Edgar Filing: ENTERGY CORP /DE/

Borrowings

Letters
of Credit

Capacity
Available

(In Millions)

Document

__________________________________________________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarterly Period Ended March 31, 2019
	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	1-35747	ENTERGY NEW ORLEANS, LLC (a Texas limited liability company) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 82-2212934


1-10764	ENTERGY ARKANSAS, LLC (a Texas limited liability company) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 83-1918668	1-34360	ENTERGY TEXAS, INC. (a Texas corporation) 10055 Grogans Mill Road The Woodlands, Texas 77380 Telephone (409) 981-2000 61-1435798


1-32718	ENTERGY LOUISIANA, LLC (a Texas limited liability company) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 576-4000 47-4469646	1-09067	SYSTEM ENERGY RESOURCES, INC. (an Arkansas corporation) 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 72-0752777


1-31508	ENTERGY MISSISSIPPI, LLC (a Texas limited liability company) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 83-1950019

__________________________________________________________________________________________

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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 þ No o

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 þ No o

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 filer	Accelerated filer	Non- accelerated filer	Smaller reporting company	Emerging growth company
Entergy Corporation	ü
Entergy Arkansas, LLC			ü
Entergy Louisiana, LLC			ü
Entergy Mississippi, LLC			ü
Entergy New Orleans, LLC			ü
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. o

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

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Securities registered pursuant to Section 12(b) of the Act:



Registrant	Trading Symbol	Title of Class	Name of Each Exchange on Which Registered

Entergy Corporation	ETR	Common Stock, $0.01 Par Value – 189,926,451 shares outstanding at April 30, 2019	New York Stock Exchange LLC NYSE Chicago, Inc.

Entergy Arkansas, LLC	EAB	Mortgage Bonds, 4.90% Series due December 2052	New York Stock Exchange LLC
	EAE	Mortgage Bonds, 4.75% Series due June 2063	New York Stock Exchange LLC
	EAI	Mortgage Bonds, 4.875% Series due September 2066	New York Stock Exchange LLC

Entergy Louisiana, LLC	ELJ	Mortgage Bonds, 5.25% Series due July 2052	New York Stock Exchange LLC
	ELU	Mortgage Bonds, 4.70% Series due June 2063	New York Stock Exchange LLC
	ELC	Mortgage Bonds, 4.875% Series due September 2066	New York Stock Exchange LLC

Entergy Mississippi, LLC	EMP	Mortgage Bonds, 4.90% Series due October 2066	New York Stock Exchange LLC

Entergy New Orleans, LLC	ENJ	Mortgage Bonds, 5.0% Series due December 2052	New York Stock Exchange LLC
	ENO	Mortgage Bonds, 5.50% Series due April 2066	New York Stock Exchange LLC

Entergy Texas, Inc.	EZT	Mortgage Bonds, 5.625% Series due June 2064	New York Stock Exchange LLC

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, 2018, filed by the individual registrants with the SEC, and should be read in conjunction therewith.

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TABLE OF CONTENTS



	Page Number

Forward-looking information	iii
Definitions	vi

Part I. Financial Information

Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis	1
Consolidated Income Statements	14
Consolidated Statements of Comprehensive Income	15
Consolidated Statements of Cash Flows	16
Consolidated Balance Sheets	18
Consolidated Statements of Changes in Equity	20
Selected Operating Results	21
Notes to Financial Statements
Note 1. Commitments and Contingencies	22
Note 2. Rate and Regulatory Matters	23
Note 3. Equity	26
Note 4. Revolving Credit Facilities, Lines of Credit, Short-term Borrowings, and Long-term Debt	30
Note 5. Stock-based Compensation	34
Note 6. Retirement and Other Postretirement Benefits	36
Note 7. Business Segment Information	39
Note 8. Risk Management and Fair Values	40
Note 9. Decommissioning Trust Funds	58
Note 10. Income Taxes	64
Note 11. Property, Plant, and Equipment	65
Note 12. Variable Interest Entities	65
Note 13. Revenue Recognition	66
Note 14. Asset Retirement Obligations	68
Note 15. Leases	68
Note 16. Dispositions	76
Item 3. Quantitative and Qualitative Disclosures About Market Risk	77
Item 4. Controls and Procedures	77
Entergy Arkansas, LLC and Subsidiaries
Management’s Financial Discussion and Analysis	78
Consolidated Income Statements	84
Consolidated Statements of Cash Flows	85
Consolidated Balance Sheets	86
Consolidated Statements of Changes in Member’s Equity	88
Selected Operating Results	89
Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis	90
Consolidated Income Statements	96

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	Page Number

Consolidated Statements of Comprehensive Income	97
Consolidated Statements of Cash Flows	99
Consolidated Balance Sheets	100
Consolidated Statements of Changes in Equity	102
Selected Operating Results	103
Entergy Mississippi, LLC
Management’s Financial Discussion and Analysis	104
Income Statements	109
Statements of Cash Flows	111
Balance Sheets	112
Statements of Changes in Member’s Equity	114
Selected Operating Results	115
Entergy New Orleans, LLC and Subsidiaries
Management’s Financial Discussion and Analysis	116
Consolidated Income Statements	121
Consolidated Statements of Cash Flows	123
Consolidated Balance Sheets	124
Consolidated Statements of Changes in Member’s Equity	126
Selected Operating Results	127
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis	128
Consolidated Income Statements	133
Consolidated Statements of Cash Flows	135
Consolidated Balance Sheets	136
Consolidated Statements of Changes in Common Equity	138
Selected Operating Results	139
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis	140
Income Statements	145
Statements of Cash Flows	147
Balance Sheets	148
Statements of Changes in Common Equity	150

Part II. Other Information

Item 1. Legal Proceedings	151
Item 1A. Risk Factors	151
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	151
Item 5. Other Information	152
Item 6. Exhibits	152
Signature	155

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FORWARD-LOOKING INFORMATION

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

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


•	resolution of pending and future rate cases, 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;


•	long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;

•

regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the benefits of continued MISO participation, the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, 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 transmission reliability requirements or market power criteria by the FERC or the U.S. Department of Justice;


•	changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned, potential, or actual shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;


•	resolution of pending or future applications, and related regulatory proceedings and litigation, for license modifications or other authorizations required of nuclear generating facilities and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;


•	the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at Entergy’s nuclear generating facilities;


•	increases in costs and capital expenditures that could result from changing regulatory requirements, emerging operating and industry issues, and the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating facilities;


•	Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;


•	prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants, especially in light of the planned shutdown and sale of each of these nuclear plants;

iii

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FORWARD-LOOKING INFORMATION (Continued)


•	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, or energy policies;


•	the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions or decisions;


•	uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;


•	variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;


•	effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land and wetland loss;


•	changes in the quality and availability of water supplies and the related regulation of water use and diversion;


•	Entergy’s ability to manage its capital projects and operation and maintenance costs;


•	Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;


•	the economic climate, and particularly economic conditions in Entergy’s Utility service area and the northern United States and events and circumstances that could influence economic conditions in those areas, including power prices, and the risk that anticipated load growth may not materialize;


•	federal income tax reform, including the enactment of the Tax Cuts and Jobs Act, and its intended and unintended consequences on financial results and future cash flows;


•	the effects of Entergy’s strategies to reduce tax payments, especially in light of federal income tax reform;


•	changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments and acquisitions;


•	actions of rating agencies, including changes in the ratings of debt, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;


•	changes in inflation and interest rates;


•	the effect of litigation and government investigations or proceedings;

•

changes in technology, including (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 (iii) competition from other companies offering products and services to Entergy’s customers based on new or emerging technologies or alternative sources of generation;


•	the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;


•	Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills;

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FORWARD-LOOKING INFORMATION (Concluded)


•	changes in accounting standards and corporate governance;


•	declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;


•	future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;


•	changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;


•	the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by mid-2022, including the implementation of the planned shutdowns of Pilgrim, Indian Point 2, Indian Point 3, and Palisades;


•	the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;


•	factors that could lead to impairment of long-lived assets; and


•	the ability to successfully complete strategic transactions Entergy may undertake, including mergers, acquisitions, divestitures, or restructurings, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction.

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DEFINITIONS

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



Abbreviation or Acronym	Term

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
D.C. Circuit	U.S. Court of Appeals for the District of Columbia Circuit
DOE	United States Department of Energy
Entergy	Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation	Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.	Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana	Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana	Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy Texas	Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale Commodities	Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPA	United States Environmental Protection Agency
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FitzPatrick	James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017
Form 10-K	Annual Report on Form 10-K for the calendar year ended December 31, 2018 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand Gulf	Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh	Gigawatt-hour(s), which equals one million kilowatt-hours
Independence	Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC

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DEFINITIONS (Continued)



Abbreviation or Acronym	Term

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
ISO	Independent System Operator
kW	Kilowatt, which equals one thousand watts
kWh	Kilowatt-hour(s)
LPSC	Louisiana Public Service Commission
MISO	Midcontinent Independent System Operator, Inc., a regional transmission organization
MMBtu	One million British Thermal Units
MPSC	Mississippi Public Service Commission
MW	Megawatt(s), which equals one thousand kilowatts
MWh	Megawatt-hour(s)
Net debt to net capital ratio	Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation	Installed capacity owned and operated
NRC	Nuclear Regulatory Commission
NYPA	New York Power Authority
Palisades	Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & Other	The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
Pilgrim	Pilgrim Nuclear Power Station (nuclear), 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, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend	River Bend Station (nuclear), owned by Entergy Louisiana
SEC	Securities and Exchange Commission
System Agreement	Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System Energy	System Energy Resources, Inc.
TWh	Terawatt-hour(s), which equals one billion kilowatt-hours
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

vii

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DEFINITIONS (Concluded)



Abbreviation or Acronym	Term

Vermont Yankee	Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 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 operation and planned shutdown and sale of each of the Entergy Wholesale Commodities nuclear power plants.

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

Results of Operations

First Quarter 2019 Compared to First Quarter 2018

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2019 to the first quarter 2018 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)
2018 Consolidated Net Income (Loss)		$217,940			($17,779	)		($63,961	)		$136,200

Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)	(43,585		)	10,643			19			(32,923		)
Other operation and maintenance	(2,636		)	(2,116		)	4,218			(534		)
Asset write-offs, impairments, and related charges	—			1,055			—			1,055
Taxes other than income taxes	(2,191		)	(3,607		)	(845		)	(6,643		)
Depreciation and amortization	10,020			(111		)	300			10,209
Other income	7,076			182,512			(1,738		)	187,850
Interest expense	5,650			919			7,317			13,886
Other expenses	229			15,171			—			15,400
Income taxes	(63,788		)	66,986			(4,090		)	(892		)

2019 Consolidated Net Income (Loss)		$234,147			$97,079			($72,580	)		$258,646


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

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

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

First quarter 2019 results of operations includes impairment charges of $74 million ($58 million net-of-tax) and first quarter 2018 results of operations includes impairment charges of $73 million ($58 million net-of-tax) due to costs being charged directly to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the first quarter 2019 to the first quarter 2018:



	Amount
	(In Millions)
2018 net revenue		$1,460
Return of unprotected excess accumulated deferred income taxes to customers	(61		)
Volume/weather	(38		)
Retail electric price	61
Other	(6		)
2019 net revenue		$1,416

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity in 2019 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. There is no effect on net income as the reductions in net revenue 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 volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily driven by continued growth from new and expansion projects and increased demand from existing customers.

The retail electric price variance is primarily due to:


•	the regulatory charges recorded in first quarter 2018 to reflect the effects of regulatory agreements to return the benefits of the lower income tax rate in 2018 to Entergy Louisiana customers;


•	an increase in formula rate plan rates effective with the first billing cycle of January 2019 at Entergy Arkansas, as approved by the APSC;


•	a base rate increase effective October 2018 at Entergy Texas, as approved by the PUCT;


•	an increase in formula rate plan revenues implemented with the first billing cycle of September 2018 at Entergy Louisiana, as approved by the LPSC; and


•	the implementation of an advanced metering system customer charge effective January 2019 at Entergy Louisiana, as approved by the LPSC.

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

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the first quarter 2019 to the first quarter 2018:



	Amount
	(In Millions)
2018 net revenue		$382
Nuclear volume	15
Other	(4		)
2019 net revenue		$393

As shown in the table above, net revenue for Entergy Wholesale Commodities increased by $11 million in the first quarter 2019 as compared to the first quarter 2018 primarily due to higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer non-refueling outage days in the first quarter 2019 as compared to the first quarter 2018.

Following are key performance measures for Entergy Wholesale Commodities for the first quarters 2019 and 2018:



	2019	2018
Owned capacity (MW)	3,962	3,962
GWh billed	7,203	6,996

Entergy Wholesale Commodities Nuclear Fleet
Capacity factor	85%	83%
GWh billed	6,690	6,408
Average energy price ($/MWh)	$51.43	$52.29
Average capacity price ($/kW-month)	$4.71	$3.83
Refueling outage days:
Indian Point 2	—	13
Indian Point 3	21	—

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $588 million for the first quarter 2018 to $585 million for the first quarter 2019 primarily due to:


•	a decrease of $20 million in nuclear generation expenses primarily due to a lower scope of work performed in the first quarter 2019 as compared to first quarter 2018 and lower nuclear labor costs, including contract labor;


•	a decrease of $5 million in storm damage provisions at Entergy Mississippi. See Note 2 to the financial statements in the Form 10-K for discussion of storm cost recovery; and


•	a decrease of $4 million in energy efficiency costs due to the timing of recovery from customers.

The decrease was partially offset by:


•	an increase of $8 million in information technology costs primarily due to higher software maintenance costs and higher contract costs;


•	an increase of $5 million in outside legal costs primarily due to a settlement received in 2018 which reduced legal costs in the first quarter 2018;

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis


•	an increase of $4 million in spending on customer initiatives to explore new technologies and services;


•	an increase of $3 million in advanced metering costs, including customer education costs; and


•	an increase of $3 million in fossil-fueled generation expenses due to a higher scope of work performed in the first quarter 2019 as compared to the first quarter 2018.

Depreciation and amortization expenses increased primarily due to additions to plant in service, partially offset by updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement as part of a settlement approved by the FERC in August 2018. See Note 2 to the financial statements in the Form 10-K for further discussion of the Unit Power Sales Agreement.

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 2019, which included the Lake Charles Power Station, St. Charles Power Station, Montgomery County Power Station, and New Orleans Power Station projects. The increase was partially offset by changes in decommissioning trust fund activity, including portfolio rebalancing of certain of the decommissioning trust funds in 2018.

Interest expense increased primarily due to an increase in debt outstanding at the Utility operating companies. See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for a discussion of long-term debt.

Entergy Wholesale Commodities

Other income increased primarily due to gains on decommissioning trust fund investments in the first quarter 2019 as compared to the first quarter 2018. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization of higher costs associated with a refueling outage at Palisades.

Income Taxes

The effective income tax rate was 14.2% for the first quarter 2019. The difference in the effective income tax rate for the first quarter 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, partially offset by the tax effects of the disposition of Vermont Yankee. See Notes 2 and 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the tax effects of the Vermont Yankee disposition.

The effective income tax rate was 24.3% for the first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to state income taxes, a write-off of a stock-based compensation deferred tax asset, and the provision for uncertain tax positions, 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.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Income Tax Legislation

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

Entergy Wholesale Commodities Exit from the Merchant Power Business

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

Vermont Yankee Disposition

As discussed in more detail in Note 16 to the financial statements herein, in January 2019, Entergy transferred 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC, the owner of the Vermont Yankee plant, to a subsidiary of NorthStar.

Planned Sale of Pilgrim

As discussed in the Form 10-K, Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, for $1,000 (subject to adjustments for net liabilities and other amounts). The sale of Entergy Nuclear Generation Company will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. Subject to the conditions discussed in the Form 10-K, the transaction is expected to close by the end of 2019. The transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in Entergy Nuclear Generation Company and the sale price plus any agreed adjustments. As of March 31, 2019, Entergy’s adjusted net investment in Entergy Nuclear Generation Company was $180 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trust and the asset retirement obligation at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.

Planned Sale of Indian Point Energy Center

In April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 has been shut down and defueled, to a Holtec International subsidiary for decommissioning. The sale includes the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for the three units.

The transaction is subject to closing conditions, including approval from the NRC. Entergy and Holtec also plan to seek an order from the New York State Public Service Commission disclaiming jurisdiction, or alternatively approving the transaction. Closing is also conditioned on obtaining from the New York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as being consistent with applicable standards. The transaction closing is targeted for third quarter 2021, following the defueling of Indian Point 3.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

As consideration for the transfer to Holtec of its interest in Indian Point, Entergy will receive nominal cash consideration. The Indian Point transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of any agreed adjustments. As of March 31, 2019, Entergy’s adjusted net investment in the Indian Point units was $315 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of unrealized any deferred tax balances at closing. The terms of the transaction include limitations on withdrawals from the nuclear decommissioning trusts to fund decommissioning activities and controls on how Entergy manages the investment of nuclear decommissioning trust assets between signing and closing; however, the agreement does not require a minimum level of funding in the nuclear decommissioning trusts as a condition to closing.

Costs Associated with Entergy Wholesale Commodities Strategic Transactions

Entergy expects to incur employee retention and severance expenses associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet of approximately $130 million in 2019, of which $34 million has been incurred as of March 31, 2019, and a total of approximately $110 million from 2020 through 2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $74 million for the three months ended March 31, 2019. These costs were charged to expense as incurred as a result of the impaired value of certain of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge these costs to expense as incurred because Entergy expects the value of the plants to continue to be impaired.

Liquidity and Capital Resources

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

Capital Structure

Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 2019 is primarily due to the net issuance of debt in 2019.



	March 31, 2019		December 31, 2018
Debt to capital	67.8	%	66.7	%
Effect of excluding securitization bonds	(0.5	%)	(0.6	%)
Debt to capital, excluding securitization bonds (a)	67.3	%	66.1	%
Effect of subtracting cash	(1.2	%)	(0.6	%)
Net debt to net capital, excluding securitization bonds (a)	66.1	%	65.5	%


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

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, financing 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 September 2023. 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 three months ended March 31, 2019 was 4.03% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2019:

A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the 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.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of March 31, 2019, Entergy Corporation had approximately $1,942 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 2019 was 3.03%.

In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Vermont Yankee Asset Retirement Management, 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 November 2020. As of March 31, 2019, $139 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the three months ended March 31, 2019 was 4.28% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K and Note 16 to the financial statements herein for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.

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 2019 through 2021. Following are updates to that discussion.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Choctaw Generating Station

In August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary of GenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near French Camp, Mississippi. The purchase price is expected to be approximately $314 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 $401 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies. These include regulatory approvals from the MPSC and the FERC. Clearance under the Hart-Scott-Rodino Antitrust Improvements Act has occurred. In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity additions approved by the MPSC. Closing is expected to occur by the end of 2019. Due diligence performed on the plant indicates that there exists a potential mechanical issue that must be addressed prior to closing. There is some possibility that closing may be delayed to allow time for this issue to be resolved.

Searcy Solar Facility

In March 2019, Entergy Arkansas announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar energy facility that will be sited on approximately 800 acres in White County near Searcy, Arkansas. The purchase is contingent upon, among other things, obtaining necessary approvals from applicable federal and state regulatory and permitting agencies. The project will be constructed by a subsidiary of NextEra Energy Resources. Entergy Arkansas will purchase the facility upon completion and after the other purchase contingencies have been met. Closing is expected to occur by the end of 2021.

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 April 2019 meeting, the Board declared a dividend of $0.91 per share, which is the same quarterly dividend per share that Entergy has paid since the third quarter 2018.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2019 and 2018 were as follows:



	2019			2018
	(In Millions)
Cash and cash equivalents at beginning of period		$481			$781

Cash flow provided by (used in):
Operating activities	501			557
Investing activities	(951		)	(974		)
Financing activities	952			841
Net increase in cash and cash equivalents	502			424

Cash and cash equivalents at end of period		$983			$1,205

Operating Activities

Net cash flow provided by operating activities decreased by $56 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:


•	the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statements in the Form 10-K for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act;


•	the effect of less favorable weather on billed Utility sales in 2019;


•	an increase of $41 million in spending on nuclear refueling outages in 2019 as compared to the same period in 2018; and


•	an increase of $29 million in interest paid in 2019 as compared to the same period in 2018 resulting from an increase in debt outstanding.

The decrease was partially offset by:


•	an increase due to the timing of recovery of fuel and purchased power costs in 2019 as compared to the same period in 2018. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery; and


•	a decrease of $80 million in pension contributions in 2019 as compared to same period in 2018. 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.

Investing Activities

Net cash flow used in investing activities decreased $23 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to:


•	a decrease in collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants; and


•	an increase of $11 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

The decrease was partially offset by changes in the decommissioning trust funds and an increase of $20 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to:


•	an increase of $32 million in transmission construction expenditures due to a higher scope of work performed in 2019 on various projects;


•	an increase of $27 million in distribution construction expenditures primarily due to a higher scope of work performed in 2019 on various projects; and


•	an increase of $21 million in nuclear construction expenditures primarily due to higher spending on various nuclear projects.

The increase in construction expenditures was partially offset by:


•	a decrease of $33 million in fossil-fueled generation construction expenditures primarily due to lower spending in 2019 on self-build projects in the Utility business; and


•	a decrease of $22 million in information technology capital expenditures primarily due to lower spending in 2019 on various projects.

Financing Activities

Net cash flow provided by financing activities increased $111 million for the three months ended March 31, 2019 compared to the three months ended March 31, 2018 primarily due to a decrease in net repayments of $812 million of commercial paper in 2019. The increase was partially offset by:


•	long-term debt activity providing approximately $1,145 million of cash in 2019 compared to approximately $1,772 million in 2018;


•	the repurchase in first quarter 2019 of $50 million of Class A mandatorily redeemable preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, that were held by a third party; and


•	short-term borrowings of $39 million in 2018 by the nuclear fuel company variable interest entities.

For the details of Entergy’s commercial paper program, the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt, see Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K.

Rate, Cost-recovery, and Other Regulation

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

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

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets. Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of March 31, 2019 (2019 represents the remainder of the year):

Entergy Wholesale Commodities Nuclear Portfolio



	2019	2020	2021	2022
Energy
Percent of planned generation under contract (a):
Unit-contingent (b)	98%	95%	91%	66%
Planned generation (TWh) (c) (d)	18.6	17.7	9.6	2.8
Average revenue per MWh on contracted volumes:
Expected based on market prices as of March 31, 2019	$34.7	$42.0	$56.9	$58.8

Capacity
Percent of capacity sold forward (e):
Bundled capacity and energy contracts (f)	27%	37%	68%	97%
Capacity contracts (g)	30%	27%	—%	—%
Total	57%	64%	68%	97%
Planned net MW in operation (average) (d)	3,167	2,195	1,158	338
Average revenue under contract per kW per month (applies to capacity contracts only)	$5.1	$3.2	$—	$—

Total Energy and Capacity Revenues (h)
Expected sold and market total revenue per MWh	$38.9	$45.1	$55.0	$47.5
Sensitivity: -/+ $10 per MWh market price change	$38.7-$39.1	$45.0-$45.2	$54.1-$55.9	$44.1-$51.0


(a)	Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty. Positions that are not classified as hedges are netted in the planned generation under contract.

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

(b)

Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.


(c)	Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operating characteristics and outage schedules.

(d)

Assumes the planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, planned shutdown of Indian Point 3 on April 30, 2021, and planned shutdown of Palisades on May 31, 2022. For a discussion regarding the planned shutdown of the Pilgrim, Indian Point 2, Indian Point 3, and Palisades plants, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” above.


(e)	Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.


(f)	A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.


(g)	A contract for the sale of an installed capacity product in a regional market.


(h)	Includes assumptions on converting a portion of the portfolio to contracted with fixed price and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on March 31, 2019 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of $4 million for the remainder of 2019. As of March 31, 2018, a positive $10 per MW change would have had a corresponding effect on pre-tax income of $1.4 million for the remainder of 2018. A negative $10 per MWh change in the annual average energy price in the markets based on March 31, 2019 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($4) million for the remainder of 2019. As of March 31, 2018, a negative $10 per MW change would have had a corresponding effect on pre-tax income of ($1.4) million for the remainder of 2018.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. Cash and letters of credit are also acceptable forms of credit support. At March 31, 2019, based on power prices at that time, Entergy had liquidity exposure of $121 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $34 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of March 31, 2019, Entergy would have been required to provide approximately $75 million of additional cash or letters of credit under some of the agreements. As of March 31, 2019, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $235 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.

As of March 31, 2019, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investment grade credit ratings.

Nuclear Matters

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

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Entergy Corporation and Subsidiaries

Management's Financial Discussion and Analysis

Pilgrim

In March 2019 the NRC moved Pilgrim from its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix to its “licensee response column,” or Column 1.

Critical Accounting Estimates

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

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 Months Ended March 31, 2019 and 2018
(Unaudited)

	2019			2018
	(In Thousands, Except Share Data)
OPERATING REVENUES
Electric		$2,121,024			$2,248,262
Natural gas	54,948			56,695
Competitive businesses	433,612			418,924
TOTAL	2,609,584			2,723,881

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	478,330			443,296
Purchased power	339,507			396,023
Nuclear refueling outage expenses	50,441			42,760
Other operation and maintenance	783,051			783,585
Asset write-offs, impairments, and related charges	73,979			72,924
Decommissioning	102,119			94,400
Taxes other than income taxes	158,575			165,218
Depreciation and amortization	357,274			347,065
Other regulatory charges (credits)	(16,946		)	42,946
TOTAL	2,326,330			2,388,217

OPERATING INCOME	283,254			335,664

OTHER INCOME
Allowance for equity funds used during construction	38,216			28,343
Interest and investment income	228,149			16,870
Miscellaneous - net	(64,658		)	(31,356		)
TOTAL	201,707			13,857

INTEREST EXPENSE
Interest expense	200,993			182,923
Allowance for borrowed funds used during construction	(17,449		)	(13,265		)
TOTAL	183,544			169,658

INCOME BEFORE INCOME TAXES	301,417			179,863

Income taxes	42,771			43,663

CONSOLIDATED NET INCOME	258,646			136,200

Preferred dividend requirements of subsidiaries	4,109			3,439

NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION		$254,537			$132,761

Earnings per average common share:
Basic		$1.34			$0.73
Diluted		$1.32			$0.73

Basic average number of common shares outstanding	189,575,187			180,707,575
Diluted average number of common shares outstanding	192,234,191			181,431,968

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)

	2019			2018
	(In Thousands)

Net Income		$258,646			$136,200

Other comprehensive income
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of ($5,352) and $25,349)	(12,426		)	95,427
Pension and other postretirement liabilities (net of tax expense of $3,249 and $4,568)	11,550			16,574
Net unrealized investment gain (loss) (net of tax expense of $8,073 and $5,375)	13,703			(32,856		)
Other comprehensive income	12,827			79,145

Comprehensive Income	271,473			215,345
Preferred dividend requirements of subsidiaries	4,109			3,439
Comprehensive Income Attributable to Entergy Corporation		$267,364			$211,906

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
	2019			2018
	(In Thousands)
OPERATING ACTIVITIES
Consolidated net income		$258,646			$136,200
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	530,224			525,181
Deferred income taxes, investment tax credits, and non-current taxes accrued	104,884			104,607
Asset write-offs, impairments, and related charges	25,462			25,800
Changes in working capital:
Receivables	39,697			131,150
Fuel inventory	(4,401		)	(16,261		)
Accounts payable	(63,613		)	(68,857		)
Taxes accrued	(44,083		)	(56,301		)
Interest accrued	(20,546		)	(10,011		)
Deferred fuel costs	20,201			(76,238		)
Other working capital accounts	(42,016		)	(28,004		)
Changes in provisions for estimated losses	13,720			10,744
Changes in other regulatory assets	(162,192		)	84,349
Changes in other regulatory liabilities	130,924			(31,380		)
Changes in pensions and other postretirement liabilities	(7,713		)	(97,418		)
Other	(278,005		)	(76,168		)
Net cash flow provided by operating activities	501,189			557,393

INVESTING ACTIVITIES
Construction/capital expenditures	(951,629		)	(931,479		)
Allowance for equity funds used during construction	38,322			28,512
Nuclear fuel purchases	(38,445		)	(49,647		)
Insurance proceeds received for property damages	—			1,582
Changes in securitization account	(1,084		)	(7,063		)
Payments to storm reserve escrow account	(2,285		)	(1,175		)
Decrease (increase) in other investments	39,045			(406		)
Proceeds from nuclear decommissioning trust fund sales	1,307,547			1,091,332
Investment in nuclear decommissioning trust funds	(1,342,429		)	(1,106,094		)
Net cash flow used in investing activities	(950,958		)	(974,438		)

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
	2019			2018
	(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt	3,444,230			2,505,726
Treasury stock	35,577			1,952
Retirement of long-term debt	(2,298,855		)	(734,000		)
Repurchase of preferred membership units	(50,000		)	—
Changes in credit borrowings and commercial paper - net	(17		)	(773,177		)
Other	(1,945		)	5,193
Dividends paid:
Common stock	(172,591		)	(160,887		)
Preferred stock	(4,109		)	(3,439		)
Net cash flow provided by financing activities	952,290			841,368

Net increase in cash and cash equivalents	502,521			424,323

Cash and cash equivalents at beginning of period	480,975			781,273

Cash and cash equivalents at end of period		$983,496			$1,205,596

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized		$214,935			$185,606
Income taxes		($13,844	)		($4,297	)

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2019 and December 31, 2018
(Unaudited)
	2019			2018
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash		$118,384			$56,690
Temporary cash investments	865,112			424,285
Total cash and cash equivalents	983,496			480,975
Accounts receivable:
Customer	589,519			558,494
Allowance for doubtful accounts	(7,458		)	(7,322		)
Other	158,293			167,722
Accrued unbilled revenues	334,355			395,511
Total accounts receivable	1,074,709			1,114,405
Deferred fuel costs	19,209			27,251
Fuel inventory - at average cost	121,705			117,304
Materials and supplies - at average cost	771,707			752,843
Deferred nuclear refueling outage costs	231,628			230,960
Prepayments and other	205,322			234,326
TOTAL	3,407,776			2,958,064

OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds	6,877,865			6,920,164
Non-utility property - at cost (less accumulated depreciation)	310,215			304,382
Other	439,849			437,265
TOTAL	7,627,929			7,661,811

PROPERTY, PLANT, AND EQUIPMENT
Electric	50,260,871			49,831,486
Natural gas	509,987			496,150
Construction work in progress	3,289,734			2,888,639
Nuclear fuel	790,398			861,272
TOTAL PROPERTY, PLANT, AND EQUIPMENT	54,850,990			54,077,547
Less - accumulated depreciation and amortization	22,198,769			22,103,101
PROPERTY, PLANT, AND EQUIPMENT - NET	32,652,221			31,974,446

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $333,783 as of March 31, 2019 and $360,790 as of December 31, 2018)	4,908,688			4,746,496
Deferred fuel costs	239,595			239,496
Goodwill	377,172			377,172
Accumulated deferred income taxes	61,255			54,593
Other	330,745			262,988
TOTAL	5,917,455			5,680,745

TOTAL ASSETS		$49,605,381			$48,275,066

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
(Unaudited)
	2019			2018
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt		$150,010			$650,009
Notes payable and commercial paper	1,942,322			1,942,339
Accounts payable	1,406,327			1,496,058
Customer deposits	409,433			411,505
Taxes accrued	210,156			254,241
Interest accrued	172,645			193,192
Deferred fuel costs	64,653			52,396
Pension and other postretirement liabilities	62,218			61,240
Current portion of unprotected excess accumulated deferred income taxes	239,664			248,127
Other	203,655			134,437
TOTAL	4,861,083			5,443,544

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	4,252,292			4,107,152
Accumulated deferred investment tax credits	211,013			213,101
Regulatory liability for income taxes-net	1,737,479			1,817,021
Other regulatory liabilities	1,839,183			1,620,254
Decommissioning and asset retirement cost liabilities	6,577,180			6,355,543
Accumulated provisions	527,866			514,107
Pension and other postretirement liabilities	2,607,394			2,616,085
Long-term debt (includes securitization bonds of $398,291 as of March 31, 2019 and $423,858 as of December 31, 2018)	17,167,886			15,518,303
Other	634,211			1,006,249
TOTAL	35,554,504			33,767,815

Commitments and Contingencies

Subsidiaries' preferred stock without sinking fund	219,427			219,402

COMMON EQUITY
Common stock, $.01 par value, authorized 500,000,000 shares; issued 261,587,009 shares in 2019 and in 2018	2,616			2,616
Paid-in capital	5,920,183			5,951,431
Retained earnings	8,809,902			8,721,150
Accumulated other comprehensive loss	(551,152		)	(557,173		)
Less - treasury stock, at cost (71,670,773 shares in 2019 and 72,530,866 shares in 2018)	5,211,182			5,273,719
TOTAL	8,970,367			8,844,305

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$49,605,381			$48,275,066

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)

				Common Shareholders’ Equity
	Subsidiaries’ Preferred Stock			Common Stock		Treasury Stock			Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	(In Thousands)
Balance at December 31, 2017		$—			$2,548		($5,397,637	)		$5,433,433			$7,977,702			($23,531	)		$7,992,515
Implementation of accounting standards	—			—		—			—			576,257			(632,617		)	(56,360		)
Balance at January 1, 2018		$—			$2,548		($5,397,637	)		$5,433,433			$8,553,959			($656,148	)		$7,936,155

Consolidated net income	3,439			—		—			—			132,761			—			136,200
Other comprehensive income	—			—		—			—			—			79,145			79,145
Common stock issuances related to stock plans	—			—		20,477			(16,170		)	—			—			4,307
Common stock dividends declared	—			—		—			—			(160,887		)	—			(160,887		)
Preferred dividend requirements of subsidiaries	(3,439		)	—		—			—			—			—			(3,439		)
Reclassification pursuant to ASU 2018-02	—			—		—			—			(32,043		)	15,505			(16,538		)
Balance at March 31, 2018		$—			$2,548		($5,377,160	)		$5,417,263			$8,493,790			($561,498	)		$7,974,943

Balance at December 31, 2018		$—			$2,616		($5,273,719	)		$5,951,431			$8,721,150			($557,173	)		$8,844,305
Implementation of accounting standards	—			—		—			—			6,806			(6,806		)	—
Balance at January 1, 2019		$—			$2,616		($5,273,719	)		$5,951,431			$8,727,956			($563,979	)		$8,844,305

Consolidated net income	4,109			—		—			—			254,537			—			258,646
Other comprehensive income	—			—		—			—			—			12,827			12,827
Common stock issuances related to stock plans	—			—		62,537			(31,248		)	—			—			31,289
Common stock dividends declared	—			—		—			—			(172,591		)	—			(172,591		)
Preferred dividend requirements of subsidiaries	(4,109		)	—		—			—			—			—			(4,109		)
Balance at March 31, 2019		$—			$2,616		($5,211,182	)		$5,920,183			$8,809,902			($551,152	)		$8,970,367

See Notes to Financial Statements.

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ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)

	Nine Months Ended				Increase/
Description	2019		2018		(Decrease)			%
	(Dollars in Millions)
Utility electric operating revenues:
Residential		$803		$892		($89	)	(10	)
Commercial	554		596		(42		)	(7	)
Industrial	601		597		4			1
Governmental	53		57		(4		)	(7	)
Total billed retail	2,011		2,142		(131		)	(6	)
Sales for resale	84		69		15			22
Other	26		37		(11		)	(30	)
Total		$2,121		$2,248		($127	)	(6	)

Utility billed electric energy sales (GWh):
Residential	8,471		9,287		(816		)	(9	)
Commercial	6,423		6,732		(309		)	(5	)
Industrial	11,683		11,405		278			2
Governmental	601		608		(7		)	(1	)
Total retail	27,178		28,032		(854		)	(3	)
Sales for resale	3,814		3,244		570			18
Total	30,992		31,276		(284		)	(1	)

Entergy Wholesale Commodities:
Operating revenues		$434		$419		$15		4
Billed electric energy sales (GWh)	7,203		6,996		207			3

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

Vidalia Purchased Power Agreement

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

ANO Damage, Outage, and NRC Reviews

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

Pilgrim NRC Oversight and Planned Shutdown

See Note 8 to the financial statements in the Form 10-K for a discussion of the NRC’s enhanced inspections of Pilgrim and Entergy’s planned shutdown of Pilgrim on May 31, 2019. In March 2019 the NRC moved Pilgrim from its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix to its “licensee response column,” or Column 1.

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.

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.

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.

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Entergy Corporation and Subsidiaries

Notes to Financial Statements

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.

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 2019, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01882 per kWh to $0.01462 per kWh and became effective with the first billing cycle in April 2019. In March 2019 the Arkansas Attorney General filed a response to Entergy Arkansas’s annual adjustment and included with its filing a motion for investigation of alleged overcharges to customers in connection with the FERC’s October 2018 order in the opportunity sales proceeding. Entergy Arkansas filed its response to the Attorney General’s motion in April 2019 in which Entergy Arkansas stated its intent to initiate a proceeding to address recovery issues related to the October 2018 FERC order.

Entergy Louisiana

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. In January 2019 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana recorded a provision in the first quarter 2019 for the potential outcome of the audit.

Entergy Mississippi

Mississippi Attorney General Complaint

As discussed in the Form 10-K, the Mississippi Attorney General filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The defendants have denied the allegations. In December 2008 the Attorney General’s lawsuit was removed to U.S. District Court in Jackson, Mississippi. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trial to April 2019. In April 2019 the District Court remanded the Attorney General’s lawsuit to the Hinds County Chancery Court in Jackson, Mississippi.

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Entergy Corporation and Subsidiaries

Notes to Financial Statements

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)

Formula Rate Plan

As discussed in the Form 10-K, the formula rate plan filing that will be made in July 2019 to set the formula rates for the 2020 calendar year will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017 formula rate plan filing to actual 2018 costs and sales data. In the fourth quarter 2018 Entergy Arkansas recorded a provision of $35.1 million that reflected the estimate of the historical year netting adjustment that will be included in the 2019 filing to reflect the change in formula rate plan revenues associated with actual 2018 results when compared to the allowed rate of return on equity. In the first quarter 2019, Entergy Arkansas recorded an additional $10.5 million provision to reflect the current estimate of the historical year netting adjustment to be included in the 2019 filing.

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan

In March 2019, Entergy Mississippi submitted its formula rate plan 2019 test year filing and 2018 look-back filing showing Entergy Mississippi’s earned return for the historical 2018 calendar year to be above the formula rate plan bandwidth and projected earned return for the 2019 calendar year to be below the formula rate plan bandwidth. The 2019 test year filing shows a $36.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.94% return on rate base, within the formula rate plan bandwidth. The 2018 look-back filing compares actual 2018 results to the approved benchmark return on rate base and shows a $10.1 million interim decrease in formula rate plan revenues is necessary. In the fourth quarter 2018, Entergy Mississippi recorded a provision of $9.3 million that reflected the estimate of the difference between the 2018 expected earned rate of return on rate base and an established performance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism. In the first quarter 2019, Entergy Mississippi recorded a $0.8 million increase in the provision to reflect the amount shown in the look-back filing. The filing is currently subject to MPSC review. A final order is expected in the second quarter 2019, with the resulting rates effective for the first billing cycle of July 2019.

Filings with the PUCT (Entergy Texas)

Base Rate Case

In January 2019, Entergy Texas filed for recovery of rate case expenses totaling $7.2 million. The amounts requested primarily include internal and external expenses related to litigating the 2018 base rate case. Parties filed testimony in April 2019 recommending a disallowance ranging from $3.2 million to $4.2 million of the $7.2 million requested. Entergy Texas is evaluating its response to the parties’ positions. A hearing is scheduled for June 2019.

Other Filings

In March 2019, Entergy Texas filed with the PUCT a request to set a new distribution cost recovery factor (DCRF) rider. The proposed new DCRF rider is designed to collect approximately $3.2 million annually from Entergy Texas’s retail customers based on its capital invested in distribution between January 1, 2018 and December 31, 2018. A procedural schedule has been established, with a hearing in June 2019.

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Entergy Corporation and Subsidiaries

Notes to Financial Statements

In December 2018, Entergy Texas filed with the PUCT a request to set a new transmission cost recovery factor (TCRF) rider. The proposed new TCRF rider is designed to collect approximately $2.7 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and September 30, 2018. In April 2019 parties filed testimony proposing a load growth adjustment, which would fully offset Entergy Texas’s proposed TCRF revenue requirement. The PUCT has previously ruled that load growth adjustments should not be included in a TCRF. Entergy Texas filed a motion for interim rates to be effective April 2019. In April 2019 the hearing on Entergy Texas’s motion and the hearing on the merits were held, and the ALJ suspended the date on which the TCRF would be put into permanent effect until July 2019, unless an earlier decision is issued by the PUCT. This matter is currently awaiting the ALJ’s proposal for decision.

Entergy Arkansas Opportunity Sales Proceeding

As discussed in the Form 10-K, in December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order in the opportunity sales proceeding. The compliance filing provided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. No protests were filed in response to the December 2018 compliance filing. The December 2018 compliance filing is pending FERC action.

In February 2019 the LPSC filed a new complaint relating to two issues that were raised in the opportunity sales proceeding, but that, in its October 2018 order, the FERC held were outside the scope of the proceeding. In March 2019, Entergy Services filed an answer and motion to dismiss the new complaint.

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

See the Form 10-K for a discussion of the return on equity complaints filed by the APSC and the MPSC and by the LPSC against System Energy. The LPSC’s complaint also includes a challenge to System Energy’s capital structure. In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure and setting for hearing the return on equity complaint, with a refund effective date of April 2018. The portion of the LPSC’s complaint dealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearing has been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding involving New England transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. In September 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of the FERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capital structure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended capital structure complaint, and System Energy submitted a response in October 2018. In January 2019 the FERC set the amended capital structure complaint for settlement and hearing proceedings. Settlement procedures in the capital structure proceeding commenced in February 2019.

In January 2019 the LPSC and the APSC and MPSC filed direct testimony in the return on equity proceeding. For the refund period January 23, 2017 through April 23, 2018, the LPSC argues for an authorized return on equity for System Energy of 7.81% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.24%. For the refund period April 27, 2018 through July 27, 2019, and for application on a prospective basis, the LPSC argues for an authorized return on equity for System Energy of 7.97% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.41%. In March 2019, System Energy submitted answering testimony in the return on equity proceeding. For the first refund period, System Energy’s testimony argues for a return on equity of 10.10% (median) or 10.70% (midpoint). For the second refund period, System Energy’s testimony shows that the calculated returns on equity for the first period fall within the range of presumptively just and reasonable returns on equity, and thus the second complaint should be dismissed (and the first period return on equity used going forward). If the FERC nonetheless were to set a new return on equity for the second period (and going forward), System Energy argues the return on equity should be either 10.32% (median) or 10.69% (midpoint).

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Entergy Corporation and Subsidiaries

Notes to Financial Statements

Grand Gulf Sale-leaseback Renewal Complaint

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1.

In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC and City Council filed direct testimony. The LPSC testimony seeks refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions (claimed to be approximately $334.5 million as of December 2018), and the cost of capital additions associated with the sale-leaseback interest (claimed to be approximately $274.8 million), as well as interest on those amounts. The direct testimony of the City Council and the APSC and MPSC address various issues raised by the LPSC. System Energy disputes that any refunds are owed for billings under the Unit Power Sales Agreement. A hearing has been scheduled for November 2019.

NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:



	For the Three Months Ended March 31,
	2019					2018
	(In Millions, Except Per Share Data)
	Income		Shares	$/share		Income		Shares	$/share
Basic earnings per share
Net income attributable to Entergy Corporation		$254.5	189.6		$1.34		$132.8	180.7		$0.73
Average dilutive effect of:
Stock options			0.4	—