Orleans to restore electric service to its customers and Entergy New Orleans’s electric utility infrastructure. In May 2022 the City Council advisors issued a report recommending that the City Council find that Entergy New Orleans acted prudently in restoring service following Hurricane Zeta and approximately $33 million in storm restoration costs were prudently incurred and recoverable. Additionally, the advisors concluded that approximately $7 million of the $44 million withdrawn from its funded storm reserve was in excess of Entergy New Orleans’s costs and should be considered in Entergy New Orleans’s application for certification of costs related to Hurricane Ida. In September 2022 the City Council issued a resolution finding that Entergy New Orleans’s system restoration costs were reasonable and necessary, and that Entergy New Orleans acted prudently in restoring electricity following Hurricane Zeta. The City Council also found that approximately $33 million in storm costs were recoverable.


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Hurricane Ida

As discussed in the Form 10-K, in August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. In June 2022, Entergy New Orleans filed an application with the City Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately $170 million, which included $11 million in estimated costs, were reasonable, necessary, and prudently incurred to enable Entergy New Orleans to restore electric service to its customers and to repair Entergy New Orleans’s electric utility infrastructure. In addition, estimated carrying costs through December 2022 related to Hurricane Ida restoration costs were $9 million. Also, Entergy New Orleans is requesting approval that the $39 million withdrawal from its funded storm reserve in September 2021 and $7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms are properly applied to Hurricane Ida storm restoration costs, the application of which reduces the amount to be recovered from Entergy New Orleans customers by $46 million.

Additionally, as discussed in the Form 10-K, in February 2022, Entergy New Orleans filed with the City Council a securitization application requesting that the City Council review Entergy New Orleans’s storm reserve and increase the storm reserve funding level to $150 million, to be funded through securitization. In August 2022 the City Council’s advisors recommended that the City Council authorize a single securitization bond issuance to fund Entergy New Orleans’s storm recovery reserves to an amount sufficient to: (1) allow recovery of all of Entergy New Orleans’s unrecovered storm recovery costs following Hurricane Ida, subject to City Council review and certification; (2) provide initial funding of storm recovery reserves for future storms to a level of $75 million; and (3) fund the storm recovery bonds’ upfront financing costs. In September 2022, Entergy New Orleans and the City Council’s advisors entered into an agreement in principle, which was approved by the City Council along with a financing order in October 2022, authorizing Entergy New Orleans to proceed with a single securitization bond issuance of $206 million, with $125 million interim recovery, subject to City Council review and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs; $75 million to provide for a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds’ upfront financing costs. In November 2022 the City Council adopted a procedural schedule regarding the certification of the Hurricane Ida storm restoration costs in which the hearing officer shall certify the record for City Council consideration no later than August 2023.
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

2022 Formula Rate Plan Filing

In April 2022, Entergy New Orleans submitted to the City Council its formula rate plan 2021 test year filing. The 2021 test year evaluation report, subsequently updated in a July 2022 filing, produced an earned return on equity of 6.88% compared to the authorized return on equity of 9.35%. Entergy New Orleans sought approval of a $42.1 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula results in an increase in authorized electric revenues of $34.1 million and an increase in authorized gas revenues of $3.3 million. Entergy New Orleans also sought to commence collecting $4.7 million in electric revenues that were previously approved by the City Council for collection through the formula rate plan. In July 2022 the City Council’s advisors issued a report seeking a reduction to Entergy New Orleans’s proposed increase of approximately $17.1 million in total for electric and gas revenues. Effective with the first billing cycle of

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September 2022, Entergy New Orleans implemented rates reflecting an amount agreed upon by Entergy New Orleans and the City Council including adjustments filed in the City Council’s advisors’ report, per the approved process for formula rate plan implementation. The total formula rate plan increase implemented was $24.7 million, which includes an increase of $18.2 million in electric revenues, $4.7 million in previously approved electric revenues, and an increase of $1.8 million in gas revenues. Additionally, credits of $13.9 million funded by certain regulatory liabilities currently held by Entergy New Orleans for customers will be issued over an eight-month period beginning September 2022.

COVID-19 Orders

As discussed in the Form 10-K, 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 September 30, 2022, Entergy New Orleans had a regulatory asset of $13.9 million for costs associated with the COVID-19 pandemic. As part of the agreed-upon terms of its 2022 formula rate plan filing, Entergy New Orleans will recover this regulatory asset over a five-year period beginning September 2023.

Reliability Investigation

As discussed in the Form 10-K, in April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in the management and maintenance of the reliability of its distribution system. The City Council also approved a resolution that opened a prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation asserting that it had been prudent in managing system reliability. In April 2019 the City Council advisors filed comments and testimony asserting that Entergy New Orleans did not act prudently in maintaining and improving its distribution system reliability in recent years and recommending that a financial penalty in the range of $1.5 million to $2 million should be assessed.  Entergy New Orleans disagreed with the recommendation and submitted rebuttal testimony and rebuttal comments in June 2019. In November 2019 the City Council passed a resolution that penalized Entergy New Orleans $1 million for alleged imprudence in the maintenance of its distribution system. In December 2019, Entergy New Orleans filed suit in Louisiana state court seeking judicial review of the City Council’s resolution. In June 2022 the Orleans Civil District Court issued a written judgment that the penalty be set aside, reversed, and vacated. In August 2022 the Orleans Civil District Court granted a post-judgment motion to remand for the City Council to take actions consistent with its judgment.

Also in August 2022 the City Council approved a resolution establishing a 30-day comment period on proposed minimum reliability standards and an associated penalty mechanism. In September 2022, Entergy New Orleans filed comments to the proposed plan including a request for an additional round of comments.

System Resiliency and Storm Hardening

As discussed in the Form 10-K, in October 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening. The docket will identify a plan for storm hardening and resiliency projects with other stakeholders. In July 2022, Entergy New Orleans filed with the City Council a response identifying a plan for storm hardening and resiliency projects, including microgrids, to be implemented over 10 years at an approximate cost of $1.5 billion. In September 2022 the City Council approved a procedural schedule with final comments due April 2023.

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, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.

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 Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$262,904 $192,946 $641,634 $491,855 
Natural gas28,759 18,283 102,550 67,449 
TOTAL291,663 211,229 744,184 559,304 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale81,847 34,940 180,059 88,462 
Purchased power88,103 75,360 227,661 201,207 
Other operation and maintenance38,806 34,483 116,173 113,638 
Taxes other than income taxes12,920 15,530 41,353 40,380 
Depreciation and amortization19,556 18,444 57,322 54,758 
Other regulatory charges (credits) - net5,452 4,126 14,991 9,831 
TOTAL246,684 182,883 637,559 508,276 
OPERATING INCOME44,979 28,346 106,625 51,028 
OTHER INCOME
Allowance for equity funds used during construction396 433 316 1,067 
Interest and investment income215 18 307 32 
Miscellaneous - net(184)(205)766 (711)
TOTAL427 246 1,389 388 
INTEREST EXPENSE
Interest expense8,683 7,158 26,075 21,149 
Allowance for borrowed funds used during construction(215)(192)(255)(475)
TOTAL8,468 6,966 25,820 20,674 
INCOME BEFORE INCOME TAXES36,938 21,626 82,194 30,742 
Income taxes10,023 5,631 20,607 8,345 
NET INCOME$26,915 $15,995 $61,587 $22,397 
See Notes to Financial Statements.


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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Net income$61,587 $22,397 
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization57,322 54,758 
Deferred income taxes, investment tax credits, and non-current taxes accrued22,429 11,261 
Changes in assets and liabilities:
Receivables(9,022)(24,959)
Fuel inventory(3,245)79 
Accounts payable3,319 22,863 
Taxes accrued(4,241)(1,699)
Interest accrued(204)(2,796)
Deferred fuel costs(33,301)4,280 
Other working capital accounts(5,973)(7,025)
Provisions for estimated losses8,409 (62,293)
Other regulatory assets24,449 18,412 
Other regulatory liabilities(8,921)11,757 
Pension and other postretirement liabilities(6,598)(11,220)
Other assets and liabilities(9,816)41,635 
Net cash flow provided by operating activities96,194 77,450 
INVESTING ACTIVITIES
Construction expenditures(163,403)(139,153)
Allowance for equity funds used during construction316 1,067 
Changes in money pool receivable - net35,977 (1,995)
Receipts from storm reserve escrow account— 83,045 
Payments to storm reserve escrow account— (7)
Changes in securitization account(3,474)(2,380)
Net cash flow used in investing activities(130,584)(59,423)
FINANCING ACTIVITIES
Retirement of long-term debt— 19,251 
Changes in money pool payable - net— (10,190)
Other9,509 (726)
Net cash flow provided by financing activities9,509 8,335 
Net increase (decrease) in cash and cash equivalents(24,881)26,362 
Cash and cash equivalents at beginning of period42,862 26 
Cash and cash equivalents at end of period$17,981 $26,388 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$25,231 $23,015 
Income taxes$— $324 
See Notes to Financial Statements.

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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$426 $26 
Temporary cash investments17,555 42,836 
Total cash and cash equivalents17,981 42,862 
Securitization recovery trust account5,473 1,999 
Accounts receivable: 
Customer104,201 69,902 
Allowance for doubtful accounts(9,392)(13,282)
Associated companies2,948 74,146 
Other6,611 13,668 
Accrued unbilled revenues38,661 25,550 
Total accounts receivable143,029 169,984 
Deferred fuel costs25,694 — 
Fuel inventory - at average cost6,190 2,945 
Materials and supplies - at average cost21,637 19,216 
Prepayments and other12,280 5,428 
TOTAL232,284 242,434 
OTHER PROPERTY AND INVESTMENTS
Non-utility property at cost (less accumulated depreciation)1,050 1,016 
TOTAL1,050 1,016 
UTILITY PLANT
Electric1,992,727 1,976,202 
Natural gas385,007 373,983 
Construction work in progress45,338 22,199 
TOTAL UTILITY PLANT2,423,072 2,372,384 
Less - accumulated depreciation and amortization809,858 774,309 
UTILITY PLANT - NET1,613,214 1,598,075 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Deferred fuel costs4,080 4,080 
Other regulatory assets (includes securitization property of $16,350 as of September 30, 2022 and $25,761 as of December 31, 2021)
224,168 248,617 
Other63,947 56,101 
TOTAL292,195 308,798 
TOTAL ASSETS$2,138,743 $2,150,323 
See Notes to Financial Statements.

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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$170,000 $— 
Payable due to associated company1,326 1,326 
Accounts payable:
Associated companies57,512 45,057 
Other53,049 146,921 
Customer deposits31,020 28,539 
Taxes accrued144 4,385 
Interest accrued7,787 7,991 
Deferred fuel costs— 7,607 
Current portion of unprotected excess accumulated deferred income taxes— 1,906 
Other7,226 6,204 
TOTAL328,064 249,936 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued390,806 365,384 
Accumulated deferred investment tax credits16,277 16,306 
Regulatory liability for income taxes - net39,660 40,589 
Asset retirement cost liabilities— 4,032 
Accumulated provisions14,738 6,329 
Long-term debt (includes securitization bonds of $23,927 as of September 30, 2022 and $29,661 as of December 31, 2021)
602,123 777,254 
Long-term payable due to associated company9,585 9,585 
Other37,188 42,193 
TOTAL1,110,377 1,261,672 
Commitments and Contingencies
EQUITY
Member's equity700,302 638,715 
TOTAL700,302 638,715 
TOTAL LIABILITIES AND EQUITY$2,138,743 $2,150,323 
See Notes to Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
 Member's Equity
 (In Thousands)
Balance at December 31, 2020$606,917 
Net income1,771 
Balance at March 31, 2021608,688 
Net income4,631 
Balance at June 30, 2021613,319 
Net income15,995 
Balance at September 30, 2021$629,314 
Balance at December 31, 2021$638,715 
Net income15,126 
Balance at March 31, 2022653,841 
Net income19,546 
Balance at June 30, 2022673,387 
Net income26,915 
Balance at September 30, 2022$700,302 
See Notes to Financial Statements. 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Third Quarter 2022 Compared to Third Quarter 2021

Net income increased $23.2 million primarily due to higher volume/weather and higher retail electric price, partially offset by higher other operation and maintenance expenses.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Net income increased $76.2 million primarily due to higher volume/weather, higher retail electric price, and the recognition of the equity component of carrying costs as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022. The increase was partially offset by higher other operation and maintenance expenses and higher depreciation and amortization expenses.

Operating Revenues

Third Quarter 2022 Compared to Third Quarter 2021

Following is an analysis of the change in operating revenues comparing the third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues$541.6 
Fuel, rider, and other revenues that do not significantly affect net income85.7 
Volume/weather21.7 
Retail electric price10.6 
2022 operating revenues$659.6 

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 volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales, an increase in weather-adjusted residential and commercial usage, and an increase in industrial usage. The increase in weather-adjusted residential usage was primarily due to an increase in customers. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021. The increase in industrial usage was primarily due to an increase in demand from cogeneration and small industrial customers and an increase in demand from expansion projects, primarily in the chemicals, transportation, and petroleum refining industries.

The retail electric price variance is primarily due to an increase in the transmission cost recovery factor rider effective March 2022 and an increase in the distribution cost recovery factor rider effective January 2022. See

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Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission and distribution cost recovery factor rider filings.

Total electric energy sales for Entergy Texas for the three months ended September 30, 2022 and 2021 are as follows:
2022
2021
% Change
(GWh)
Residential2,125 1,963 8 
Commercial1,416 1,316 8 
Industrial2,538 2,416 5 
Governmental77 69 12 
  Total retail 6,156 5,764 7 
Sales for resale:
  Associated companies— 324 (100)
  Non-associated companies127 191 (34)
Total6,283 6,279 — 

See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2022 to the nine months ended September 30, 2021:
Amount
(In Millions)
2021 operating revenues$1,452.3 
Fuel, rider, and other revenues that do not significantly affect net income121.3 
Volume/weather62.2 
Retail electric price39.1 
System restoration carrying costs21.7 
2022 operating revenues$1,696.6 

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 volume/weather variance is primarily due to the effect of more favorable weather on residential sales, an increase in industrial usage, and an increase in weather-adjusted residential usage. The increase in industrial usage was primarily due to an increase in demand from cogeneration and small industrial customers, an increase in demand from expansion projects, primarily in the transportation and chemicals industries, and an increase in demand from existing customers, primarily in the transportation industry. The increase in weather-adjusted residential usage was primarily due to an increase in customers.


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The retail electric price variance is primarily due to:

•increases in the transmission cost recovery factor rider effective March 2021 and March 2022;
•an increase in the distribution cost recovery factor rider effective January 2022; and
•the implementation of the generation cost recovery rider, which includes the first-year revenue requirement for the Montgomery County Power Station, effective in late January 2021.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission and distribution cost recovery factor rider and generation cost recovery rider filings.

System restoration carrying costs represent the equity component of system restoration carrying costs, recorded in second quarter 2022, recognized as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022. See Note 2 to the financial statements herein for a discussion of the securitization.

Total electric energy sales for Entergy Texas for the nine months ended September 30, 2022 and 2021 are as follows:
2022
2021
% Change
(GWh)
Residential5,345 4,844 10 
Commercial3,706 3,420 8 
Industrial7,291 6,561 11 
Governmental207 190 9 
  Total retail 16,549 15,015 10 
Sales for resale:
  Associated companies279 983 (72)
  Non-associated companies432 824 (48)
Total17,260 16,822 3 

See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.

Other Income Statement Variances

Third Quarter 2022 Compared to Third Quarter 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $7.8 million in power delivery expenses primarily due to higher vegetation maintenance costs;
•an increase of $2 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•several individually insignificant items.

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

Interest expense increased primarily due to the issuance of $290.85 million of senior secured system restoration bonds in April 2022 and the issuance of $325 million of 5.00% Series mortgage bonds in August 2022,

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partially offset by the repayment, prior to maturity, of $545.9 million of senior secured transition bonds as a result of payments made on the remaining principal balance in 2022.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Other operation and maintenance expenses increased primarily due to:

•an increase of $11.7 million in power delivery expenses primarily due to higher vegetation maintenance costs and higher reliability costs;
•an increase of $5.8 million in non-nuclear generation expenses primarily due to higher expenses associated with the Hardin County Peaking Facility, which was purchased in June 2021, and a higher scope of work performed in 2022 as compared to the same period in 2021;
•an increase of $2.7 million in customer service center support costs primarily due to higher contract costs;
•an increase of $2.4 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; and
•several individually insignificant items.

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 2022.

Interest expense increased primarily due to the issuance of $290.85 million of senior secured system restoration bonds in April 2022, partially offset by the repayment, prior to maturity, of $545.9 million of senior secured transition bonds as a result of payments made on the remaining principal balance in 2022.

Income Taxes

The effective income tax rates were 14.4% for the third quarter 2022 and 13.5% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 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. 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rates were 13.7% for the third quarter 2021 and 11.3% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 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. 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 of 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 for discussion of the Inflation Reduction Act of 2022.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Cash and cash equivalents at beginning of period$28 $248,596 
Net cash provided by (used in):
Operating activities224,735 254,980 
Investing activities(487,729)(479,166)
Financing activities477,070 (24,385)
Net increase (decrease) in cash and cash equivalents214,076 (248,571)
Cash and cash equivalents at end of period$214,104 $25 

Operating Activities

Net cash flow provided by operating activities decreased $30.2 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements herein for a discussion of fuel and purchased power cost recovery. The decrease was partially offset by higher collections from customers, the timing of payments to vendors, and a decrease of $24.7 million in storm spending in 2022, primarily due to Hurricane Laura, Hurricane Delta, and Winter Storm Uri restoration efforts in 2021.

Investing Activities

Net cash flow used in investing activities increased $8.6 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to the sale of a 7.56% partial interest in the Montgomery County Power Station in June 2021 for approximately $67.9 million and cash collateral of $31.2 million posted in 2022 to support Entergy Texas’s obligations to MISO. The increase was partially offset by:

•a decrease of $44.4 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2022, partially offset by higher capital expenditures as a result of increased development in Entergy Texas’s service area. The decrease in storm restoration spending is primarily due to Hurricane Laura and Hurricane Delta restoration efforts in 2021;
•the purchase of the Hardin County Peaking Facility in June 2021 for approximately $36.7 million; and
•a decrease of $26.6 million in non-nuclear generation construction expenditures primarily due to higher spending in 2021 on the Montgomery County Power Station project.

Financing Activities

Entergy Texas’s financing activities provided $477.1 million of cash for the nine months ended September 30, 2022 compared to using $24.4 million for the nine months ended September 30, 2021 primarily due to the following activity:

•the issuance of $325 million of 5.00% Series mortgage bonds in August 2022;
•the issuance of $290.85 million of senior secured system restoration bonds in April 2022;
•the repayment, prior to maturity, of $125 million of 2.55% Series mortgage bonds in May 2021;

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•the repayment, at maturity, of $75 million of 4.10% Series mortgage bonds in September 2021;
•the issuance of $130 million of 1.50% Series mortgage bonds in August 2021;
•money pool activity; and
•a capital contribution of $85 million received from Entergy Corporation in April 2021 in order to maintain Entergy Texas’s capital structure and in anticipation of various upcoming capital expenditures.

Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased $79.6 million for the nine months ended September 30, 2022 compared to increasing by $20.1 million for the nine months ended September 30, 2021. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

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 Texas’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 long-term debt in 2022, partially offset by an increase in equity resulting from retained earnings.
September 30,
2022		December 31,
2021
Debt to capital51.5 %48.7 %
Effect of excluding the securitization bonds(2.6 %)(0.5 %)
Debt to capital, excluding securitization bonds (a)48.9 %48.2 %
Effect of subtracting cash(2.1 %)— %
Net debt to net capital, excluding securitization bonds (a)46.8 %48.2 %

(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 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 is developing its capital investment plan for 2023 through 2025 and currently anticipates making $3.4 billion in capital investments during that period. The preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Texas’s portfolio, including Orange County Advanced Power Station; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to drive reliability and resilience while also supporting renewables expansion;

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and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Texas’s receivables from or (payables to) the money pool were as follows:

September 30,
2022		December 31,
2021		September 30,
2021		December 31,
2020
(In Thousands)
$5,146($79,594)($20,075)$4,601

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 June 2027.  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 September 30, 2022, there were no cash borrowings and $1.1 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 September 30, 2022, $9.7 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.

Orange County Advanced Power Station

As discussed in the Form 10-K, in September 2021, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Orange County Advanced Power Station, a new 1,215 MW combined-cycle combustion turbine facility to be located in Bridge City, Texas at an initially-estimated expected total cost of $1.2 billion inclusive of the estimated costs of the generation facilities, transmission upgrades, contingency, an allowance for funds used during construction, and necessary regulatory expenses, among others. The project includes combustion turbine technology with dual fuel capability, able to co-fire up to 30% hydrogen by volume upon commercial operation and upgradable to support 100% hydrogen operations in the future. In December 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2022 certain intervenors filed testimony opposing the hydrogen co-firing component of the proposed project and others filed testimony opposing the project outright. Also in March 2022 the PUCT staff filed testimony opposing the hydrogen co-firing component of the proposed project, but otherwise taking no specific position on the merits of the project. The PUCT staff also proposed that the PUCT establish a maximum amount that Entergy Texas may recover in rates attributable to the project. In April 2022, Entergy Texas filed rebuttal testimony addressing and rebutting these various arguments. Also in April 2022 the ALJs with the State Office of Administrative Hearings approved a continuance of the hearing on the merits from April 2022 to June 2022, providing Entergy Texas an opportunity to accelerate the determination and fixing of pricing for 60 days for the Orange County Advanced Power Station prior to the hearing. In May 2022, Entergy Texas obtained and provided to the parties an updated fixed pricing option of $1.58 billion, available until mid-July 2022. The hearing on the merits was held in June 2022, and post-hearing briefs were submitted in July 2022. In September 2022 the ALJs with the State Office of Administrative Hearings issued a proposal for decision recommending the PUCT approve Entergy Texas’s application for certification of Orange County Advanced Power Station subject to certain conditions, including a cap on cost recovery at $1.37 billion, the exclusion of investment associated with co-firing hydrogen, weatherization requirements, and customer receipt of any contractual benefits associated with the facility’s guaranteed heat rate. In October 2022 the parties in the proceeding filed exceptions and replies to exceptions to the proposal for decision. Also in October 2022, Entergy Texas filed with the PUCT information regarding a new fixed pricing option for an estimated project cost of approximately $1.55 billion associated with Entergy Texas’s issuance of limited notice to proceed by mid-November 2022. A final order by the PUCT is expected in the fourth quarter of 2022. Entergy Texas also is pursuing environmental permitting that is

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required prior to the commencement of construction. Subject to receipt of required regulatory approvals, permits, and other conditions, the facility is expected to be in service by the end of 2026.

Hurricane Laura, Hurricane Delta, and Winter Storm Uri

As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization in December 2021. In November 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022, Entergy Texas reclassified $153 million from utility plant to other regulatory assets.

In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured system restoration bonds (securitization bonds). With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas began cost recovery through the system restoration charge effective with the first billing cycle of May 2022 and the system restoration charge is expected to remain in place up to 15 years. See Note 4 to the financial statements herein for a discussion of the April 2022 issuance of the securitization bonds.

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

2022 Base Rate Case

In July 2022, Entergy Texas filed a base rate case with the PUCT seeking a net increase in base rates of approximately $131.4 million. The base rate case was based on a 12-month test year ending December 31, 2021. Key drivers of the requested increase are changes in depreciation rates as the result of a depreciation study and an increase in the return on equity. In addition, Entergy Texas included capital additions placed into service for the period of January 1, 2018 through December 31, 2021, including those additions currently reflected in the distribution and transmission cost recovery factor riders and the generation cost recovery rider, all of which would be reset to zero as a result of this proceeding. In July 2022, the PUCT referred the proceeding to the State Office of Administrative Hearings. In October 2022 intervenors filed direct testimony challenging and supporting various aspects of Entergy Texas’s rate case application. The key issues addressed included the appropriate return on equity, generation plant deactivations, depreciation rates, and proposed tariffs related to electric vehicles. In November 2022 the PUCT staff filed direct testimony addressing a similar set of issues and recommending a reduction of $50.7 million to Entergy Texas’s overall cost of service associated with the requested net increase in base rates of approximately $131.4 million. Entergy Texas will file rebuttal testimony in November 2022. A hearing on the merits is scheduled for December 2022. If a settlement is not reached, a final decision by the PUCT is expected in second quarter 2023.


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Distribution Cost Recovery Factor (DCRF) Rider

As discussed in the Form 10-K, in August 2021, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The amended rider was designed to collect from Entergy Texas’s retail customers approximately $40.2 million annually, or $13.9 million in incremental annual revenues beyond Entergy Texas’s then-effective DCRF rider based on its capital invested in distribution between September 1, 2020 and June 30, 2021. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in December 2021. In December 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding, including a motion for interim rates to take effect for usage on and after January 24, 2022. Also, in December 2021, the ALJ with the State Office of Administrative Hearings issued an order granting the motion for interim rates, which went into effect in January 2022, admitting evidence, and remanding the proceeding to the PUCT to consider the settlement. In March 2022 the PUCT issued an order approving the settlement.

Transmission Cost Recovery Factor (TCRF) Rider

As discussed in the Form 10-K, in October 2021, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The amended rider was designed to collect from Entergy Texas’s retail customers approximately $66.1 million annually, or $15.1 million in incremental annual revenues beyond Energy Texas’s then-effective TCRF rider based on its capital invested in transmission between September 1, 2020 and July 31, 2021 and changes in approved transmission charges. In January 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In February 2022 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2022. In February 2022 the ALJ granted the motion for interim rates, admitted evidence, and remanded the case to the PUCT for consideration of a final order at a future open meeting. In June 2022 the PUCT issued an order approving the settlement.

Generation Cost Recovery Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider to begin recovering a return of and on its generation capital investment in the Montgomery County Power Station through August 31, 2020, which was approved by the PUCT on an interim basis in January 2021. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include its generation capital investment in Montgomery County Power Station after August 31, 2020 and an unopposed settlement agreement filed on behalf of the parties by Entergy Texas in October 2021 was approved by the PUCT in January 2022. In February 2022, Entergy Texas filed a relate-back rider to collect over five months an additional approximately $5 million, which is the difference between the interim revenue requirement approved in January 2021 and the revenue requirement approved in January 2022 that reflects Entergy Texas’s full generation capital investment and ownership in Montgomery County Power Station on January 1, 2021, plus carrying costs from January 2021 through January 2022 when the updated revenue requirement took effect. In April 2022, Entergy Texas and the PUCT staff filed a joint proposed order that supports approval of Entergy Texas’s as-filed request. The PUCT approved the relate-back rider consistent with Entergy Texas’s as-filed request, and rates became effective over a five month period, in August 2022.

In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which closed in June 2021. Because Hardin was to be acquired in the future, the initial generation cost recovery rider rates proposed in the application represented no change from the generation cost recovery rider rates established in Entergy Texas’s previous generation cost recovery rider proceeding. In July 2021 the PUCT issued an order approving the application. In August 2021, Entergy Texas filed an update application to recover its actual investment in the acquisition of the Hardin County Peaking Facility. In September 2021 the PUCT referred the proceeding to the State Office of Administrative

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Hearings. A procedural schedule was established with a hearing scheduled in April 2022. In January 2022, Entergy Texas filed an update to its application to align the requested revenue requirement with the terms of the generation cost recovery rider settlement approved by the PUCT in January 2022. In March 2022, Entergy Texas filed on behalf of the parties an unopposed motion, which motion was granted by the ALJ with the State Office of Administrative Hearings, to abate the procedural schedule indicating that the parties had reached an agreement in principle. In April 2022, Entergy Texas filed on behalf of the parties a unanimous settlement agreement that would adjust its generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million, which is $4.5 million in incremental annual revenue above the $88.3 million approved in January 2022, related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility. Concurrently with filing of the unanimous settlement agreement, Entergy Texas submitted an agreed motion to admit evidence and remand the case to the PUCT for review and consideration of the settlement agreement, which motion was granted by the ALJ with the State Office of Administrative Hearings. The PUCT approved the settlement agreement and rates became effective in August 2022. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect.

COVID-19 Orders

As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings, the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As of September 30, 2022, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022.

Green Pricing Option Tariffs

In January 2022, Entergy Texas filed an application requesting approval to implement two voluntary renewable option tariffs, Rider Small Volume Renewable Option (Rider SVRO) and Rider Large Volume Renewable Option (Rider LVRO). Both tariffs are voluntary offerings that give customers the ability to match some or all of their monthly electricity usage with renewable energy credits that are purchased by Entergy Texas and retired on the customer’s behalf. Voluntary participation in either Rider SVRO or Rider LVRO and the charges assessed under the respective tariff would be in addition to the charges paid by customers under their otherwise applicable rate schedules and riders. In April 2022, Entergy Texas filed on behalf of the parties an unopposed settlement agreement supporting approval of Entergy Texas’s proposed green pricing option tariffs. As part of the settlement agreement, Entergy Texas agreed to revise the cost allocation between the rate tiers of Rider SVRO and committed to collaborating with and considering the input of customers to develop an asset-backed green tariff program. The PUCT approved the settlement agreement in August 2022.

Fuel and purchased power recovery

In May 2022, Entergy Texas filed an application with the PUCT to implement an interim fuel surcharge to collect the cumulative under-recovery of approximately $51.7 million, including interest, of fuel and purchased power costs incurred from May 1, 2020 through December 31, 2021. The under-recovery balance is primarily attributable to the impacts of Winter Storm Uri, including historically high natural gas prices, partially offset by settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas proposed that the interim fuel surcharge be assessed over a period of six months beginning with the first billing cycle after the PUCT issues a final order, but no later than the first billing cycle of September 2022. Also in May 2022, the PUCT referred the proceeding to the State Office of Administrative Hearings. In July 2022, Entergy Texas filed on behalf of the parties an unopposed settlement resolving all issues in the proceeding. In addition, Entergy Texas filed on

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behalf of the parties a motion to admit evidence, to approve interim rates as requested in the initial application, and to remand the proceeding to the PUCT to consider the unopposed settlement. In August 2022 the ALJ with the State Office of Administrative Hearings issued an order granting Entergy Texas’s motion, approving interim rates effective with the first billing cycle of September 2022, and remanding the case to the PUCT for final approval.

In September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the reconciliation period, Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. A PUCT decision is expected in September 2023.

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 discussion of nuclear matters.

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.

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 Texas’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits.

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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CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$659,556 $541,632 $1,696,629 $1,452,286 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale113,154 92,843 247,929 269,270 
Purchased power208,703 155,723 564,809 425,784 
Other operation and maintenance83,014 68,973 230,580 202,743 
Taxes other than income taxes29,886 30,479 73,817 73,025 
Depreciation and amortization58,472 54,711 171,781 159,234 
Other regulatory charges (credits) - net8,072 10,029 43,917 51,122 
TOTAL501,301 412,758 1,332,833 1,181,178 
OPERATING INCOME158,255 128,874 363,796 271,108 
OTHER INCOME
Allowance for equity funds used during construction3,616 1,836 9,375 6,951 
Interest and investment income1,062 204 1,597 632 
Miscellaneous - net(1,655)(507)(1,757)(1,457)
TOTAL3,023 1,533 9,215 6,126 
INTEREST EXPENSE
Interest expense24,613 21,220 68,626 66,157 
Allowance for borrowed funds used during construction(1,218)(738)(3,150)(2,797)
TOTAL23,395 20,482 65,476 63,360 
INCOME BEFORE INCOME TAXES137,883 109,925 307,535 213,874 
Income taxes19,881 15,084 41,645 24,185 
NET INCOME118,002 94,841 265,890 189,689 
Preferred dividend requirements518 470 1,554 1,411 
EARNINGS APPLICABLE TO COMMON STOCK$117,484 $94,371 $264,336 $188,278 
See Notes to Financial Statements.














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CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Net income$265,890 $189,689 
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization171,781 159,234 
Deferred income taxes, investment tax credits, and non-current taxes accrued57,532 31,518 
Changes in assets and liabilities:
Receivables(63,743)(50,538)
Fuel inventory16,868 7,232 
Accounts payable77,740 20,506 
Taxes accrued2,520 6,003 
Interest accrued(4,832)(12,808)
Deferred fuel costs(273,644)(103,013)
Other working capital accounts(11,927)(19,522)
Provisions for estimated losses(414)67 
Other regulatory assets(130,042)72,760 
Other regulatory liabilities(23,014)(21,469)
System restoration costs approved for securitization recognized as regulatory asset153,383 — 
Pension and other postretirement liabilities(12,458)(16,489)
Other assets and liabilities(905)(8,190)
Net cash flow provided by operating activities224,735 254,980 
INVESTING ACTIVITIES
Construction expenditures(469,630)(541,161)
Allowance for equity funds used during construction9,375 6,951 
Proceeds from sale of assets— 67,920 
Payment for purchase of assets— (36,534)
Litigation proceeds from settlement agreement4,134 — 
Changes in money pool receivable - net(5,146)4,601 
Changes in securitization account4,698 19,057 
Increase in other investments(31,160)— 
Net cash flow used in investing activities(487,729)(479,166)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt606,444 127,931 
Retirement of long-term debt(54,257)(269,435)
Capital contribution from parent— 85,000 
Changes in money pool payable - net(79,594)20,075 
Preferred stock dividends paid(1,542)(1,411)
Other6,019 13,455 
Net cash flow provided by (used in) financing activities477,070 (24,385)
Net increase (decrease) in cash and cash equivalents214,076 (248,571)
Cash and cash equivalents at beginning of period28 248,596 
Cash and cash equivalents at end of period$214,104 $25 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$71,311 $77,110 
Income taxes$1,085 $11,710 
See Notes to Financial Statements.

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$5,290 $28 
Temporary cash investments208,814 — 
Total cash and cash equivalents214,104 28 
Securitization recovery trust account21,931 26,629 
Accounts receivable:
Customer141,972 83,797 
Allowance for doubtful accounts(2,989)(5,814)
Associated companies17,759 31,720 
Other17,608 13,404 
Accrued unbilled revenues79,887 62,241 
Total accounts receivable254,237 185,348 
Deferred fuel costs321,924 48,280 
Fuel inventory - at average cost25,844 42,712 
Materials and supplies - at average cost82,470 72,884 
Prepayments and other57,253 17,515 
TOTAL977,763 393,396 
OTHER PROPERTY AND INVESTMENTS
Investments in affiliates - at equity262 300 
Non-utility property - at cost (less accumulated depreciation)376 376 
Other18,097 18,128 
TOTAL18,735 18,804 
UTILITY PLANT
Electric7,259,010 7,181,567 
Construction work in progress285,907 183,965 
TOTAL UTILITY PLANT7,544,917 7,365,532 
Less - accumulated depreciation and amortization2,121,834 2,049,750 
UTILITY PLANT - NET5,423,083 5,315,782 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $274,933 as of September 30, 2022 and $23,818 as of December 31, 2021)
551,375 421,333 
Other126,722 112,096 
TOTAL678,097 533,429 
TOTAL ASSETS$7,097,678 $6,261,411 
See Notes to Financial Statements.  

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT LIABILITIES
Accounts payable:
Associated companies$73,558 $142,929 
Other197,204 164,981 
Customer deposits38,503 37,271 
Taxes accrued51,538 49,018 
Interest accrued14,170 19,002 
Current portion of unprotected excess accumulated deferred income taxes2,660 27,188 
Other19,107 16,120 
TOTAL396,740 456,509 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued761,897 692,496 
Accumulated deferred investment tax credits8,864 9,325 
Regulatory liability for income taxes - net133,021 144,145 
Other regulatory liabilities49,698 37,060 
Asset retirement cost liabilities10,971 8,520 
Accumulated provisions7,828 8,242 
Long-term debt (includes securitization bonds of $287,229 as of September 30, 2022 and $53,979 as of December 31, 2021)
2,907,947 2,354,148 
Other73,170 67,760 
TOTAL3,953,396 3,321,696 
Commitments and Contingencies
EQUITY
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2022 and 2021
49,452 49,452 
Paid-in capital1,050,125 1,050,125 
Retained earnings1,609,215 1,344,879 
Total common shareholder's equity2,708,792 2,444,456 
Preferred stock without sinking fund38,750 38,750 
TOTAL2,747,542 2,483,206 
TOTAL LIABILITIES AND EQUITY$7,097,678 $6,261,411 
See Notes to Financial Statements.

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Common Equity
Preferred StockCommon
Stock		Paid-in
Capital		Retained
Earnings		Total
(In Thousands)
Balance at December 31, 2020$35,000 $49,452 $955,162 $1,117,964 $2,157,578 
Net income— — — 50,058 50,058 
Preferred stock dividends— — — (470)(470)
Balance at March 31, 202135,000 49,452 955,162 1,167,552 2,207,166 
Net income— — — 44,790 44,790 
Capital contribution from parent— — 85,000 — 85,000 
Preferred stock dividends— — — (471)(471)
Balance at June 30, 202135,000 49,452 1,040,162 1,211,871 2,336,485 
Net income— — — 94,841 94,841 
Preferred stock dividends— — — (470)(470)
Balance at September 30, 2021$35,000 $49,452 $1,040,162 $1,306,242 $2,430,856 
Balance at December 31, 2021$38,750 $49,452 $1,050,125 $1,344,879 $2,483,206 
Net income— — — 50,403 50,403 
Preferred stock dividends— — — (518)(518)
Balance at March 31, 202238,750 49,452 1,050,125 1,394,764 2,533,091 
Net income— — — 97,485 97,485 
Preferred stock dividends— — — (518)(518)
Balance at June 30, 202238,750 49,452 1,050,125 1,491,731 2,630,058 
Net income— — — 118,002 118,002 
Preferred stock dividends— — — (518)(518)
Balance at September 30, 2022$38,750 $49,452 $1,050,125 $1,609,215 $2,747,542 
See Notes to Financial Statements.

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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. As discussed in “Complaints Against System Energy” below, System Energy is currently involved in proceedings at the FERC commenced by the retail regulators of its customers regarding its return on equity, its capital structure, its renewal of the sale-leaseback of 11.5% of Grand Gulf, the treatment of uncertain tax positions in rate base, the prudence of its operation of Grand Gulf, and the rates it charges under the Unit Power Sales Agreement.

Results of Operations

Net Income

Third Quarter 2022 Compared to Third Quarter 2021

Net income remained relatively unchanged, decreasing $0.1 million, for the third quarter 2022 compared to the third quarter 2021.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

System Energy experienced a net loss of $321.4 million in the nine months ended September 30, 2022 compared to net income of $81.7 million for the nine months ended September 30, 2021 primarily due to a regulatory charge of $551 million ($413 million net-of-tax) recorded in the second quarter 2022 to reflect the effects of the partial settlement agreement and offer of settlement related to pending proceedings before the FERC. Partially offsetting the decrease in earnings was an increase in revenues resulting from changes in rate base. See Note 2 to the financial statements herein for discussion of the partial settlement agreement and offer of settlement.

Income Taxes

The effective income tax rates were 11% for the third quarter 2022 and 26.4% for the nine months ended September 30, 2022. The differences in the effective income tax rates for the third quarter 2022 and the nine months ended September 30, 2022 versus the federal statutory rate of 21% were primarily due to state income taxes, which included an adjustment to the amortization of state investment tax credits recorded in the third quarter 2022.

The effective income tax rate was 23.5% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes.

The effective income tax rate was 7.7% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.


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Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Inflation Reduction Act of 2022.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2022 and 2021 were as follows:
20222021
(In Thousands)
Cash and cash equivalents at beginning of period$89,201 $242,469 
Net cash provided by (used in):
Operating activities177,739 130,676 
Investing activities(118,663)(75,603)
Financing activities46,958 (134,400)
Net increase (decrease) in cash and cash equivalents106,034 (79,327)
Cash and cash equivalents at end of period$195,235 $163,142 

Operating Activities

Net cash flow provided by operating activities increased $47.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to income tax payments of $39.1 million in 2021, timing of collections of receivables, and timing of payments to vendors, partially offset by an increase in spending of $36.1 million on nuclear refueling outages in 2022 as compared to the same period in 2021. System Energy had income tax payments in 2021 as a result of the amended Mississippi tax returns filed based on federal adjustments related to the resolution of the 2014-2015 IRS audit, as well as a portion of the payments made in accordance with an intercompany income tax allocation agreement. See Note 3 to the financial statements in the Form 10-K for discussion of the 2014-2015 IRS audit.

Investing Activities

Net cash flow used in investing activities increased $43.1 million for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 primarily due to:

•an increase of $66.4 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022; and
•an increase of $52.6 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 offset by money pool activity.

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 $70.9 million for the nine months ended September 30, 2022 compared to increasing by $8.3 million for the nine months ended September 30, 2021. The money pool is an inter-

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company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

System Energy’s financing activities provided $47 million of cash for the nine months ended September 30, 2022 compared to using $134.4 million of cash for the nine months ended September 30, 2021 primarily due to:

•the repayment in February 2021 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity; and
•a decrease of $74 million in common stock dividends and distributions. No common stock dividends or distributions were made in 2022 in order to maintain System Energy’s capital structure and in anticipation of the settlement with the MPSC.

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

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 the net loss in 2022.

 September 30,
2022		December 31,
2021
Debt to capital50.6 %40.4 %
Effect of subtracting cash(7.1 %)(3.0 %)
Net debt to net capital43.5 %37.4 %

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.

System Energy is developing its capital investment plan for 2023 through 2025 and currently anticipates making $510 million in capital investments during that period. The preliminary estimate includes amounts associated with Grand Gulf investments and initiatives.


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System Energy’s receivables from the money pool were as follows:
September 30,
2022		December 31,
2021		September 30,
2021		December 31, 2020
(In Thousands)
$4,802$75,745$12,338$4,004

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 June 2025. As of September 30, 2022, $83.9 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

See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. The following are updates to that discussion. See “System Energy Settlement with the MPSC” below for discussion of a partial settlement agreement and offer of settlement related to the pending proceedings before the FERC.

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $62 million, which includes interest through September 30, 2022, and the estimated resulting annual rate reduction would be approximately $34 million. The estimated refund will continue to accrue interest until a final FERC decision is issued.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021 the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions were filed in May 2021 by System Energy, the FERC trial staff, the

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LPSC, APSC, MPSC, and the City Council. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

In August 2022 the D.C. Circuit Court of Appeals issued an order addressing appeals of FERC’s Opinion No. 569 and 569-A, which established the methodology applied in the ALJ’s initial decision in the proceeding against System Energy discussed above. The appellate order addressed the methodology for determining the return on equity applicable to transmission owners in MISO. The D.C. Circuit found FERC’s use of the Risk Premium model as part of the methodology to be arbitrary and capricious, and remanded the case back to FERC. The remanded case is pending FERC action.

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

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through September 30, 2022 is approximately $422 million, plus interest, which is approximately $144 million through September 30, 2022. 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 $20 million, which includes interest through September 30, 2022.

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

LPSC Additional Complaints

As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at the 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.

Unit Power Sales Agreement Complaint

The first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in September 2020. The first complaint raises two sets of rate allegations: violations of the filed rate and a

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corresponding request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales Agreement prospectively. In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of September 21, 2020, establishing hearing procedures, and holding those procedures in abeyance pending the FERC’s review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above. System Energy agreed that the hearing should be held in abeyance but sought rehearing of the FERC’s decision as related to matters set for hearing that were beyond the scope of the FERC’s jurisdiction or authority. The complainants sought rehearing of the FERC’s decision to hold the hearing in abeyance and filed a motion to proceed, which motion System Energy subsequently opposed. In June 2021, System Energy’s request for rehearing was denied by operation of law, and System Energy filed an appeal of the FERC’s orders in the Court of Appeals for the Fifth Circuit. The appeal was initially stayed for a period of 90 days, but the stay expired. In November 2021 the Fifth Circuit dismissed the appeal as premature.

In November 2021 the LPSC, the APSC, and the City Council filed direct testimony and requested the FERC to order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement. The LPSC’s refund claims include, among other things, allegations that: (1) System Energy should not have included certain sale-leaseback transaction costs in prepayments; (2) System Energy should have credited rate base to reflect the time value of money associated with the advance collection of lease payments; (3) System Energy incorrectly included refueling outage costs that were recorded in account 174 in rate base; and (4) System Energy should have excluded several accumulated deferred income tax balances in account 190 from rate base. The LPSC is also seeking a retroactive adjustment to retained earnings and capital structure in conjunction with the implementation of its proposed refunds. In addition, the LPSC seeks amendments to the Unit Power Sales Agreement going forward to address below-the-line costs, incentive compensation, the working capital allowance, litigation expenses, and the 2019 termination of the capital funds agreement. The APSC argues that: (1) System Energy should have included borrowings from the Entergy System money pool in its determination of short-term debt in its cost of capital; and (2) System Energy should credit customers with System Energy’s allocation of earnings on money pool investments. The City Council alleges that System Energy has maintained excess cash on hand in the money pool and that retention of excess cash was imprudent. Based on this allegation, the City Council’s witness recommends a refund of approximately $98.8 million for the period 2004-September 2021 or other alternative relief. The City Council further recommends that the FERC impose a hypothetical equity ratio such as 48.15% equity to capital on a prospective basis.

In January 2022, System Energy filed answering testimony arguing that the FERC should not order refunds for prior periods or any prospective amendments to the Unit Power Sales Agreement. In response to the LPSC’s refund claims, System Energy argues, among other things, that: (1) the inclusion of sale-leaseback transaction costs in prepayments was correct; (2) the filed rate doctrine bars the request for a retroactive credit to rate base for the time value of money associated with the advance collection of lease payments; (3) an accounting misclassification for deferred refueling outage costs has been corrected, caused no harm to customers, and requires no refunds; and (4) its accounting and ratemaking treatment of specified accumulated deferred income tax balances in account 190 has been correct. System Energy further responds that no retroactive adjustment to retained earnings or capital structure should be ordered because there is no general policy requiring such a remedy and there was no showing that the retained earnings element of the capital structure was incorrectly implemented. Further, System Energy presented evidence that all of the costs that are being challenged were long known to the retail regulators and were approved by them for inclusion in retail rates, and the attempt to retroactively challenge these costs, some of which have been included in rates for decades, is unjust and unreasonable. In response to the LPSC’s proposed going-forward adjustments, System Energy presents evidence to show that none of the proposed adjustments are needed. On the issue of below-the-line expenses, during discovery procedures, System Energy identified a historical allocation error in certain months and agreed to provide a bill credit to customers to correct the error. In response to the APSC’s claims, System Energy argues that the Unit Power Sales Agreement does not include System Energy’s borrowings from the Entergy System money pool or earnings on deposits to the Entergy System money pool in the determination of the cost of capital; and accordingly, no refunds are appropriate on those issues. In response to the City Council’s claims, System Energy argues that it has reasonably managed its cash and that the City Council’s

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theory of cash management is defective because it fails to adequately consider the relevant cash needs of System Energy and it makes faulty presumptions about the operation of the Entergy System money pool. System Energy further points out that the issue of its capital structure is already subject to pending FERC litigation.

In March 2022 the FERC trial staff filed direct and answering testimony in response to the LPSC, the APSC, and the City Council’s direct testimony. In its testimony, the FERC trial staff recommends refunds for two primary reasons: (1) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with rate refunds; and (2) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005. The FERC trial staff recommends refunds of $84.1 million, exclusive of any tax gross-up or FERC interest. In addition, the FERC trial staff recommends the following prospective modifications to the Unit Power Sales Agreement: (1) inclusion of a rate base credit to recognize the time value of money associated with the advance collection of lease payments; (2) exclusion of executive incentive compensation costs for members of the Office of the Chief Executive and long-term performance unit costs where awards are based solely or primarily on financial metrics; and (3) exclusion of unvested, accrued amounts for stock options, performance units, and restricted stock awards. With respect to issues that ultimately concern the reasonableness of System Energy’s rate of return, the FERC trial staff states that it is unnecessary to consider such issues in this proceeding, in light of the pending case concerning System Energy’s return on equity and capital structure. On all other material issues raised by the LPSC, the APSC, and the City Council, the FERC trial staff recommends either no refunds or no modification to the Unit Power Sales Agreement.

In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations of refunds for the accumulated deferred income taxes issues and proposed modifications to the Unit Power Sales Agreement for the executive incentive compensation issues. In June 2022 the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005. Based on the testimony revisions, the FERC trial staff’s recommended refunds total $106.6 million, exclusive of any tax gross-up or FERC awarded interest. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the changes in the FERC trial staff’s testimony and oppose its revised recommendation.

In May 2022 the LPSC, the APSC, and the City Council filed rebuttal testimony. The LPSC’s testimony asserts new claims, including that: (1) certain of the sale-leaseback transaction costs may have been imprudently incurred; (2) accumulated deferred income taxes associated with sale-leaseback transaction costs should have been included in rate base; (3) accumulated deferred income taxes associated with federal investment tax credits should have been excluded from rate base; (4) monthly net operating loss accumulated deferred income taxes should have been excluded from rate base; and (5) several categories of proposed rate changes, including executive incentive compensation, air travel, industry dues, and legal costs, also warrant historical refunds. The LPSC’s rebuttal testimony argues that refunds for the alleged tariff violations and other claims must be calculated by rerunning the Unit Power Sales Agreement formula rate; however, it includes estimates of refunds associated with some, but not all, of its claims, totaling $286 million without interest. The City Council’s rebuttal testimony also proposes a new, alternate theory and claim for relief regarding System Energy’s participation in the Entergy System money pool, under which it calculates estimated refunds of approximately $51.7 million. The APSC’s rebuttal testimony agrees with the LPSC’s direct testimony that retained earnings should be adjusted in a comprehensive refund calculation. The testimony quantifies the estimated impacts of three issues: (1) a $1.5 million reduction in the revenue requirement under the Unit Power Sales Agreement if System Energy’s borrowings from the money pool are included in short-term debt; (2) a $1.9 million reduction in the revenue requirement if System Energy’s allocated share of money pool earnings are credited through the Unit Power Sales Agreement; and (3) a $1.9 million reduction in the revenue requirement for every $50 million of refunds ordered in a given year, without interest.

In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony, for the hearing to begin in September 2022, and for the initial decision to be issued in March 2023. In July 2022, System

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Energy filed responsive rebuttal testimony responding to the new claims in the LPSC’s and the City Council’s rebuttal testimony. Also in July 2022 the LPSC filed supplemental rebuttal testimony responding to System Energy’s revised cross-answering testimony, and System Energy filed responsive rebuttal testimony responding to that testimony. In August 2022 the LPSC filed responsive rebuttal testimony to System Energy’s responsive rebuttal testimony. The hearing commenced in September 2022.

LPSC Petition for Writ of Mandamus

In August 2022 the LPSC filed a petition for a writ of mandamus asking the Fifth Circuit Court of Appeals to order the FERC to act within ninety days on certain pending proceedings, including the Grand Gulf prudence complaint, the return on equity and capital structure complaints, and the Grand Gulf sale-leaseback renewal complaint. In September 2022 the FERC and System Energy filed oppositions to the LPSC’s petition, and the APSC and the City Council filed interventions in support of the petition. See Note 2 to the financial statements in the Form 10-K for further discussion of the complaints.

System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2020 Calendar Year Bills

System Energy’s Unit Power Sales Agreement includes formula rate protocols that provide for the disclosure of cost inputs, an opportunity for informal discovery procedures, and a challenge process. In February 2022, pursuant to the protocols procedures, the LPSC, the APSC, the MPSC, the City Council, and the Mississippi Public Utilities Staff filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2020. The formal challenge alleges: (1) that it was imprudent for System Energy to accept the IRS’s partial acceptance of a previously uncertain tax position; (2) that System Energy should have delayed recording the result of the IRS’s partial acceptance of the previously uncertain tax position until after internal tax allocation payments were made; (3) that the equity ratio charged in rates was excessive; (4) that sale-leaseback rental payments should have been excluded from rates; and (5) that all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2020 bills. While System Energy disagrees that any refunds are owed for the 2020 calendar year bills, the formal challenge estimates that the financial impact of the first through fourth allegations is approximately $53 million in refunds, excluding interest which will be calculated after a FERC order is issued; it does not provide an estimate of the financial impact of the fifth allegation.

In March 2022, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.

System Energy Settlement with the MPSC

In June 2022, System Energy, Entergy Mississippi, and additional named Entergy parties involved in thirteen docketed proceedings before the FERC filed with the FERC a partial settlement agreement and offer of settlement. The settlement memorializes the Entergy parties’ agreement with the MPSC to globally resolve all actual and potential claims between the Entergy parties and the MPSC associated with those FERC proceedings and with System Energy’s past implementation of the Unit Power Sales Agreement. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. Entergy Mississippi purchases the greatest single amount, nearly 40% of System Energy’s share of Grand Gulf, after its additional purchases from affiliates are considered. The settlement therefore limits System Energy’s overall refund exposure associated with the identified proceedings because they will be resolved completely as between the Entergy parties and the MPSC.

The FERC proceedings that are resolved as between the Entergy parties and the MPSC include the return on equity and capital structure complaints, the Grand Gulf sale-leaseback renewal complaint and uncertain tax position

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Management's Financial Discussion and Analysis
rate base issue, the Unit Power Sales Agreement complaint, and the Grand Gulf prudence complaint, all of which are discussed in Note 2 to the financial statements in the Form 10-K, and updated above. They also include the proceedings concerning System Energy’s return of excess accumulated deferred income taxes after the Tax Cuts and Jobs Act and the proceedings established to address System Energy’s October 2020 and December 2020 Federal Power Act section 205 filings to provide credits to customers related to the IRS’s decision as to the uncertain decommissioning tax position, also as all discussed in Note 2 to the financial statements in the Form 10-K. The settlement also resolves the MPSC’s involvement in the formal challenge filed by the retail regulators of System Energy’s customers in connection with the implementation of the Unit Power Sales Agreement annual formula rate protocols for the 2020 test year, which is discussed above.

The settlement provides for a black-box refund of $235 million from System Energy to Entergy Mississippi, which will be paid within 120 days of the settlement’s effective date (either the date of the FERC approval of the settlement without material modification, or the date that all settling parties agree to accept modifications or otherwise modify the settlement in response to a proposed material modification by the FERC). In addition, beginning with the July 2022 service month, the settlement provides for Entergy Mississippi’s bills from System Energy to be adjusted to reflect: an authorized rate of return on equity of 9.65%, a capital structure not to exceed 52% equity, a rate base reduction for the advance collection of sale-leaseback rental costs, and the exclusion of certain long-term incentive plan performance unit costs from rates.

The settlement is expressly contingent upon the approval of the FERC and the MPSC. It was approved by the MPSC in June 2022. The remaining retail regulators of Entergy’s utility operating company purchasers under the Unit Power Sales Agreement (the APSC, the LPSC, and the City Council) may elect to join the settlement. If all of them elect to do so under the terms of the settlement, then the total black-box refund payment by System Energy would be $588.25 million, and the prospective rate adjustments would apply to all purchasers under the Unit Power Sales Agreement.

If the FERC approves the settlement in accordance with its terms, then it will become binding upon the Entergy parties and the MPSC even if no additional retail regulators elect to join the settlement. The settlement will have no effect on the rights of non-settling parties to the identified FERC proceedings.

System Energy previously recorded a provision and associated liability of $37 million for elements of the applicable litigation. In June 2022, System Energy recorded a regulatory charge of $551 million ($413 million net-of-tax), increasing the regulatory liability to $588 million, which consists of $235 million for the settlement with the MPSC and $353 million for potential future refunds to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. In August 2022 comments on the settlement were filed by the APSC, the LPSC, the City Council, and the FERC trial staff. The APSC, the LPSC, and the City Council do not intend to join the settlement, but they do not oppose its approval as between the MPSC and the Entergy parties. The FERC trial staff concludes that the settlement is fair, reasonable, and in the public interest. Reply comments were filed in August 2022. System Energy requested an order from the FERC by November 2022.

Nuclear Matters

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

Environmental Risks

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


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System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. See “Qualified Pension and Other Postretirement Benefits” in the “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for updates to the discussion of qualified pension and other postretirement benefits. The following is an update to that discussion.

In the third quarter 2022, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $5.4 million reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement obligation cost asset that will be depreciated over the remaining life of the unit.
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.
STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months EndedNine Months Ended
2022202120222021
(In Thousands)(In Thousands)
OPERATING REVENUES
Electric$179,800 $154,319 $485,048 $433,378 
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale12,125 15,279 31,658 46,211 
Nuclear refueling outage expenses6,483 6,867 17,730 20,377 
Other operation and maintenance69,719 54,709 168,308 154,716 
Decommissioning10,117 9,721 30,050 28,875 
Taxes other than income taxes7,430 7,268 22,431 21,061 
Depreciation and amortization38,742 25,991 106,442 79,953 
Other regulatory charges (credits) - net(8,324)(1,707)510,667 (7,707)
TOTAL136,292 118,128 887,286 343,486 
OPERATING INCOME (LOSS)43,508 36,191 (402,238)89,892 
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction1,536 1,546 6,164 4,012 
Interest and investment income (loss)3,669 11,839 (58)36,871 
Miscellaneous - net(9,028)(4,372)(13,408)(14,282)
TOTAL(3,823)9,013 (7,302)26,601 
INTEREST EXPENSE
Interest expense9,189 9,513 27,782 28,627 
Allowance for borrowed funds used during construction(246)(261)(982)(678)
TOTAL8,943 9,252 26,800 27,949 
INCOME (LOSS) BEFORE INCOME TAXES30,742 35,952 (436,340)88,544 
Income taxes3,385 8,453 (114,981)6,851 
NET INCOME (LOSS)$27,357 $27,499 ($321,359)$81,693 
See Notes to Financial Statements.


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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
20222021
(In Thousands)
OPERATING ACTIVITIES
Net income (loss)($321,359)$81,693 
Adjustments to reconcile net income (loss) to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization163,043 151,345 
Deferred income taxes, investment tax credits, and non-current taxes accrued(129,093)17,233 
Changes in assets and liabilities:
Receivables(29,703)(5,216)
Accounts payable(7,193)(4,292)
Taxes accrued9,106 (35,063)
Interest accrued(972)(1,557)
Other working capital accounts(34,961)5,133 
Other regulatory assets(23,107)71,486 
Other regulatory liabilities282,463 31,909 
Pension and other postretirement liabilities(14,704)(20,721)
Other assets and liabilities284,219 (161,274)
Net cash flow provided by operating activities177,739 130,676 
INVESTING ACTIVITIES
Construction expenditures(132,100)(64,196)
Allowance for equity funds used during construction6,164 4,012 
Nuclear fuel purchases(77,707)(27,958)
Proceeds from the sale of nuclear fuel18,845 21,657 
Proceeds from nuclear decommissioning trust fund sales273,108 769,979 
Investment in nuclear decommissioning trust funds(277,916)(770,763)
Changes in money pool receivable - net70,943 (8,334)
Net cash flow used in investing activities(118,663)(75,603)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt955,587 565,610 
Retirement of long-term debt(908,629)(626,010)
Common stock dividends and distributions paid— (74,000)
Net cash flow provided by (used in) financing activities46,958 (134,400)
Net increase (decrease) in cash and cash equivalents106,034 (79,327)
Cash and cash equivalents at beginning of period89,201 242,469 
Cash and cash equivalents at end of period$195,235 $163,142 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized$30,231 $30,335 
Income taxes$— $39,085 
See Notes to Financial Statements.

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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash$350 $87 
Temporary cash investments194,885 89,114 
Total cash and cash equivalents195,235 89,201 
Accounts receivable:
Associated companies78,528 118,977 
Other6,212 7,003 
Total accounts receivable84,740 125,980 
Materials and supplies - at average cost129,376 127,093 
Deferred nuclear refueling outage costs40,289 10,123 
Prepayments and other4,381 1,870 
TOTAL454,021 354,267 
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds1,086,261 1,385,254 
TOTAL1,086,261 1,385,254 
UTILITY PLANT
Electric5,413,884 5,362,494 
Construction work in progress94,303 97,968 
Nuclear fuel187,663 171,438 
TOTAL UTILITY PLANT5,695,850 5,631,900 
Less - accumulated depreciation and amortization3,419,437 3,396,136 
UTILITY PLANT - NET2,276,413 2,235,764 
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets418,653 395,546 
Other1,773 1,793 
TOTAL420,426 397,339 
TOTAL ASSETS$4,237,121 $4,372,624 
See Notes to Financial Statements.

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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2022 and December 31, 2021
(Unaudited)
20222021
(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt$250,037 $50,329 
Accounts payable:
Associated companies25,922 23,682 
Other59,673 62,573 
Taxes accrued42,024 32,918 
Interest accrued10,742 11,714 
Other4,100 4,101 
TOTAL392,498 185,317 
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued255,791 382,931 
Accumulated deferred investment tax credits43,614 43,003 
Regulatory liability for income taxes - net108,662 113,165 
Other regulatory liabilities1,031,910 744,944 
Decommissioning1,032,276 1,007,603 
Pension and other postretirement liabilities61,400 76,104 
Long-term debt538,924 690,967 
Other2,045 37,230 
TOTAL3,074,622 3,095,947 
Commitments and Contingencies
COMMON EQUITY
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2022 and 2021
951,850 951,850 
Retained earnings (accumulated deficit)(181,849)139,510 
TOTAL770,001 1,091,360 
TOTAL LIABILITIES AND EQUITY$4,237,121 $4,372,624 
See Notes to Financial Statements.

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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Common Equity
Common
Stock		Retained
Earnings (Accumulated Deficit)		Total
(In Thousands)
Balance at December 31, 2020$951,850 $128,696 $1,080,546 
Net income— 23,864 23,864 
Common stock dividends and distributions— (21,000)(21,000)
Balance at March 31, 2021951,850 131,560 1,083,410 
Net income— 30,330 30,330 
Common stock dividends and distributions— (5,000)(5,000)
Balance at June 30, 2021951,850 156,890 1,108,740 
Net income— 27,499 27,499 
Common stock dividends and distributions— (48,000)(48,000)
Balance at September 30, 2021$951,850 $136,389 $1,088,239 
Balance at December 31, 2021$951,850 $139,510 $1,091,360 
Net income— 31,432 31,432 
Balance at March 31, 2022951,850 170,942 1,122,792 
Net loss— (380,148)(380,148)
Balance at June 30, 2022951,850 (209,206)742,644 
Net income— 27,357 27,357 
Balance at September 30, 2022$951,850 ($181,849)$770,001 
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 factors presented below, updates and should be read in conjunction with the risk factors and information disclosed in the Form 10-K.

The completion of capital projects, including the construction of power generation facilities, and other capital improvements involve substantial risks. Should such efforts be unsuccessful, the financial condition, results of operations, or liquidity of Entergy and the Utility operating companies could be materially affected.

Entergy’s and the Utility operating companies’ ability to complete capital projects, including the construction of power generation facilities, or make other capital improvements, in a timely manner and within budget is contingent upon many variables and subject to substantial risks. These variables include, but are not limited to, project management expertise, escalating costs for materials, labor, and environmental compliance, reliance on suppliers for timely and satisfactory performance, and pandemic-related delays and cost increases. Delays in obtaining permits, shortages in materials and qualified labor, levels of public support or opposition, suppliers and contractors not performing as expected or required under their contracts and/or experiencing financial problems that inhibit their ability to fulfill their obligations under contracts, changes in the scope and timing of projects, poor quality initial cost estimates from contractors, the inability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel costs, or materials costs, downward changes in the economy, changes in law or regulation, including environmental compliance requirements, trade and tariff issues associated with imported solar panels, supply chain delays or disruptions, and other events beyond the control of the Utility operating companies may occur that may materially affect the schedule, cost, and performance of these projects. If these projects or other capital improvements are significantly delayed or become subject to cost overruns or cancellation, Entergy and the Utility operating companies could incur additional costs and termination payments, or face increased risk of potential write-off of the investment in the project. In addition, the Utility operating companies could be exposed to higher costs and market volatility, which could affect cash flow and cost recovery, should their respective regulators decline to approve the construction of the project or new generation needed to meet the reliability needs of customers at the lowest reasonable cost.

For further information regarding capital expenditure plans and other uses of capital in connection with capital projects, including the potential construction and/or purchase of additional generation supply sources within the Utility operating companies’ service territory, see the “Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital” section of Management’s Financial Discussion and Analysis for Entergy herein and in the Form 10-K and the “Liquidity and Capital Resources - Uses of Capital” section of Management’s Financial Discussion and Analysis in the Form 10-K and the “Liquidity and Capital Resources - Uses and Sources of Capital” section of Management’s Financial Discussion and Analysis herein for each of the Registrant Subsidiaries.


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Recent U.S. tax legislation may materially adversely affect Entergy’s financial condition, results of operations, and cash flows.

The Tax Cuts and Jobs Act of 2017, CARES Act of 2020, and the Inflation Reduction Act of 2022 significantly changed the U.S. Internal Revenue Code, including taxation of U.S. corporations, by, among other things, reducing the federal corporate income tax rate, limiting interest deductions, altering the expensing of capital expenditures, enacting a new corporate alternative minimum tax, and expanding federal tax credits for clean energy production. The interpretive guidance issued by the IRS and state tax authorities may be inconsistent with Entergy’s own interpretation and the legislation could be subject to amendments, which could lessen or increase certain impacts of the legislation. In addition, the retail regulatory treatment of the expanded tax credits and corporate alternative minimum tax could materially impact Entergy’s future cash flows, and this legislation could result in unintended consequences not yet identified that could have a material adverse impact on Entergy’s financial results and future cash flows.

The tax rate decrease included in the Tax Cuts and Jobs Act required Entergy to record a regulatory liability for income taxes payable to customers. Such regulatory liability for income taxes is described in Note 3 to the financial statements in the Form 10-K. Depending on the outcome of IRS examinations or tax positions and elections that Entergy may make, Entergy and the Registrant Subsidiaries may be required to record additional charges or credits to income tax expense.

Based on current information and forecasts, Entergy and the Registrant Subsidiaries may be subject to the corporate alternative minimum tax included in the Inflation Reduction Act of 2022 beginning in 2026.

See Note 3 to the financial statements in the Form 10-K for discussion of the effects of the Tax Cuts and Jobs Act on 2019, 2020, and 2021 results of operations and financial condition, the provisions of the Tax Cuts and Jobs Act, and the uncertainties associated with accounting for the Tax Cuts and Jobs Act, and Note 2 to the financial statements in the Form 10-K for discussion of the regulatory proceedings that have considered the effects of the Tax Cuts and Jobs Act. See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the effects of the Inflation Reduction Act of 2022.

Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition, and liquidity.

Entergy and its subsidiaries make judgments regarding the potential tax effects of various transactions and results of operations to estimate their obligations to taxing authorities. These tax obligations include income, franchise, real estate, sales and use, and employment-related taxes. These judgments include provisions for potential adverse outcomes regarding tax positions that have been taken. Entergy and its subsidiaries also estimate their ability to utilize tax benefits, including those in the form of carryforwards for which the benefits have already been reflected in the financial statements. Changes in federal, state, or local tax laws, adverse tax audit results or adverse tax rulings on positions taken by Entergy and its subsidiaries could negatively affect Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition, and liquidity. The intended and unintended consequences of recently enacted legislation could have a material adverse impact on Entergy’s financial results and future cash flows. For further information regarding Entergy’s income taxes, see Note 10 to the financial statements herein and Note 3 to the financial statements in the Form 10-K.


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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)
7/01/2022-7/31/2022— $— — $350,052,918 
8/01/2022-8/31/2022— $— — $350,052,918 
9/01/2022-9/30/2022— $— — $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 2022, Entergy withheld 79,738 shares of its common stock at $110.35 per share, 77,207 shares of its common stock at $111.16 per share, 35,940 shares of its common stock at $111.77 per share, 1,219 shares of its common stock at $109.01 per share, 577 shares of its common stock at $106.62 per share, 232 shares of its common stock at $110.77 per share, 87 shares of its common stock at $109.01 per share, and 82 shares of its common stock at $111.47 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.

Nuclear Waste Policy Act of 1982

Nuclear Plant Decommissioning

In March 2022 filings with the NRC were made reporting on decommissioning funding for Palisades and the Big Rock Point dry fuel storage facility. Those reports showed that decommissioning funding for those facilities met the NRC’s financial assurance requirements.


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NRC Reactor Oversight Process

In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022; however, Waterford 3 is expected to remain in Column 2 until the NRC conducts a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2.

Environmental Regulation

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

National Ambient Air Quality Standards

See the Form 10-K for discussion of the National Ambient Air Quality Standards (NAAQS) set by the EPA in accordance with the Clean Air Act. Following are updates to that discussion.

Hazardous Air Pollutants

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. In February 2021 the D.C. Circuit granted the EPA’s motion to hold the litigation in abeyance pending the agency’s review of the appropriate and necessary rule. In February 2022 the EPA issued a proposed rule revoking the 2020 rule and determining, again, that it is “appropriate and necessary” to regulate hazardous air pollutants. The EPA is seeking additional information, which it could use to further tighten the standard. Entergy will continue to monitor this situation.

Cross-State Air Pollution

As discussed in the Form 10-K, the Cross-State Air Pollution Rule (CSAPR) has been remanded to and modified by the EPA on multiple occasions. In April 2022 the EPA published a rule to address interstate transport for the 2015 ozone NAAQS which will increase the stringency of the CSAPR program in all four of the states where the Utility operating companies operate. If finalized as proposed, the rule will significantly reduce emission allowances and would likely require the installation of post-combustion nitrogen oxides (NOx) emissions controls on any coal or large legacy gas units that will operate beyond 2026 and are not currently equipped with such controls. Fifteen Entergy-owned units, totaling approximately 9,370 MW of total unit capacity, are identified by the EPA for selective catalytic reduction retrofits. If all of these units were retrofitted as proposed, the EPA estimates that the capital cost is expected to be approximately $1.6 billion. Additionally, the EPA is proposing controls on certain non-electric generating NOx sources. Since releasing the proposed rule, the price for Group 3 allowances has increased significantly, reaching $40,000 per allowance in late June 2022. Comments on the proposed rule were due in June 2022. MISO, other impacted regional transmission organizations, and various state public service commissions all filed comments expressing reliability concerns if the rule is finalized as proposed. Entergy filed individual comments which assert, in addition to other issues, that the EPA’s proposal represents over-control of the Entergy units in Arkansas and Mississippi; the EPA should consider an alternative approach or provide flexibility for units with a limited remaining useful life; the EPA should consult with regional transmission organizations to determine the reliability impacts of the proposed rule; and the EPA should consider and incorporate current economic trends, including inflation, into any benefit-costs analysis supporting the rule.


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Regional Haze

As discussed in the Form 10-K, the second planning period (2018-2028) for the regional haze program required states to examine sources for impacts on visibility and to prepare State Implementation Plans (SIPs) by July 31, 2021 which the Arkansas Department of Energy and Environment, Division of Environmental Quality (ADEQ) did not meet, but has since submitted it to the EPA for review. The ADEQ reviewed Entergy’s Independence plant, but determined that additional air emission controls would not be cost-effective considering the facility’s commitment to cease coal-fired combustion by December 31, 2030.

The Texas Commission on Environmental Quality has completed its second-planning period SIP and submitted it to the EPA for review. There were no Entergy sources selected for additional emission controls. The Mississippi Department of Environmental Quality continues to develop its SIP, but there are no Entergy sources that are expected to be impacted.

In August 2022 the EPA issued findings of failure to submit regional haze SIPs to 15 states, including Louisiana and Mississippi. These findings were effective September 2022 and start the two-year period for the EPA to either approve a SIP submitted by the state or issue a final federal plan.

Greenhouse Gas Emissions

As discussed in the Form 10-K, 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, which established national emissions performance rates for existing fossil-fuel fired steam electric generating units and combustion turbines. 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. In January 2021 the U.S. Court of Appeals for the D.C. Circuit vacated ACE. The court held that ACE relied on an incorrect interpretation of the Clean Air Act that the statute expressly forecloses emission reduction approaches, such as emissions trading and generating shifting, that cannot be applied at and to the individual source. The court remanded ACE to the EPA for further consideration and also vacated the repeal of the Clean Power Plan. In March 2021 the D.C. Circuit issued a partial mandate vacating the ACE rule, but withheld the mandate vacating the repeal of the Clean Power Plan pending the EPA’s new rulemaking to regulate greenhouse gas emissions. Thus, there currently is no regulation in place with respect to greenhouse gas emissions from existing electric generating units and states are not expected to take further action to develop and submit plans at this time. In October 2021 the United States Supreme Court agreed to hear a challenge to the already vacated ACE rule. In June 2022 the United States Supreme Court held that the EPA could not use generation shifting as the best system of emission reduction under Section 111(d) of the Clean Air Act. The EPA does still have the authority to regulate greenhouse gas emissions, but those emissions reductions must be technology based. The EPA has announced its intent to propose a rule for existing power plants pursuant to the Clean Air Act by March 2023. The ultimate impact of the United States Supreme Court's decision cannot be determined at this time.

Federal Jurisdiction of Waters of the United States

In June 2020 the EPA’s revised definition of waters of the United States in the Navigable Waters Protection Rule (NWPR) became effective, narrowing the scope of Clean Water Act jurisdiction, as compared to a 2015 definition which had been stayed by several federal courts. In August 2021 a federal district court vacated and remanded the NWPR for further consideration. The EPA and the U.S. Army Corps of Engineers (Corps) subsequently issued a statement that the agencies would revert to pre-2015 regulations pending a new rulemaking. In December 2021, the EPA and the Corps proposed a revised definition of waters of the United States by repealing the NWPR and codifying a definition that reflects the pre-2015 regulatory regime as interpreted by several United States Supreme Court decisions. Comments on the proposed rule were due in February 2022. In January 2022, despite pending rulemaking, the United States Supreme Court agreed to hear a case regarding the proper test under

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previous Supreme Court decisions for determining jurisdiction of waters of the United States. The EPA intends to complete the rulemaking in two phases: finalize the December 2021 proposal and then issue a subsequent rulemaking that refines the rule as necessary based on the United States Supreme Court’s decision.

Retail Rate Regulation

The following replaces the information provided in footnote (b) to the table providing rate base and other information in the “Retail Rate Regulation” section of Part I, Item 1 of the Form 10-K relating to the Entergy Louisiana (electric) rate base amount of $13.6 billion: (b) Based on December 31, 2020 test year and includes approximately $800 million for the Lake Charles Power Station and excludes $300 million for the Washington Parish Energy Center, included in the capacity rider, $100 million of transmission plant investment, included in the transmission rider, and $300 million of distribution investment, included in the distribution rider.

Item 6.  Exhibits
4(a) -
4(b) -
4(c) -
4(d) -
4(e) -
*10(a) -
*10(b) -
*31(a) -
*31(b) -
*31(c) -
*31(d) -
*31(e) -
*31(f) -
*31(g) -
*31(h) -
*31(i) -
*31(j) -
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*31(m) -
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*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.

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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/ Reginald T. Jackson
Reginald T. Jackson
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)

Date:    November 3, 2022


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