a04011.htm

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

FORM 10-Q

(Mark One)
  
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the Quarterly Period Ended June 30, 2011
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from ____________ to ____________

 
Commission
File Number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, Telephone
Number, and IRS Employer Identification No.
  
 
Commission
File Number
Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices, Telephone
Number, and IRS Employer Identification No.
1-11299
ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
  
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
         
         
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
  
0-05807
ENTERGY NEW ORLEANS, INC.
(a Louisiana corporation)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-0273040
         
         
0-20371
ENTERGY GULF STATES LOUISIANA, L.L.C.
(a Louisiana limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
74-0662730
  
1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
350 Pine Street
Beaumont, Texas 77701
Telephone (409) 981-2000
61-1435798
         
         
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
446 North Boulevard
Baton Rouge, Louisiana 70802
Telephone (800) 368-3749
75-3206126
  
1-09067
SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
Echelon One
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
         

__________________________________________________________________________________________

 
 
 

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 þ No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 
Large
accelerated
filer
  
 
Accelerated
filer
  
Non-
accelerated
filer
  
Smaller
reporting
company
Entergy Corporation
Ö
            
Entergy Arkansas, Inc.
        
Ö
    
Entergy Gulf States Louisiana, L.L.C.
        
Ö
    
Entergy Louisiana, LLC
        
Ö
    
Entergy Mississippi, Inc.
        
Ö
    
Entergy New Orleans, Inc.
        
Ö
    
Entergy Texas, Inc.
        
Ö
    
System Energy Resources, Inc.
        
Ö
    

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No þ

Common Stock Outstanding
  
Outstanding at July 29, 2011
Entergy Corporation
($0.01 par value)
176,781,300

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2010 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2011

 
Page Number
   
iv
vi
Entergy Corporation and Subsidiaries
  
 
1
9
13
14
16
16
16
17
18
20
22
23
24
67
Entergy Arkansas, Inc. and Subsidiaries
  
 
68
71
73
73
73
73
73
74
75
76
78
79
Entergy Gulf States Louisiana, L.L.C.
  
 
80
82
84
85
85
85
85
86
87
88
90
91
   


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2011

 
Page Number
   
Entergy Louisiana, LLC
  
 
92
95
98
98
98
98
99
100
101
102
104
105
Entergy Mississippi, Inc.
  
 
106
108
110
110
110
111
113
114
116
117
Entergy New Orleans, Inc.
  
 
118
120
122
122
122
122
123
125
126
128
129
   


ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2011

 
Page Number
   
Entergy Texas, Inc. and Subsidiaries
  
 
130
133
135
135
135
135
136
137
138
140
141
System Energy Resources, Inc.
  
 
142
142
144
144
144
145
147
148
150
Part II.  Other Information
  
151
151
151
152
155
158




FORWARD-LOOKING INFORMATION

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

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

·  
resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, and other regulatory proceedings, including those related to Entergy’s System Agreement or any successor agreement or arrangement, Entergy’s utility supply plan, recovery of storm costs, and recovery of fuel and purchased power costs
·  
changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, the operations of the independent coordinator of transmission for Entergy’s utility service territory and transition to a successor or alternative arrangement, including possible participation in a regional transmission organization, and the application of more stringent transmission reliability requirements or market power criteria by the FERC
·  
changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those owned or operated by the Entergy Wholesale Commodities business, and the effects of new or existing safety concerns regarding nuclear power plants and nuclear fuel
·  
resolution of pending or future applications for license renewals or modifications of nuclear generating facilities
·  
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities
·  
Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities
·  
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants
·  
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts
·  
volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities
·  
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation
·  
changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances, and changes in costs of compliance with environmental and other laws and regulations




FORWARD-LOOKING INFORMATION (Concluded)

·  
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal
·  
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes and ice storms and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance
·  
effects of climate change
·  
Entergy’s ability to manage its capital projects and operation and maintenance costs
·  
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms
·  
the economic climate, and particularly economic conditions in Entergy’s Utility service territory and the Northeast United States and events that could influence economic conditions in those areas
·  
the effects of Entergy’s strategies to reduce tax payments
·  
changes in the financial markets, particularly those affecting the availability of capital and Entergy’s ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions
·  
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria
·  
changes in inflation and interest rates
·  
the effect of litigation and government investigations or proceedings
·  
advances in technology
·  
the potential effects of threatened or actual terrorism, cyber attacks or data security breaches, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion
·  
Entergy’s ability to attract and retain talented management and directors
·  
changes in accounting standards and corporate governance
·  
declines in the market prices of marketable securities and resulting funding requirements for Entergy’s defined benefit pension and other postretirement benefit plans
·  
changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites
·  
factors that could lead to impairment of long-lived assets
·  
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture



DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
 
Abbreviation or Acronym
 
 
Term
AFUDC
Allowance for Funds Used During Construction
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council or Council
Council of the City of New Orleans, Louisiana
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Texas
Entergy Texas, Inc., a company created in connection with the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale
Commodities
(EWC)
Entergy’s non-utility business segment primarily comprised of the ownership and operation of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by those plants to wholesale customers
  
EPA
United States Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
firm LD
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2010 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service


DEFINITIONS (Continued)

Abbreviation or Acronym
 
Term
ISO
Independent System Operator
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
MISO
Midwest Independent Transmission System Operator, Inc., a regional transmission organization
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatts
MWh
Megawatt-hour(s)
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Offsetting positions
Transactions for the purchase of energy, generally to offset a firm LD transaction
Palisades
Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement or power purchase agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Gulf States Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
SPP
Southwest Power Pool
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
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
unit-contingent
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather



ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Entergy operates primarily through its two, reportable, operating segments: Utility and Entergy Wholesale Commodities.

·  
Utility generates, transmits, distributes, and sells electric power in service territories in four states that include portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.
·  
The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  This business also provides services to other nuclear power plant owners.  Entergy Wholesale Commodities also owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

In the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear business segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization.  The prior period financial information in this Form 10-Q has been restated to reflect the change in reportable segments.

Results of Operations

Second Quarter 2011 Compared to Second Quarter 2010

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the second quarter 2011 to the second quarter 2010 showing how much the line item increased or (decreased) in comparison to the prior period:

   
 
 
Utility
  
Entergy
Wholesale Commodities
  
 
Parent &
Other (1)
  
 
 
Entergy
   
(In Thousands)
                 
2nd Qtr 2010 Consolidated Net Income
  
$230,173 
  
$104,557 
  
($14,447)
  
$320,283 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
  
 
 
11,992 
  
 
 
(55,659)
  
 
 
1,117 
  
 
 
(42,550)
Other operation and maintenance expenses
  
13,669 
  
(19,296)
  
17,919 
  
12,292 
Taxes other than income taxes
  
4,493 
  
(2,454)
  
208 
  
2,247 
Depreciation and amortization
  
2,547 
  
5,983 
  
109 
  
8,639 
Other income
  
11,004 
  
(4,272)
  
(2,825)
  
3,907 
Interest expense
  
(17,590)
  
(4,594)
  
11,227 
  
(10,957)
Other expenses
  
(680)
  
2,455 
  
- 
  
1,775 
Income taxes
  
(2,011)
  
(3,024)
  
(47,919)
  
(52,954)
                 
2nd Qtr 2011 Consolidated Net Income
  
$252,741 
  
$65,556 
  
$2,301 
  
$320,598 

(1)
Parent & Other includes eliminations, which are primarily intersegment activity.
 
 
 
 
 


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

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the second quarter 2011 to the second quarter 2010.

  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$1,293 
Retail electric price
  
21 
Volume/weather
  
14 
Purchased power capacity
  
(4)
Net wholesale revenue
  
(11)
Other
  
(8)
2011 net revenue
  
$1,305 

The retail electric price variance is primarily due to:

·  
a base rate increase at Entergy Arkansas effective July 2010;
·  
rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; and
·  
formula rate plan increases at Entergy Louisiana effective September 2010 and May 2011.

These were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K and herein for further discussion of these proceedings.

The volume/weather variance is primarily due to an increase of 730 GWh in billed electricity usage in all sectors, including the effect of more favorable weather on the residential and commercial sectors.  Industrial sales growth leveled off somewhat after significant growth since the beginning of 2010.  Entergy’s service territory continues to benefit from expansions, while there has been some pullback in the paper and wood segments and small industrials.

The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.

The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and higher wholesale energy costs.




Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the second quarter 2011 to the second quarter 2010.

  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$530 
Realized price changes
  
(52)
Volume
  
5 
Other
  
(9)
2011 net revenue
  
$474 

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $56 million, or 11%, in the second quarter 2011 compared to the second quarter 2010 primarily due to lower pricing in its contracts to sell power.

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the second quarter 2011 and 2010:

   
2011
  
2010
         
Net MW in operation at June 30
  
4,998
  
4,998
Average realized revenue per MWh
  
$52.38
  
$57.69
GWh billed
  
9,993
  
9,868
Capacity factor
  
91%
  
90%
Refueling Outage Days:
        
Indian Point 2
  
-
  
11
Indian Point 3
  
7
  
-
Pilgrim
  
25
  
-
Vermont Yankee
  
-
  
29

Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 10,652 GWh in the second quarter 2011 and 10,498 GWh in the second quarter 2010, with average realized revenue per MWh of $52.32 in the second quarter 2011 and $58.15 in the second quarter 2010.

Realized Price per MWh

See the Form 10-K for a discussion of Entergy Wholesale Commodities nuclear business’s realized price per MWh, including the factors that influence it and the decrease in the annual average realized price per MWh to $59.16 in 2010 from $61.07 for 2009.  Entergy Wholesale Commodities’ nuclear business is almost certain to experience a decrease again in 2011 because, as shown in the contracted sale of energy table "Market and Credit Risk Sensitive Instruments," Entergy Wholesale Commodities has sold forward 96% of its planned nuclear energy output for the remainder of 2011 for an average contracted energy price of $54 per MWh.  In addition, Entergy Wholesale Commodities has sold forward 87% of its planned nuclear energy output for 2012 for an average contracted energy price of $49 per MWh.




Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $471 million for the second quarter 2010 to $485 million for the second quarter 2011 primarily due to:

·  
an increase of $13 million in nuclear expenses primarily due to higher labor costs;
·  
an increase of $5 million in legal expenses primarily resulting from an increase in legal and regulatory activity increasing the use of outside legal services;
·  
an increase of $4 million in legal expenses due to the deferral in 2010 of certain litigation expenses in accordance with regulatory treatment; and
·  
an increase of $3 million due to the deferral in 2010 of 2009 Entergy Arkansas rate case expenses.

These increases were partially offset by a decrease of $11 million in fossil expenses resulting from a greater number and scope of outages in second quarter 2010 compared to second quarter 2011.

Other income increased due to:

·  
an increase in distributions of $6 million earned by Entergy Louisiana and $3 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy’s net income because the investment is in another Entergy subsidiary.  See Note 2 to the financial statements in the Form 10-K for discussion of these investments in preferred membership interests; and
·  
an increase of $5 million in realized earnings on decommissioning trust fund investments.

These increases were partially offset by a decrease due to $8 million in carrying charges on storm restoration costs recorded in the second quarter 2010.

Interest expense decreased primarily due to the refinancing of long-term debt at lower interest rates by certain of the Utility operating companies.  Also contributing to the decrease was interest expense accrued in 2010 related to the expected result of the LPSC staff audit of the fuel adjustment clause for the period 1995 through 2004.

Entergy Wholesale Commodities

           Other operation and maintenance expenses decreased from $250 million for the second quarter 2010 to $231 million for the second quarter 2011 primarily due to:

·  
a decrease in costs related to spin-off dis-synergies;
·  
a decrease of $7 million due to the absence of expenses from the Harrison County plant, which was sold in December 2010; and
·  
a decrease in spending on tritium remediation work.

Parent & Other

The increase in other operation and maintenance expenses is primarily due to activity, which eliminates in consolidation, between the parent company and the two reportable business segments.

Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010 with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.




Income Taxes

The effective income tax rates for the second quarters 2011 and 2010 were 32% and 38.9%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the second quarter 2011 is primarily due to a settlement regarding an issue which had previously been considered an uncertain tax position.  These factors were partially offset by a Michigan tax law change that repealed the business tax and enacted a corporate income tax, which eliminates a deduction that was available under the business tax; state income taxes; and certain book and tax differences for Utility plant items. The difference in the effective income tax rate versus the statutory rate of 35% for the second quarter 2010 was primarily due to state income taxes and certain book and tax differences for Utility plant items.

Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 2011 to the six months ended June 30, 2010 showing how much the line item increased or (decreased) in comparison to the prior period:

   
 
 
Utility
  
Entergy
Wholesale Commodities
  
 
Parent &
Other (1)
  
 
 
Entergy
   
(In Thousands)
                 
2010 Consolidated Net Income
  
$373,144 
  
$195,099 
  
($29,146)
  
$539,097 
                 
Net revenue (operating revenue less fuel
  expense, purchased power, and other
  regulatory charges/credits)
  
 
 
30,233 
  
 
 
(95,800)
  
 
 
1,342 
  
 
 
(64,225)
Other operation and maintenance expenses
  
26,702 
  
(69,851)
  
8,702 
  
(34,447)
Taxes other than income taxes
  
(1,746)
  
(5,908)
  
(277)
  
(7,931)
Depreciation and amortization
  
(4,394)
  
8,701 
  
12 
  
4,319 
Other income
  
10,257 
  
(27,760)
  
(4,935)
  
(22,438)
Interest expense
  
(26,482)
  
(51,792)
  
23,719 
  
(54,555)
Other expenses
  
(64)
  
7,223 
  
1 
  
7,160 
Income taxes
  
(1,776)
  
(5,623)
  
(28,990)
  
(36,389)
                 
2011 Consolidated Net Income
  
$421,394 
  
$188,789 
  
($35,906)
  
$574,277 

(1)
Parent & Other includes eliminations, which are primarily intersegment activity.
 
Refer to “ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS” for further information with respect to operating statistics.




Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2011 to the six months ended June 30, 2010.

  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$2,423 
Retail electric price
  
39 
Volume/weather
  
23 
Net gas revenue
  
(7)
Purchased power capacity
  
(9)
Net wholesale revenue
  
(14)
Other
  
(2)
2011 net revenue
  
$2,453 

The retail electric price variance is primarily due to:

·  
a base rate increase at Entergy Arkansas effective July 2010;
·  
rate actions at Entergy Texas, including a base rate increase effective August 2010 and an additional increase beginning May 2011; and
·  
formula rate plan increases at Entergy Louisiana effective September 2010 and May 2011.

These were partially offset by a formula rate plan decrease at Entergy New Orleans effective October 2010.  See Note 2 to the financial statements in the Form 10-K for further discussion of these proceedings.

The volume/weather variance is primarily due to an increase of 1,202 GWh in weather-adjusted usage across all sectors.  Weather-adjusted residential retail sales growth reflected an increase in the number of customers.  Industrial sales have realized sustained growth since the beginning of 2010 and the first half of 2011 continued the trend.  Entergy’s service territory has benefitted from the national manufacturing economy as well as industrial facility expansions.  Industrial customers in Entergy’s service territory also have benefitted from the need to re-stock inventory and export trends.  The weather effect declined, despite the experience of favorable weather in the first half of 2011, primarily because the near-record-setting cold weather experienced in the first quarter 2010 was even more favorable.

The net gas revenue variance is primarily due to milder weather as compared to last year.

The purchased power capacity variance is primarily due to price increases for ongoing purchased power capacity and additional capacity purchases.

The net wholesale revenue variance is primarily due to lower margins on co-owner contracts and higher wholesale energy costs.




Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the six months ended June 30, 2011 to the six months ended June 30, 2010.

  
  
Amount
  
  
(In Millions)
     
2010 net revenue
  
$1,095 
Realized price changes
  
(67)
Volume
  
(14)
Other
  
(15)
2011 net revenue
  
$999 

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $96 million, or 9%, in the six months ended June 30, 2011 compared to the six months ended June 30, 2010 primarily due to lower pricing in its contracts to sell power and lower volume resulting from an increase in forced outages for Entergy Wholesale Commodities’ nuclear fleet in 2011.

Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for the six months ended June 30, 2011 and 2010:

   
2011
  
2010
         
Net MW in operation at June 30
  
4,998
  
4,998
Average realized revenue per MWh
  
$54.91
  
$58.22
GWh billed
  
19,906
  
20,123
Capacity factor
  
91%
  
92%
Refueling Outage Days:
        
Indian Point 2
  
-
  
33
Indian Point 3
  
30
  
-
Pilgrim
  
25
  
-
Vermont Yankee
  
-
  
29

Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 21,171 GWh in the six months ended June 30, 2011 and 21,626 GWh in the six months ended June 30, 2010, with average realized revenue per MWh of $54.64 in the six months ended June 30, 2011 and $58.23 in the six months ended June 30, 2010.  See also the discussion in “Realized Price per MWh” in the Second Quarter 2011 Compared to Second Quarter 2010 section.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $906 million for the six months ended June 30, 2010 to $933 million for the six months ended June 30, 2011 primarily due to:

·  
an increase of $17 million in nuclear expenses primarily due to higher labor and benefits costs;
·  
an increase of $8 million in legal expenses primarily resulting from an increase in legal and regulatory activity increasing the use of outside legal services;
·  
an increase of $6 million in transmission and distribution expenses primarily due to vegetation and maintenance expenses; and
·  
several individually insignificant items.
 

These increases were partially offset by a decrease of $18 million in fossil expenses resulting from more outages in the first half of 2010 and an increase of $6 million in nuclear insurance refunds received in 2011 as compared to the same period in 2010.

Other income increased due to an increase in distributions of $12 million earned by Entergy Louisiana and $7 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company.  The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy’s net income because the investment is in another Entergy subsidiary.  See Note 2 to the financial statements in the Form 10-K for discussion of these investments in preferred membership interests.  This was partially offset by a decrease due to $8 million in carrying charges on storm restoration costs recorded in the second quarter 2010.

Interest expense decreased primarily due to the refinancing of long-term debt at lower interest rates by certain of the Utility operating companies.  Also contributing to the decrease was interest expense accrued in 2010 related to the expected result of the LPSC staff audit of Entergy Gulf States Louisiana’s fuel adjustment clause for the period 1995 through 2004.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $510 million for the six months ended June 30, 2010 to $440 million for the six months ended June 30, 2011 primarily due to:

·  
the write-off of $32 million of capital costs in first quarter 2010, primarily for software that will not be utilized, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business;
·  
a decrease of $13 million due to the absence of expenses from the Harrison County plant which was sold in December 2010;
·  
a decrease in spending on tritium remediation work; and
·  
several other individually insignificant factors.

Other income decreased primarily due to a decrease in interest income earned on loans to the parent company, Entergy Corporation, and a decrease of $9 million in realized earnings on decommissioning trust fund investments.

Interest expense decreased primarily due to the write-off of $37 million of debt financing costs in the first quarter 2010, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.

Parent & Other

Interest expense increased primarily due to $1 billion of Entergy Corporation notes payable issued in September 2010 with the proceeds used to pay down the borrowings outstanding on Entergy Corporation’s revolving credit facility, which were at a lower interest rate.
 


Income Taxes

           The effective income tax rates for the six months ended June 30, 2011 and 2010 were 35.4% and 39.5%, respectively.  The difference in the effective income tax rate versus the statutory rate of 35% for the six months ended June 30, 2011 is primarily due to a settlement regarding an issue which had previously been considered an uncertain tax position.  This was partially offset by:

·  
a Michigan tax law change that repealed the business tax and enacted a corporate income tax, which eliminates a deduction that was available under the business tax;
·  
state income taxes; and
·  
certain book and tax differences for Utility plant items.
 
The difference in the effective income tax rate versus the statutory rate of 35% for the six months ended June 30, 2010 was primarily due to:

·  
a charge of $16 million recorded in first quarter 2010 resulting from a change in tax law associated with the federal healthcare legislation enacted in March 2010.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K for a discussion of the federal healthcare legislation; and
·  
state income taxes; and
·  
certain book and tax differences for Utility plant items.

These factors were partially offset by:

·  
a $19 million tax benefit recorded first quarter 2010 in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and
·  
book and tax differences related to the allowance for equity funds used during construction.

Liquidity and Capital Resources

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

Capital Structure

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

   
June 30,
2011
  
December 31,
2010
         
Debt to capital
  
58.1%
  
57.3%
Effect of excluding the Arkansas and Texas securitization bonds
  
(1.8)%
  
(2.0)%
Debt to capital, excluding securitization bonds (1)
  
56.3%
  
55.3%
Effect of subtracting cash
  
(1.2)%
  
(3.2)%
Net debt to net capital, excluding securitization bonds (1)
  
55.1%
  
52.1%

(1)
Calculation excludes the Arkansas and Texas securitization bonds, which are non-recourse to Entergy Arkansas and Entergy Texas, respectively.

Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund.  Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition.
 

As discussed in the Form 10-K, Entergy Corporation has in place a revolving credit facility that expires in August 2012.  Entergy Corporation has the ability to issue letters of credit against the total borrowing capacity of the facility.  As of June 30, 2011, the capacity and amounts outstanding under the credit facility are:

 
Capacity
  
 
Borrowings
  
Letters
of Credit
  
Capacity
Available
(In Millions)
             
$3,465 
  
$1,895 
  
$25 
  
$1,545
 
Entergy Corporation’s credit facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above.  Entergy is currently in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur.

See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

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 2011 through 2013.  Following are updates to the discussion in the Form 10-K.

Acadia Unit 2 Purchase Agreement

See the Form 10-K for a discussion of the agreement Entergy Louisiana signed to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer.  Entergy Louisiana acquired the plant on April 29, 2011.

Summer 2009 Long-Term Request for Proposal

As discussed in the Form 10-K, the construction or purchase of three resources identified in the Summer 2009 Long-Term Request for Proposal were included in the 2011-2013 capital expenditure estimates in the Form 10-K.  In addition to the self-build option at Entergy Louisiana’s Ninemile site noted in the Form 10-K, in April 2011 two Entergy Utility operating companies announced that they have signed agreements to acquire the other two resources, the 620 MW Hot Spring Energy Facility and the 450 MW Hinds Energy Facility.

Ninemile Point Unit 6 Self-Build Project

In June 2011, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by Entergy Louisiana’s construction of a combined-cycle gas turbine generating facility (Ninemile 6) at its existing Ninemile Point electric generating station.  Ninemile 6 will be a nominally-sized 550 MW unit that is estimated to cost approximately $721 million to construct, excluding interconnection and transmission upgrades.  Entergy Gulf States Louisiana joined in the application, seeking certification of its purchase under a life-of-unit power purchase agreement of up to 35% of the capacity and energy generated by Ninemile 6.  The Ninemile 6 capacity and energy is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy Gulf States Louisiana, and 20% to Entergy New Orleans.  Entergy New Orleans has filed a request with the City Council to approve its purchase under a life-of-unit power purchase agreement of this capacity and energy.  If the City Council does not approve this power purchase agreement in a timely manner, then an allocation of 65% to Entergy Louisiana and 35% to Entergy Gulf States Louisiana is proposed.  If approvals are obtained from the LPSC and other permitting agencies, Ninemile 6 construction is expected to begin in 2012, and the unit is expected to commence commercial operation by mid-2015.
 

Hot Spring Energy Facility Purchase Agreement

In April 2011, Entergy Arkansas announced that it has signed an asset purchase agreement to acquire the Hot Spring Energy Facility, a 620 MW natural gas-fired combined-cycle turbine plant located in Hot Spring County, Arkansas, from a subsidiary of KGen Power Corporation.  The purchase price is expected to be approximately $253 million.  Entergy Arkansas also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $277 million.  A transmission study estimates that the acquisition could require investment for supplemental upgrades in the Entergy transmission system, but there are still uncertainties associated with the results of this study that must be resolved.  The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the APSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Closing is expected to occur in mid-2012.  In July 2011, Entergy Arkansas filed its application with the APSC requesting approval of the acquisition and full cost recovery.
 
Hinds Energy Facility Purchase Agreement

In April 2011, Entergy Mississippi announced that it has signed an asset purchase agreement to acquire the Hinds Energy Facility, a 450 MW natural gas-fired combined-cycle turbine plant located in Jackson, Mississippi, from a subsidiary of KGen Power Corporation.  The purchase price is expected to be approximately $206 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $246 million.  A transmission study estimates that the acquisition could require investment for supplemental upgrades in the Entergy transmission system, but there are still uncertainties associated with the results of this study that must be resolved. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.  These include regulatory approvals from the MPSC and FERC, as well as clearance under the Hart-Scott-Rodino anti-trust law.  Closing is expected to occur in mid-2012.  In July 2011, Entergy Mississippi filed with the MPSC requesting approval of the acquisition and full cost recovery.

Waterford 3 Steam Generator Replacement Project

See the Form 10-K for a discussion of the Waterford 3 Steam Generator Replacement project.  With regard to the delay in the delivery of the steam generators, Entergy Louisiana worked with the manufacturer to fully develop and evaluate repair options, and expects the replacement steam generators to be delivered in time for the Fall 2012 refueling outage.  Extensive inspections of the existing steam generators at Waterford 3 in cooperation with the manufacturer were completed in April 2011.  The review of data obtained during these inspections supports the conclusion that Waterford 3 can operate safely for another full cycle before the replacement of the existing steam generators.  Entergy Louisiana is required to report formally its findings to the NRC through a report made 180 days after plant start up.  At this time, a requirement to perform a mid-cycle outage for further inspections in order to allow the plant to continue operation until its Fall 2012 refueling outage is not anticipated.  Entergy Louisiana currently expects the cost of the project, including carrying costs, to increase to approximately $687 million if the replacement occurs during the Fall 2012 refueling outage.

Entergy Louisiana’s existing formula rate plan provides for rate treatment of the Waterford 3 project costs, including in-service rate recovery without regulatory lag and treatment outside of the formula rate plan earnings sharing formula; however, these provisions contemplated the project being placed in service during the term of the current formula rate plan and will not apply at the time of the expected in-service date in the Fall 2012.  Entergy Louisiana will seek to reestablish comparable rate recovery provisions for the project through renewal or extension of the current formula rate plan provisions or through a base rate filing.
 

Dividends and Stock Repurchases

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities.  At its January, April, and July 2011 meetings, the Board declared dividends of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010.
 
Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 2011 and 2010 were as follows:

   
2011
  
2010
   
(In Millions)
         
Cash and cash equivalents at beginning of period
  
$1,294 
  
$1,710 
         
Cash flow provided by (used in):
        
Operating activities
  
977 
  
1,468 
Investing activities
  
(1,827)
  
(1,173)
Financing activities
  
86 
  
(670)
Effect of exchange rates on cash and cash equivalents
  
- 
  
1 
Net decrease in cash and cash equivalents
  
(764)
  
(374)
         
Cash and cash equivalents at end of period
  
$530 
  
$1,336 

Operating Activities

Entergy's cash flow provided by operating activities decreased by $491 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010, primarily due to a decrease in deferred fuel cost collections and an increase of $163 million in pension contributions.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.  A $42 million increase in incentive compensation payments, which occur in the first quarter, and the decrease in Entergy Wholesale Commodities net revenue that is discussed above also contributed to the decrease, as well as several other individually insignificant factors.

Investing Activities

Net cash used in investing activities increased by $654 million for the six months ended June 30, 2011 compared to the six months ended June 30, 2010 primarily due to:

·  
the purchase of the Acadia Power Plant by Entergy Louisiana for approximately $300 million in April 2011;
·  
an increase in nuclear fuel purchases, as more plants were preparing for refueling outages in the spring 2011 than in the spring 2010;
·  
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line, as Entergy received net deposits from Entergy Wholesale Commodities’ counterparties during 2010 and made net collateral deposits in 2011.  Entergy Wholesale Commodities’ forward sales contracts are discussed in the Market and Credit Risk Sensitive Instruments section below; and
 
 

·  
an increase in construction expenditures, primarily in the Utility business.  Entergy’s construction spending plans for 2011 through 2013 are discussed in the Form 10-K.  April 2011 storms that caused damage to transmission and distribution lines, equipment, poles, and other facilities, primarily in Arkansas, also contributed to the increase.  The estimated capital cost of repairing that damage is approximately $55 million.
 
Financing Activities

Financing activities provided $86 million of cash for the six months ended June 30, 2011 compared to using $670 million of cash for the six months ended June 30, 2010 primarily because long-term debt activity provided approximately $519 million of cash in 2011 and used approximately $249 million of cash in 2010. For details of Entergy's long-term debt activity in 2011 see Note 4 to the financial statements herein.  Offsetting these increases in sources of cash, Entergy repurchased $160 million of its common stock in the six months ended June 30, 2011 and repurchased $138 million of its common stock in the six months ended June 30, 2010.  Entergy’s share repurchase programs are discussed in the Form 10-K.

Rate, Cost-recovery, and Other Regulation

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

See the Form 10-K for a discussion of federal regulatory proceedings.  Following are updates to that discussion.

System Agreement and Independent Coordinator of Transmission (ICT)

As discussed in the Form 10-K, in November 2010 the FERC issued an order accepting the Utility operating companies’ proposal to extend the ICT arrangement with SPP by an additional term of two years, providing time for analysis of longer term structures.  In addition, in December 2010 the FERC issued an order that granted the Entergy Regional State Committee (E-RSC) additional authority over transmission upgrades and cost allocation.  The E-RSC, comprised of one representative from each of the Utility operating company retail regulators, was formed in 2009 to consider several of the issues related to the Entergy transmission system.  The Utility operating companies expect that the E-RSC will review the cost-benefit analysis, discussed below, that the Utility operating companies submitted in May 2011 to each of their respective retail regulators comparing the ICT arrangement to joining the SPP RTO or the Midwest Independent Transmission System Operator (MISO).

Also as discussed in the Form 10-K, in February 2010 the APSC issued a show cause order opening an inquiry to conduct an investigation regarding the prudence of Entergy Arkansas’s entering a successor pooling agreement with the other Entergy Utility operating companies, as opposed to becoming a standalone entity upon exit from the System Agreement in December 2013, and whether Entergy Arkansas, as a standalone utility, should join the SPP RTO.  The APSC subsequently added evaluation of Entergy Arkansas joining MISO on a standalone basis as an alternative to be considered.  In August 2010, the APSC directed Entergy Arkansas and all parties to compare five strategic options at the same time as follows: (1) Entergy Arkansas Self-Provide; (2) Entergy Arkansas with 3rd party coordination agreements; (3) Successor Arrangements; (4) Entergy Arkansas as a standalone member of SPP RTO; and (5) Entergy Arkansas as a standalone member of MISO.



On April 25, 2011, Entergy announced that each of the Utility operating companies propose joining MISO, which is expected to provide long-term benefits for the customers of each of the Utility operating companies.  MISO is a regional transmission organization that operates in 13 U.S. states (Illinois, Indiana, Iowa, Kentucky, Michigan, Minnesota, Missouri, Montana, North Dakota, Ohio, Pennsylvania, South Dakota, and Wisconsin) and also in Canada.  The Utility operating companies provided analysis in May 2011 to their retail regulators supporting this decision.  The APSC has requested additional information from both Entergy and MISO.  The APSC’s procedural schedule for the proceeding includes an evidentiary hearing scheduled for September 7, 2011.  Entergy’s May 2011 filings estimate that the expected transition and implementation costs of joining MISO are approximately $105 million if all of the Utility operating companies join MISO, most of which will be spent in late 2012 and 2013.  Maintaining the viability of the alternatives of Entergy Arkansas joining MISO alone or standing alone within an ICT arrangement is expected to result in an additional cost of approximately $35 million, for a total cost of approximately $140 million.  This amount could increase with extended litigation in various regulatory proceedings.  It is expected that costs will be incurred to obtain regulatory approvals, to revise or implement commercial and legal agreements, to integrate transmission and generation facilities, to develop back-office accounting and settlement systems, and to build out communications infrastructure.  The Utility operating companies also expect to make filings later in 2011 with their retail regulators regarding the transfer of control of their transmission assets to MISO.  The target implementation date for joining MISO is December 2013.

In June 2011, MISO filed with the FERC a request for a transitional waiver of provisions of its open access transmission energy and operating reserve markets tariff regarding allocation of transmission network upgrade costs, in order to establish a transition for the integration of the Utility operating companies.  Several parties have intervened in the proceeding, including Entergy, the APSC, the LPSC, and the City Council, and some of the parties have also filed comments or protests.  A procedural schedule has not been established.

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As discussed more fully in the Form 10-K, the sale of electricity from the power generation plants owned by Entergy Wholesale Commodities, unless otherwise contracted, is subject to the fluctuation of market power prices.  Following is an updated summary of the amount of Entergy Wholesale Commodities nuclear power plants’ planned energy output that is sold forward under physical or financial contracts as of August 2, 2011 (2011 represents the remainder of the year):

   
2011
  
2012
  
2013
  
2014
  
2015
  
                       
Percent of planned generation sold forward:
                      
Unit-contingent
  
76%
  
59%
  
36%
  
14%
  
12%
  
     Unit-contingent with guarantee of availability (1)
  
20%
  
14%
  
16%
  
 13%
  
 13%
  
Firm LD
  
3%
  
24%
  
24%
  
8%
  
-%
  
Offsetting positions
  
(3)%
  
(10)%
  
-%
  
-%
  
-%
  
Total energy sold forward
  
96%
  
87%
  
76%
  
35%
  
25%
  
Planned generation (TWh) (2)
  
21
  
41
  
40
  
41
  
41
  
Average revenue under contract per MWh (3) (4)
  
$54
  
$49
  
$45-51
  
$49-55
  
$49-57
  

(1)
A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
 

(2)
Assumes NRC license renewal for plants whose current licenses expire within five years and the continued operation of all six plants.  NRC license renewal applications are in process for three units, as follows (with current license expirations in parentheses): Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015).  See also Note 11 to the financial statements for a discussion regarding the continued operation of Vermont Yankee.
(3)
The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant through March 21, 2012.  The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far.
(4)
Average revenue under contract may fluctuate due to factors including positive or negative basis differentials, option premiums and market prices at time of option expiration, costs to convert firm LD to unit-contingent, and other risk management costs.  Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA.
 
Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 2011 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $9 million in 2011.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements.  The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At June 30, 2011, based on power prices at that time, Entergy had liquidity exposure of $61 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commodities segment) transactions, $20 million of guarantees that support letters of credit, and $6 million of posted cash collateral to the ISOs.  As of June 30, 2011, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $116 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.   In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2011, Entergy would have been required to provide approximately $53 million of additional cash or letters of credit under some of the agreements.

As of June 30, 2011, the counterparties or their guarantors for 99.8% of the planned energy output under contract for Entergy Wholesale Commodities through 2015 have public investment grade credit ratings and 0.2% is with load-serving entities without public credit ratings.

In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area.  Following is a summary of the amount of the Entergy Wholesale Commodities nuclear plants’ installed capacity that is currently sold forward, and the blended amount of Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward as of August 2, 2011 (2011 represents the remainder of the year):

 

   
2011
  
2012
  
2013
  
2014
  
2015
  
                       
Percent of capacity sold forward:
                      
Bundled capacity and energy contracts
  
26%
  
18%
  
16%
  
16%
  
16%
  
Capacity contracts
  
33%
  
30%
  
26%
  
25%
  
 11%
  
Total capacity sold forward
  
59%
  
48%
  
42%
  
41%
  
27%
  
Planned net MW in operation
  
4,998
  
4,998
  
4,998
  
4,998
  
4,998
  
Average revenue under contract per kW per month
(applies to capacity contracts only)
  
$2.4
  
$2.9
  
$3.2
  
$3.1
  
$2.9
  
 
Blended Capacity and Energy Recap (based on revenues)
                      
% of planned generation and capacity sold forward
  
96%
  
87%
  
74%
  
37%
  
25%
  
Blended revenue under contract per MWh
  
$55
  
$51
  
$49
  
$54
  
$56
  


Nuclear Matters

After the nuclear incident in Japan resulting from the March 2011 earthquake and tsunami, the NRC established a task force to conduct a review of processes and regulations relating to nuclear facilities in the United States.  The task force issued a near term (90-day) report in July 2011 that has made recommendations, which are currently being evaluated.  The lessons learned from the events in Japan and the NRC recommendations may affect future operations of U.S. nuclear facilities, including Entergy's, and could, among other things, result in increased costs and capital requirements associated with operating Entergy's nuclear plants.

Critical Accounting Estimates

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’s accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets and trust fund investments, qualified pension and other postretirement benefits, and other contingencies.  Following is an update to that discussion.  For updates of the impairment of long-lived assets discussion regarding Vermont Yankee see Note 11 to the financial statements herein.

Nuclear Decommissioning Costs

In the first quarter 2011, 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 $38.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset. 

New Accounting Pronouncements

The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements.  Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.

In May 2011 the FASB issued ASU No. 2011-4, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” which states that the ASU explains how to measure fair value.  The ASU states that:  1) the amendments in the ASU result in common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards; 2) consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements; 3) for many of the requirements, the
 
 
 

FASB does not intend for the ASU to result in a change in the application of the requirements of current U.S. GAAP; 4) some of the amendments clarify the FASB’s intent about the application of existing fair value measurement requirements; and 5) other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements.  ASU No. 2011-4 is effective for Entergy for the first quarter 2012.  Entergy does not expect ASU No. 2011-4 to affect materially its results of operations, financial position, or cash flows.

In June 2011 the FASB issued ASU No. 2011-5, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.”  The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  ASU No. 2011-5 is effective for Entergy for the first quarter 2012.  ASU No. 2011-5 will have no effect on Entergy’s results of operations, financial position, or cash flows.

 
 
 
 
 
 
 
 
 
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CONSOLIDATED STATEMENTS OF INCOME
  
For the Three and Six Months Ended June 30, 2011 and 2010
  
(Unaudited)
  
                         
   
Three Months Ended
    
Six Months Ended
  
   
2011
    
2010
    
2011
    
2010
  
      (In Thousands, Except Share Data)  
                         
OPERATING REVENUES
                        
Electric
   $ 2,212,038     $ 2,214,108     $ 4,077,936     $ 4,221,038  
Natural gas
     28,891       31,136       100,014       127,163  
Competitive businesses
     562,350       617,706       1,166,538       1,274,095  
TOTAL
     2,803,279       2,862,950       5,344,488       5,622,296  
                                 
OPERATING EXPENSES
                                
Operating and Maintenance:
                                
   Fuel, fuel-related expenses, and
                                
     gas purchased for resale
     563,333       631,546       1,071,026       1,190,214  
   Purchased power
     451,227       416,458       813,845       891,361  
   Nuclear refueling outage expenses
     62,966       64,221       126,951       126,510  
   Other operation and maintenance
     712,496       700,204       1,368,245       1,402,692  
Decommissioning
     55,497       52,467       110,762       104,043  
Taxes other than income taxes
     129,215       126,968       254,449       262,380  
Depreciation and amortization
     264,206       255,567       529,090       524,771  
Other regulatory charges (credits) - net
     5,601       (10,722 )     491       17,370  
TOTAL
     2,244,541       2,236,709       4,274,859       4,519,341  
                                 
OPERATING INCOME
     558,738       626,241       1,069,629       1,102,955  
                                 
OTHER INCOME
                                
Allowance for equity funds used during construction
     20,753       17,630       38,042       30,926  
Interest and investment income
     35,921       34,955       62,668       83,164  
Miscellaneous - net
     (16,962 )     (16,780 )     (26,360 )     (17,302 )
TOTAL
     39,712       35,805       74,350       96,788  
                                 
INTEREST EXPENSE
                                
Interest expense
     136,049       148,179       272,183       327,379  
Allowance for borrowed funds used during construction
     (9,150 )     (10,323 )     (17,684 )     (18,325 )
TOTAL
     126,899       137,856       254,499       309,054  
                                 
INCOME BEFORE INCOME TAXES
     471,551       524,190       889,480       890,689  
                                 
Income taxes
     150,953       203,907       315,203       351,592  
                                 
CONSOLIDATED NET INCOME
     320,598       320,283       574,277       539,097  
                                 
Preferred dividend requirements of subsidiaries
     5,015       5,017       10,031       10,033  
                                 
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
   $ 315,583     $ 315,266     $ 564,246     $ 529,064  
                                 
                                 
Earnings per average common share:
                                
    Basic
   $ 1.77     $ 1.67     $ 3.16     $ 2.80  
    Diluted
   $ 1.76     $ 1.65     $ 3.14     $ 2.77  
Dividends declared per common share
   $ 0.83     $ 0.83     $ 1.66     $ 1.58  
                                 
Basic average number of common shares outstanding
     177,808,890       188,776,240       178,318,784       188,988,284  
Diluted average number of common shares outstanding
     178,925,180       190,717,958       179,502,551       190,999,699  
                                 
See Notes to Financial Statements.
                                

 
19
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
For the Six Months Ended June 30, 2011 and 2010
  
(Unaudited)
  
   
2011
    
2010
  
   
(In Thousands)
  
             
OPERATING ACTIVITIES
            
Consolidated net income
   $ 574,277     $ 539,097  
Adjustments to reconcile consolidated net income to net cash flow
                
 provided by operating activities:
                
  Depreciation, amortization, and decommissioning, including nuclear fuel amortization
     852,028       831,785  
  Deferred income taxes, investment tax credits, and non-current taxes accrued
     305,121       342,641  
  Changes in working capital:
                
     Receivables
     (168,253 )     (177,445 )
     Fuel inventory
     (5,457 )     5,002  
     Accounts payable
     (76,803 )     23,094  
     Prepaid taxes and taxes accrued
     (2,810 )     10,104  
     Interest accrued
     (39,404 )     (28,815 )
     Deferred fuel
     (198,052 )     (2,070 )
     Other working capital accounts
     (112,386 )     (126,824 )
  Changes in provisions for estimated losses
     (5,954 )     (30,218 )
  Changes in other regulatory assets
     96,549       (22,703 )
  Changes in pensions and other postretirement liabilities
     (232,306 )     (74,187 )
  Other
     (9,301 )     178,373  
Net cash flow provided by operating activities
     977,249       1,467,834  
                 
  INVESTING ACTIVITIES
                
Construction/capital expenditures
     (991,293 )     (918,582 )
Allowance for equity funds used during construction
     38,681       30,926  
Nuclear fuel purchases
     (403,168 )     (218,829 )
Payment for purchase of plant
     (299,590 )     -  
Proceeds from sale of assets and businesses
     -       9,675  
Changes in securitization account
     9,106       (22,528 )
NYPA value sharing payment
     (72,000 )     (72,000 )
Payments to storm reserve escrow account
     (3,294 )     (3,030 )
Receipts from storm reserve escrow account
     -       9,925  
Decrease (increase) in other investments
     (42,994 )     55,430  
Proceeds from nuclear decommissioning trust fund sales
     636,359       1,487,387  
Investment in nuclear decommissioning trust funds
     (699,530 )     (1,531,275 )
Net cash flow used in investing activities
     (1,827,723 )     (1,172,901 )
                 
See Notes to Financial Statements.
                
                 


ENTERGY CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
For the Six Months Ended June 30, 2011 and 2010
  
(Unaudited)
  
   
2011
    
2010
  
   
(In Thousands)
  
             
FINANCING ACTIVITIES
            
Proceeds from the issuance of:
            
  Long-term debt
     1,075,180       525,789  
  Common stock and treasury stock
     16,958       8,716  
Retirement of long-term debt
     (555,940 )     (774,772 )
Repurchase of common stock
     (159,602 )     (137,749 )
Changes in credit borrowings - net
     15,960       17,123  
Dividends paid:
                
  Common stock
     (296,355 )     (298,796 )
  Preferred stock
     (10,031 )     (10,033 )
Net cash flow provided by (used in) financing activities
     86,170       (669,722 )
                 
Effect of exchange rates on cash and cash equivalents
     (310 )     762  
                 
Net decrease in cash and cash equivalents
     (764,614 )     (374,027 )
                 
Cash and cash equivalents at beginning of period
     1,294,472       1,709,551  
                 
Cash and cash equivalents at end of period
   $ 529,858     $ 1,335,524  
                 
                 
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
  Cash paid during the period for:
                
    Interest - net of amount capitalized
   $ 267,493     $ 268,624  
    Income taxes
   $ 77     $ 26,054  
                 
                 
See Notes to Financial Statements.
                

 
 
CONSOLIDATED BALANCE SHEETS
  
ASSETS
  
June 30, 2011 and December 31, 2010
  
(Unaudited)
  
             
   
2011
    
2010
  
   
(In Thousands)
  
             
CURRENT ASSETS
            
Cash and cash equivalents:
            
  Cash
   $ 94,968     $ 76,290  
  Temporary cash investments
     434,890       1,218,182  
     Total cash and cash equivalents
     529,858       1,294,472  
Securitization recovery trust account
     33,938       43,044  
Accounts receivable:
                
  Customer
     693,937       602,796  
  Allowance for doubtful accounts
     (31,002 )     (31,777 )
  Other
     162,190       161,662  
  Accrued unbilled revenues
     377,977       302,901  
     Total accounts receivable
     1,203,102       1,035,582  
Deferred fuel costs
     111,444       64,659  
Accumulated deferred income taxes
     6,975       8,472  
Fuel inventory - at average cost
     212,982       207,520  
Materials and supplies - at average cost
     869,341       866,908  
Deferred nuclear refueling outage costs
     287,282       218,423  
System agreement cost equalization
     66,351       52,160  
Prepaid taxes
     304,617       301,807  
Prepayments and other
     237,252       246,036  
TOTAL
     3,863,142       4,339,083  
                 
OTHER PROPERTY AND INVESTMENTS
                
Investment in affiliates - at equity
     44,172       40,697  
Decommissioning trust funds
     3,775,026       3,595,716  
Non-utility property - at cost (less accumulated depreciation)
     260,614       257,847  
Other
     412,090       405,946  
TOTAL
     4,491,902       4,300,206  
                 
PROPERTY, PLANT AND EQUIPMENT
                
Electric
     38,179,664       37,153,061  
Property under capital lease
     790,533       800,078  
Natural gas
     336,814       330,608  
Construction work in progress
     1,799,906       1,661,560  
Nuclear fuel
     1,451,087       1,377,962  
TOTAL PROPERTY, PLANT AND EQUIPMENT
     42,558,004       41,323,269  
Less - accumulated depreciation and amortization
     17,919,151       17,474,914  
PROPERTY, PLANT AND EQUIPMENT - NET
     24,638,853       23,848,355  
                 
DEFERRED DEBITS AND OTHER ASSETS
                
Regulatory assets:
                
  Regulatory asset for income taxes - net
     841,137       845,725  
  Other regulatory assets (includes securitization property of
                
     $852,723 as of June 30, 2011 and $882,346 as of
                
     December 31, 2010)
     3,736,785       3,838,237  
  Deferred fuel costs
     172,202       172,202  
Goodwill
     377,172       377,172  
Accumulated deferred income taxes
     80,910       54,523  
Other
     927,658       909,773  
TOTAL
     6,135,864       6,197,632  
                 
TOTAL ASSETS
   $ 39,129,761     $ 38,685,276  
                 
See Notes to Financial Statements.
                

 
ENTERGY CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED BALANCE SHEETS
  
LIABILITIES AND EQUITY
  
June 30, 2011 and December 31, 2010
  
(Unaudited)
  
             
   
2011
    
2010
  
   
(In Thousands)
  
             
CURRENT LIABILITIES
            
Currently maturing long-term debt
   $ 128,062     $ 299,548  
Notes payable
     130,795       154,135  
Accounts payable
     1,044,217       1,181,099  
Customer deposits
     345,079       335,058  
Accumulated deferred income taxes
     99,147       49,307  
Interest accrued
     178,280       217,685  
Deferred fuel costs
     15,142       166,409  
Obligations under capital leases
     3,599       3,388  
Pension and other postretirement liabilities
     40,235       39,862  
System agreement cost equalization
     66,351       52,160  
Other
     191,497       277,598  
TOTAL
     2,242,404       2,776,249  
                 
NON-CURRENT LIABILITIES
                
Accumulated deferred income taxes and taxes accrued
     8,867,158       8,573,646  
Accumulated deferred investment tax credits
     284,852       292,330  
Obligations under capital leases
     40,177       42,078  
Other regulatory liabilities
     578,821       539,026  
Decommissioning and asset retirement cost liabilities
     3,218,881       3,148,479  
Accumulated provisions
     390,089       395,250  
Pension and other postretirement liabilities
     1,942,685       2,175,364  
Long-term debt (includes securitization bonds of $895,824 as of
                
   June 30, 2011 and $931,131 as of December 31, 2010)
     12,057,368       11,317,157  
Other
     599,015       618,559  
TOTAL
     27,979,046       27,101,889  
                 
Commitments and Contingencies
                
                 
Subsidiaries' preferred stock without sinking fund
     216,745       216,738  
                 
EQUITY
                
Common Shareholders' Equity:
                
Common stock, $.01 par value, authorized 500,000,000 shares;
                
  issued 254,752,788 shares in 2011 and in 2010
     2,548       2,548  
Paid-in capital
     5,366,132       5,367,474  
Retained earnings
     8,957,516       8,689,401  
Accumulated other comprehensive loss
     (75,156 )     (38,212 )
Less - treasury stock, at cost (77,919,322 shares in 2011 and
                
  76,006,920 shares in 2010)
     5,653,474       5,524,811  
Total common shareholders' equity
     8,597,566       8,496,400  
Subsidiaries' preferred stock without sinking fund
     94,000       94,000  
TOTAL
     8,691,566       8,590,400  
                 
TOTAL LIABILITIES AND EQUITY
   $ 39,129,761     $ 38,685,276  
                 
See Notes to Financial Statements.
                

 
 
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME
  
For the Six Months Ended June 30, 2011 and 2010
  
(Unaudited) (In Thousands)
  
                                           
         
Common Shareholders' Equity
              
   
Subsidiaries' Preferred Stock
    
Common Stock
    
Treasury Stock
    
Paid-in Capital
    
Retained Earnings
    
Accumulated Other Comprehensive Income (Loss)
    
Total
  
Balance at December 31, 2009
   $ 94,000     $ 2,548     $ (4,727,167 )   $ 5,370,042     $ 8,043,122     $ (75,185 )   $ 8,707,360  
                                                         
Consolidated net income (a)
     10,033       -       -       -       529,064       -       539,097  
Other comprehensive income:
                                                        
    Cash flow hedges net unrealized
     gain (net of tax expense of
     $36,587)
     -       -       -       -       -       59,071       59,071  
    Pension and other postretirement
     liabilities (net of tax expense of
     $2,541)
     -       -       -       -       -       5,010       5,010  
    Net unrealized investment losses
     (net of tax benefit of $16,078)
     -       -       -       -       -       (19,202 )     (19,202 )
    Foreign currency translation (net
     of tax benefit of $409)
     -       -       -       -       -       (759 )     (759 )
        Total comprehensive income
                                                     583,217  
                                                         
Common stock repurchases
     -       -       (137,749 )     -       -       -       (137,749 )
Common stock issuances related to 
  stock plans
     -       -       13,899       7,077       -       -       20,976  
Common stock dividends declared
     -       -       -       -       (299,033 )     -       (299,033 )
Preferred dividend requirements of
  subsidiaries (a)
     (10,033 )     -       -       -       -       -       (10,033 )
                                                         
Balance at June 30, 2010
   $ 94,000     $ 2,548     $ (4,851,017 )   $ 5,377,119     $ 8,273,153     $ (31,065 )   $ 8,864,738  
                                                         
                                                         
Balance at December 31, 2010
   $ 94,000     $ 2,548     $ (5,524,811 )   $ 5,367,474     $ 8,689,401     $ (38,212 )   $ 8,590,400  
                                                         
Consolidated net income (a)
     10,031       -       -       -       564,246       -       574,277  
Other comprehensive income:
                                                        
    Cash flow hedges net unrealized
     loss (net of tax benefit of $41,843)
     -       -       -       -       -       (71,724 )     (71,724 )
    Pension and other postretirement
     liabilities (net of tax expense of
     $3,057)
     -       -       -       -       -       6,598       6,598