爲向路易斯安那州Entergy Bay States提供財務報告而成立的前身公司，包括路易斯安那州Entergy Bay States和德克薩斯州Entergy的資產和業務運營
路易斯安那州企業海灣州
Entergy Bay States路易斯安那州有限責任公司，路易斯安那州的一家有限責任公司，作爲Entergy Bay States，Inc.和Entergy Bay States，Inc.的後續公司爲財務報告目的而正式成立的管轄權分離的一部分。根據上下文，該術語也用於指Entergy Bay States，Inc.的路易斯安那州管轄業務。自2015年10月1日起，路易斯安那州Entergy海灣州的業務與路易斯安那州Entergy合併。
路易斯安那州的Entergy
Entergy Louisiana，LLC，一家德克薩斯州的有限責任公司，正式成立，是路易斯安那州Entergy Bay States與前身Entergy Louisiana，LLC(Old Entergy Louisiana，LLC)合併爲一家公用事業公司的一部分，出於財務報告目的，它是Old Entergy Louisiana的繼任者
Entergy德克薩斯
Entergy Texas，Inc.是作爲Entergy Bay States，Inc.管轄權分離的一部分而正式成立的德克薩斯州公司。根據上下文，該術語也用於指Entergy Bay States，Inc.的德克薩斯州管轄業務。
折舊和攤銷費用增加主要是由於聯邦能源委員會於2023年8月批准了一項和解協議，建立了用於計算Grand Gulf工廠折舊和攤銷費用的更新折舊率，導致System Energy 2023年折舊費用減少了4100萬美元。單位電力銷售協議和在役工廠的增加。 有關單位電力銷售協議折舊修正案程序的討論，請參閱表格10-k中財務報表的註釋2。
•an increase of $9 million in transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for discussion of the recovery of these costs;
•一項監管指控7,800美元萬，由Entergy New Orleans在2024年第一季度記錄，主要是爲了反映Entergy New Orleans與市議會在2024年4月達成的原則上的和解協議，以便與客戶額外分享2016-2018年美國國稅局審計決議帶來的所得稅優惠。關於2024年4月和解的原則討論，請參閱本文財務報表註釋10，關於2016-2018年IRS審計決議的討論，請參閱10-k表格財務報表註釋3;以及
2024年9月，密西西比州Entergy宣佈計劃建造、擁有和運營Delta Blues Advanced Power Station，這是一個754兆瓦的聯合循環燃燒渦輪機設施，將位於密西西比州華盛頓縣。該設施將主要由天然氣提供動力，還將具備碳捕獲和氫聯合燃燒的選項。Delta Blues高級發電站的成本估計爲12美元億。2024年1月通過的州立法規定，對某些類型的設施的建設進行預認證，這些設施直接或間接地向客戶提供電力服務，並根據立法規定的項目。根據這項立法，Delta Blues高級發電站的建設有資格獲得預認證。在這項立法的支持下，密西西比州Entergy開始通過其公式費率計劃附加條款中的臨時設施費率調整條款，收回Delta Blues高級發電站的某些建設成本，該費率於2024年7月生效。從設施客戶那裏收取的非燃料收入將包括在公式費率計劃中，以抵消設施的收入要求。建設正在進行中，預計該設施將於2028年投入使用。
聯想電站和孤星電站
2024年6月，Entergy Texas提出申請，要求修改Entergy Texas的便利和必要性證書，以建造、擁有和運營聯想電站(Legend Power Station)和孤星發電廠(Lone Star Power Station)，前者位於德克薩斯州傑斐遜縣，後者是一座754兆瓦的聯合循環燃燒渦輪機設施，將具備碳捕獲和儲存以及氫氣共燃選項；孤星發電廠(Lone Star Power Station)位於德克薩斯州利伯蒂縣，是一座453兆瓦的簡單循環燃燒渦輪機設施，將具備氫共燃選項。Entergy Texas在其申請中指出，聯想發電站預計耗資14.6億美元，孤星發電站預計耗資73530萬，每種情況下都包括髮電設施的估計成本、互聯成本、傳輸網絡升級，以及建設期間使用的資金補貼。正如申請書中所述，Entergy Texas正在考慮聯想發電站的替代融資方式，並計劃尋求最符合其客戶利益的融資方案。2024年7月，PUCt將訴訟程序移交給州行政聽證辦公室，同樣在2024年7月，行政法法官與州行政聽證辦公室通過了一項程序性時間表，關於案情的聽證會定於2024年10月開始。2024年9月，德克薩斯州Entergy提交了一項動議，ALJ向州行政聽證辦公室批准了一項動議，要求延長本訴訟的程序時間表，以解決與聯想發電站和孤星發電站的成本和範圍相關的某些事態發展。一旦開發了所需的信息，Entergy Texas計劃更新這兩個項目的申請中的經濟分析，並提交擬議的更新程序時間表。根據所需的監管批准和其他條件，這兩個設施預計將在2028年年中投入使用。
如表格10-k所述，2021年10月，市議會通過了一項決議和命令，確立了關於系統復原力和風暴強化的議程和程序時間表。2022年7月，新奧爾良Entergy向市議會提交了一份答覆，確定了風暴加固和彈性項目(包括微電網)的初步計劃，將在十年內實施，成本約爲15億。2023年2月，市議會批准了一項修訂後的程序時間表，要求新奧爾良Entergy在2023年4月提交一份文件，其中包含一份縮小了的擬議硬化項目清單。2023年4月，新奧爾良企業集團提交了所需的申請和支持證詞，尋求市議會批准十年基礎設施強化計劃的第一階段(五年和55900美元萬)，總金額約爲10美元億。除了其他救濟措施外，Entergy New Orleans還尋求市議會批准一名騎手從客戶那裏收回基礎設施加固計劃的成本。2024年2月，市議會批准了一項決議，授權新奧爾良企業實施一項復原力項目，部分資金將由能源部的電網復原力和創新合作伙伴計劃提供的5,500美元萬的匹配資金提供。該決議還要求新奧爾良Entergy在2024年7月之前提交一份修訂後的復原力計劃，其中包括三年內的項目。2024年3月，新奧爾良企業集團向市議會提交了申請，要求批准爲期三年的彈性計劃，其中包括16800美元的萬硬化項目。這項爲期三年的復原力計劃是對之前授權的復原力項目的補充，該項目將由能源部的電網復原力和創新夥伴計劃提供部分資金。2024年7月，市議會就新奧爾良Entergy的三年復原力計劃舉行了一次技術會議。2024年10月，市議會批准了一項決議，授權一項爲期兩年、總額爲10000美元的萬復原力計劃。該決議指示新奧爾良Entergy向市議會通報修訂後的三年復原力計劃中將包括在兩年復原力計劃中的硬化項目子集。
2024年4月，新奧爾良Entergy向市議會提交了2023年測試年度的公式費率計劃。在2024年沒有要求的比率變化的情況下，2023年測試年度評估報告產生的電子賺取股本回報率爲8.66%，天然氣賺取的股本回報率爲5.87與以下每個項目的授權股本回報率相比9.35%。Entergy New Orleans尋求批准一筆$12.6根據市議會在2018年利率案中設定並於2023年再次獲得市議會批准的公式，增加100萬歐元的利率。該公式將導致授權電力收入增加#美元。7.02000萬美元，授權天然氣收入增加美元5.61000萬美元。在市議會審查之後，市議會的顧問在2024年7月發佈了一份報告，要求將Entergy New Orleans所要求的公式費率計劃收入減少總計約美元1.6 由於所謂的錯誤，電力和天然氣總計價值100萬美元。 根據公式費率計劃實施的批准流程，Entergy New Orleans於2024年9月第一個計費週期生效，按照Entergy New Orleans和市議會商定的金額實施費率。 實施的配方奶粉價格計劃增加總額爲美元11.2700萬美元，其中包括增加1,000萬美元5.8 電力收入百萬美元，增加美元5.4 天然氣收入百萬美元。
問題. 同樣在2021年4月，LCSC、APSC、MPSC、市議會和FERC審判工作人員提交了有關例外情況的簡報。 System Energy、FERC審判工作人員、LCSC、APSC、MPSC和市議會於2021年5月提交了反對例外情況的回覆簡報。 可能需要的退款，只有在FERC發佈命令審查最初的決定後才會到期。
黑匣子退款$116來自系統能源公司的100萬美元，包括大約5美元18 Entergy New Orleans已從System Energy獲得100萬美元。 2024年3月美元98 向Entergy New Orleans退還的100萬美元黑匣子從長期其他監管負債重新分類爲應付賬款-System Energy資產負債表上的關聯公司。
除了#美元的黑匣子退款116如上所述，從2024年6月服務月開始，和解協議規定對來自系統能源的Entergy New Orleans的賬單進行調整，以反映授權的股本回報率9.65%，資本結構不得超過52%股權。
2024年8月，FERC批准了該和解協議，「因爲它似乎公平合理，並且符合公共利益」。 System Energy支付了剩餘黑匣子退款美元98 2024年10月，將於2024年10月轉讓給Entergy New Orleans。 如上所述和10-k表格財務報表註釋2中，System Energy此前已就FERC收到的這些投訴與MPSC和APSC達成和解。 與APSC、MPSC和市議會的和解幾乎代表 85系統能源在大灣區產出中所佔份額的%。
(c)信貸安排包括以該安排一部分借款能力爲抵押開立信用證的預先承諾如下：5 阿肯色州Entergy百萬美元;美元15 Entergy Louisiana百萬美元;美元5密西西比州Entergy；100萬美元10 Entergy New Orleans百萬美元;和美元30 德克薩斯州Entergy百萬美元。
信貸安排的承諾費從0.075%到 0.375阿肯色州Entergy、路易斯安那州Entergy、密西西比州Entergy和德克薩斯州Entergy的未提取承諾額的%，以及Entergy New Orleans的整個設施金額的%。每項信貸安排都要求登記子公司借款人保持定義的債務比率爲65%或以下。每一註冊子公司均遵守本公約。
Entergy通過購買天然氣掉期和期權來管理其路易斯安那州司法管轄區(路易斯安那州Entergy Louisiana和新奧爾良Entergy)和密西西比州Entergy的燃料價格波動，這些掉期和期權在財務上與Henry Hub天然氣日平均價格或NYMEX Henry Hub進行結算。這些掉期和期權通過燃料費用與監管資產或負債相抵，按市值計價。該計劃的所有好處或成本都記錄在燃料成本中。這些掉期的名義交易量是基於路易斯安那州Entergy和密西西比州Entergy發電預計年度天然氣價格波動的一部分，以及Entergy New Orleans預計冬季天然氣分銷的一部分。截至2024年9月30日，Entergy執行天然氣掉期和期權的最長時間爲6對密西西比州的Entergy來說是幾個月。截至2024年9月30日，未平倉天然氣掉期和期權總量爲8,607,900密西西比州企業和企業的MMBTU。截至2024年9月30日，路易斯安那州和新奧爾良的企業沒有未平倉天然氣掉期或期權。這些天然氣掉期和期權的信貸支持由主協議涵蓋，這些協議不要求Entergy提供基於市值的抵押品，但確實帶有足夠的擔保語言，可能導致要求抵押品。
如表格10-k財務報表附註3所述，2023年11月，美國國稅局完成了對2016至2018納稅年度的審查，併爲每一名接受審計的聯邦申報人發佈了一份稅務代理報告。根據先前的監管協議和一般費率制定原則，新奧爾良Entergy在2023年第四季度記錄了監管負債和相關監管費用#美元602000萬(美元)44(稅後淨額)。2024年4月，新奧爾良Entergy和市議會原則上達成和解，新奧爾良Entergy同意與客戶分享$1382016-2018年美國國稅局審計決議帶來的所得稅優惠。在原則上基於這一和解協議，2024年第一季度，新奧爾良Entergy增加了相關的監管責任，從602000萬美元至2000萬美元138億美元，並記錄了相應的$781000萬美元監管費用(美元57(稅後淨額)。和解協議原則上要求監管責任在25年內攤銷，未攤銷餘額包括在利率基數中，攤銷被視爲減少Entergy New Orleans的零售收入要求。2024年5月，市議會批准了這項和解。
2024年7月，LCSC工作人員發佈了一份報告，建議LCSC批准Delta States Utilities LA，LLC（Bernhard Capital Partners Management LP附屬公司）和Entergy Louisiana的申請，以及其中描述的交易符合公共利益並提出了某些條件。 2024年8月，LCSC發佈命令，接受LCSC工作人員的報告和建議。
正如10-k表格中所討論的那樣，2023年12月，Entergy New Orleans和Entergy New Orleans天然氣分銷業務的買家向市議會提交了聯合申請，尋求批准擬議交易。 2024年9月，聽證官員認證了訴訟記錄，供市議會審議。 計劃在2025年第一季度做出決定。
Net income increased $5.6 million primarily due to higher retail electric price, partially offset by lower volume/weather, higher other operation and maintenance expenses, and higher taxes other than income taxes.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net income increased $33.4 million primarily due to higher retail electric price, partially offset by higher taxes other than income taxes and higher interest expense.
Operating Revenues
Third Quarter 2024 Compared to Third Quarter 2023
Following is an analysis of the change in operating revenues comparing the third quarter 2024 to the third quarter 2023:
Amount
(In Millions)
2023 operating revenues
$538.8
Fuel, rider, and other revenues that do not significantly affect net income
(46.7)
Volume/weather
(11.0)
Retail electric price
27.1
2024 operating revenues
$508.2
Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in weather-adjusted commercial usage.
The retail electric price variance is primarily due to increases in formula rate plan rates effective April 2024 and July 2024, including the implementation of the interim facilities rate adjustment effective over six months beginning in July 2024. See Note 2 to the financial statements herein for discussion of the formula rate plan filings.
Total electric energy sales for Entergy Mississippi for the three months ended September 30, 2024 and 2023 are as follows:
2024
2023
% Change
(GWh)
Residential
1,774
1,925
(8)
Commercial
1,380
1,436
(4)
Industrial
647
647
—
Governmental
113
119
(5)
Total retail
3,914
4,127
(5)
Sales for resale:
Non-associated companies
1,287
961
34
Total
5,201
5,088
2
See Note 12 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023:
Amount
(In Millions)
2023 operating revenues
$1,396.4
Fuel, rider, and other revenues that do not significantly affect net income
(79.3)
Volume/weather
(2.4)
Retail electric price
51.2
2024 operating revenues
$1,365.9
Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to a decrease in weather-adjusted residential usage and the effect of less favorable weather on commercial sales. The decrease is substantially offset by an increase in weather-adjusted commercial usage and the effect of more favorable weather on residential sales.
The retail electric price variance is primarily due to increases in formula rate plan rates effective April 2024 and July 2024. See Note 2 to the financial statements herein for discussion of the formula rate plan filings.
Total electric energy sales for Entergy Mississippi for the nine months ended September 30, 2024 and 2023 are as follows:
2024
2023
% Change
(GWh)
Residential
4,317
4,336
—
Commercial
3,554
3,556
—
Industrial
1,736
1,779
(2)
Governmental
304
311
(2)
Total retail
9,911
9,982
(1)
Sales for resale:
Non-associated companies
4,244
3,734
14
Total
14,155
13,716
3
See Note 12 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Other Income Statement Variances
Third Quarter 2024 Compared to Third Quarter 2023
Other operation and maintenance expenses increased primarily due to:
•an increase of $6.4 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for discussion of Entergy Mississippi’s storm damage mitigation and restoration rider;
•an increase of $1.3 million in contract costs related to operational performance, customer service, and organizational health initiatives; and
•several individually insignificant items.
The increase was partially offset by a decrease of $3.9 million in power delivery expenses primarily due to the timing of vegetation maintenance costs.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments.
Interest expense increased primarily due to the issuance of $300 million of 5.85% Series mortgage bonds in May 2024.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Other operation and maintenance expenses increased primarily due to:
•an increase of $4.7 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $2.3 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;
•an increase of $2.3 million in energy efficiency expenses primarily due to the timing of recovery from customers; and
The increase was partially offset by a decrease of $5.3 million in power delivery expenses primarily due to the timing of vegetation maintenance costs.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includes regulatory credits of $7.3 million, recorded in second quarter 2024, to reflect the effects of the joint stipulation reached in the 2024 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2024 formula rate plan filing.
Interest expense increased primarily due to the issuance of $300 million of 5.85% Series mortgage bonds in May 2024 and higher interest expense from carrying costs related to the deferred fuel balance, partially offset by the repayment of a $150 million unsecured term loan, of which $50 million was repaid in May 2023 and $100 million was repaid in December 2023.
Income Taxes
The effective income tax rates were 25.0% for the third quarter 2024 and 24.2% for the nine months ended September 30, 2024. The differences in the effective income tax rates for the third quarter 2024 and the nine months ended September 30, 2024 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rates were 24.2% for the third quarter 2023 and 24.5% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 2024 and 2023 were as follows:
2024
2023
(In Thousands)
Cash and cash equivalents at beginning of period
$6,630
$16,979
Net cash provided by (used in):
Operating activities
448,253
408,904
Investing activities
(481,457)
(433,505)
Financing activities
63,707
17,938
Net increase (decrease) in cash and cash equivalents
Net cash flow provided by operating activities increased $39.3 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to lower fuel costs and a decrease of $11.3 million in pension contributions resulting from the timing of contributions in 2024 compared to 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding. The increase was partially offset by:
•the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•the timing of payments to vendors;
•lower collections from customers; and
•an increase of $7 million in interest paid.
Investing Activities
Net cash flow used in investing activities increased $48.0 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to:
•an increase of $60.8 million in transmission construction expenditures primarily due to increased development in Entergy Mississippi’s service area;
•an increase of $45.3 million in non-nuclear generation construction expenditures primarily due to higher spending on the Delta Blues Advanced Power Station project in 2024; and
•money pool activity.
The increase was partially offset by:
•a decrease of $33.7 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2024; and
•the substantial completion payment of approximately $30.4 million in April 2023 for the purchase of the Sunflower Solar facility by a consolidated tax equity partnership. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase.
Increases in Entergy Mississippi’s receivable from the money pool are a use of cash flow, and Entergy Mississippi’s receivable from the money pool increased $3.4 million for the nine months ended September 30, 2024 compared to decreasing by $26.9 million for the nine months ended September 30, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $45.8 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the repayment, prior to maturity, of $250 million of 3.10% Series mortgage bonds in June 2023 and the repayment, prior to maturity, in May 2023, of $50 million of an unsecured term loan due December 2023. The increase was partially offset by:
•the repayment, prior to maturity, of $100 million of 3.75% Series mortgage bonds in June 2024;
•money pool activity;
•a capital contribution of $25.7 million received in April 2023 from the noncontrolling tax equity investor in MS Sunflower Partnership, LLC and used by the partnership for payments in the acquisition of the
Sunflower Solar facility. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase; and
•a decrease of $21.2 million in prepaid deposits related to contributions-in-aid-of-construction primarily for customer and generator interconnection agreements.
Decreases in Entergy Mississippi’s payable to the money pool are a use of cash flow, and Entergy Mississippi’s payable to the money pool decreased $73.8 million for the nine months ended September 30, 2024 compared to increasing by $23.9 million for the nine months ended September 30, 2023.
Capital Structure
Entergy Mississippi’s debt to capital ratio is shown in the following table.
September 30, 2024
December 31, 2023
Debt to capital
50.9
%
50.5
%
Effect of subtracting cash
(0.3
%)
(0.1
%)
Net debt to net capital (non-GAAP)
50.6
%
50.4
%
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources”in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. The following are updates to the information provided in the Form 10-K.
Entergy Mississippi is developing its capital investment plan for 2025 through 2027 and currently anticipates making $3.7 billion in capital investments during that period. In addition to routine capital spending to maintain operations, the preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Mississippi’s portfolio, as well as to support customer growth, including Delta Blues Advanced Power Station and additional solar generation; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, government actions, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
September 30, 2024
December 31, 2023
September 30, 2023
December 31, 2022
(In Thousands)
$3,400
($73,769)
($23,893)
$26,879
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has a credit facility in the amount of $300 million scheduled to expire in June 2029. The credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of September 30, 2024, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO and for other purposes. As of September 30, 2024, $31.8 million in MISO letters of credit and $1.3 million in non-MISO letters of credit were outstanding under this facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Delta Blues Advanced Power Station
In September 2024, Entergy Mississippi announced plans to construct, own, and operate the Delta Blues Advanced Power Station, a 754 MW combined-cycle combustion turbine facility, to be located in Washington County, Mississippi. The facility will primarily be powered by natural gas, and it will also be enabled with carbon capture and hydrogen co-firing optionality. The Delta Blues Advanced Power Station will cost an estimated $1.2 billion. State legislation passed in January 2024 provides for the pre-certification of construction for certain types of facilities that directly or indirectly provide electric service to customers with defined projects under the legislation. Construction of the Delta Blues Advanced Power Station qualifies under this legislation for pre-certification. As enabled by this legislation, Entergy Mississippi began recovery of certain costs of construction of the Delta Blues Advanced Power Station through the interim facilities rate adjustments provision of its formula rate plan rider, which rates became effective in July 2024. Non-fuel revenue collected from the facility’s customer will be included in the formula rate plan to offset the facility’s revenue requirement. Construction is in progress and the facility is expected to be in service by 2028.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Retail Rates
2024 Formula Rate Plan Filing
In March 2024, Entergy Mississippi submitted its formula rate plan 2024 test year filing and 2023 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 2023 calendar year to be within the formula rate plan bandwidth and projected earned return for the 2024 calendar year to be below the formula rate plan bandwidth. The 2024 test year filing showed a $63.4 million rate increase was necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 7.10%, within the formula rate plan bandwidth. The 2023 look-back filing compared actual 2023 results to the approved benchmark return on rate base and reflected no change in formula rate plan revenues. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $32.6 million interim rate increase, reflecting a cap equal to 2% of 2023 retail revenues, effective April 2024.
In December 2014 the MPSC ordered Entergy Mississippi to file an updated depreciation study at least once every four years. Pursuant to this order and Entergy Mississippi’s filing cycle, Entergy Mississippi would have filed an updated depreciation report with its formula rate plan filing in 2023. However, in July 2022 the MPSC directed Entergy Mississippi to file its next depreciation study in connection with its 2024 formula rate plan filing notwithstanding the MPSC’s prior order. Accordingly, Entergy Mississippi filed a depreciation study in February 2024. The study showed a need for an increase in annual depreciation expense of $55.2 million. The calculated increase in annual depreciation expense was excluded from Entergy Mississippi’s 2024 formula rate plan revenue increase request because the MPSC had not yet approved the proposed depreciation rates.
In June 2024, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed the 2024 test year filing, with the exception of immaterial adjustments to certain operation and maintenance expenses. After performance adjustments, the formula rate plan reflected an earned return on rate base of 6.08% for calendar year 2024, which resulted in a total revenue increase of $64.6 million for 2024. The joint stipulation also recommended approval of a revised customer charge of $31.82 per month for residential customers and $53.10 per month for general service customers. Pursuant to the stipulation, Entergy Mississippi’s 2023 look-back filing reflected an earned return on rate base of 6.81%, resulting in an increase of $0.3 million in the formula rate plan revenues for 2023. Finally, the stipulation recommended approval of Entergy Mississippi’s proposed depreciation rates with those rates to be implemented upon request and approval at a later date. In June 2024 the MPSC approved the joint stipulation with rates effective in July 2024. The approval also included a reduction to the energy cost factor, resulting in a net bill decrease for a typical residential customer using 1,000 kWh per month. Also in June 2024, Entergy Mississippi recorded regulatory credits of $7.3 million to reflect the difference between interim rates placed in effect in April 2024 and the rates reflected in the joint stipulation.
In May 2024, Entergy Mississippi received approval from the MPSC for formula rate plan revisions that were necessary for Entergy Mississippi to comply with state legislation passed in January 2024. The legislation allows Entergy Mississippi to make interim rate adjustments to recover the non-fuel related annual ownership cost of certain facilities that directly or indirectly provide service to customers who own certain data processing center projects as specified in the legislation. Entergy Mississippi filed the first of its annual interim facilities rate adjustment reports in May 2024 to recover approximately $8.7 million of these costs over a six-month period with rates effective beginning in July 2024.
Grand Gulf Capacity Filing
In September 2024, Entergy Mississippi filed a notice of intent with the MPSC to implement revisions to its unit power cost recovery rider that would allow Entergy Mississippi to recover the first year of costs associated with the transfer of Entergy Louisiana’s interest in and purchases of Grand Gulf capacity and energy under the revised rider schedule, effective by January 1, 2025. This notice filing relates to the divestiture of Entergy Louisiana’s 14% share of Grand Gulf capacity and energy under the Unit Power Sales Agreement and 2.43% share of capacity and energy from Entergy Arkansas under the MSS-4 replacement tariff. This divestiture will be effectuated initially through Entergy Mississippi’s purchases from Entergy Louisiana pursuant to a PPA governed by the MSS-4 replacement tariff, a tariff governing the sales of energy and capacity among the Utility operating companies as described in the System Energy global settlement with the LPSC and Entergy Louisiana. See “Complaints Against System Energy- System Energy Settlement with the LPSC” in Note 2 to the financial statements herein for further details of the System Energy global settlement with the LPSC. In October 2024, Entergy Louisiana and Entergy Mississippi filed the proposed MSS-4 replacement PPA with the FERC. The parties requested that the MPSC and the FERC issue orders accepting the PPA no later than December 2024.
Fuel and purchased power cost recovery
In June 2024 the MPSC approved a joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff for Entergy Mississippi’s 2024 formula rate plan filing. The 2024 formula rate plan filing included the conclusion of the modified interim adjustments to Entergy Mississippi’s energy cost
recovery rider and power management rider, which were approved in October 2022 and allowed Entergy Mississippi to recover certain under-collected fuel balances. The stipulation provided for Entergy Mississippi to reduce its net energy cost factor. See “Filings with the MPSC (Entergy Mississippi) - Retail Rates - 2024 Formula Rate Plan Filing” in Note 2 to the financial statements herein for discussion of the 2024 formula rate plan filing and the joint stipulation agreement.
Storm Cost Recovery Filings with Retail Regulators
As discussed in the Form 10-K, Entergy Mississippi had approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeded $15 million, the collection of the storm damage provision ceased until such time that the accumulated storm damage provision became less than $10 million.
In December 2023, Entergy Mississippi filed a Notice of Storm Escrow Disbursement and Request for Interim Relief notifying the MPSC that Entergy Mississippi had requested disbursement of approximately $34.5 million of storm escrow funds from its restricted storm escrow account. The filing also requested authorization from the MPSC, on a temporary basis, that the $34.5 million of storm escrow funds be credited to Entergy Mississippi’s storm damage provision, pending the MPSC’s review of Entergy Mississippi’s storm-related costs, and that Entergy Mississippi continue to bill its monthly storm damage provision without suspension in the event the storm damage provision balance exceeds $15 million, in anticipation of a subsequent filing by Entergy Mississippi in this proceeding. The storm damage reserve exceeded $15 million upon receipt of the storm escrow funds. Because the MPSC had not entered an order on Entergy Mississippi’s filing on the requested relief to continue billing this provision, Entergy Mississippi suspended billing the monthly storm damage provision effective with February 2024 bills.
In March 2024, Entergy Mississippi made a combined dual filing which included a Notice of Intent to Make Routine Change in Rates and Schedules and a Motion for Determination relating to the above-described Notice of Storm Escrow Disbursement. The Notice of Intent proposed a new storm damage mitigation and restoration rider to supersede both the current storm damage rate schedule and the vegetation management rider schedule, in which the collection of both expenses would be combined. The proposal requests that the MPSC authorize Entergy Mississippi to collect a storm damage provision of $5.2 million per month. Furthermore, if Entergy Mississippi’s accumulated storm damage provision balance exceeds $70 million, collection of the storm damage provision would cease until such time that the accumulated storm damage provision becomes less than $60 million.
The Mississippi Public Utilities Staff reviewed the storm-related costs submitted by Entergy Mississippi and found them prudent. In June 2024 the MPSC considered and unanimously granted the relief sought by Entergy Mississippi, including authorization to credit any remaining funds in the storm escrow account to Entergy Mississippi’s storm damage reserve and to close the storm escrow account. Entergy Mississippi’s storm escrow account was liquidated in July 2024, and the new combined storm damage mitigation and restoration rider became effective with the July 2024 billing cycle. Additionally, Entergy Mississippi made a compliance filing to cease billing under the existing vegetation management rider schedule as of the same billing cycle.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Federal Regulation”in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for utility regulatory accounting, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
Net income decreased $4.4 million primarily due to lower volume/weather, partially offset by lower other operation and maintenance expenses.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net income decreased $56.3 million primarily due to a $78.5 million ($57.4 million net-of-tax) regulatory charge, recorded in first quarter 2024, primarily to reflect a settlement in principle between Entergy New Orleans and the City Council in April 2024 for additional sharing with customers of income tax benefits from the resolution of the 2016-2018 IRS audit. Also contributing to the decrease were higher other operation and maintenance expenses. The decrease was partially offset by a lower effective income tax rate. See Note 10 to the financial statements herein for discussion of the April 2024 settlement in principle and Note 3 to the financial statements in the Form 10-K for discussion of the resolution of the 2016-2018 IRS audit.
Operating Revenues
Third Quarter 2024 Compared to Third Quarter 2023
Following is an analysis of the change in operating revenues comparing the third quarter 2024 to the third quarter 2023:
Amount
(In Millions)
2023 operating revenues
$254.3
Fuel, rider, and other revenues that do not significantly affect net income
(13.4)
Volume/weather
(9.8)
Retail electric price
1.4
2024 operating revenues
$232.5
Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales.
The retail electric price variance is primarily due to an increase in formula rate plan rates effective September 2023 in accordance with the terms of the 2023 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan filing.
Total electric energy sales for Entergy New Orleans for the three months ended September 30, 2024 and 2023 are as follows:
2024
2023
% Change
(GWh)
Residential
778
877
(11)
Commercial
614
652
(6)
Industrial
114
129
(12)
Governmental
232
232
—
Total retail
1,738
1,890
(8)
Sales for resale:
Non-associated companies
426
600
(29)
Total
2,164
2,490
(13)
See Note 12 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023:
Amount
(In Millions)
2023 operating revenues
$651.2
Fuel, rider, and other revenues that do not significantly affect net income
(24.6)
Volume/weather
(6.0)
Retail electric price
4.2
2024 operating revenues
$624.8
Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to a decrease in weather-adjusted commercial usage and the effect of less favorable weather on residential sales.
The retail electric price variance is primarily due to an increase in formula rate plan rates effective September 2023 in accordance with the terms of the 2023 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan filing.
Total electric energy sales for Entergy New Orleans for the nine months ended September 30, 2024 and 2023 are as follows:
2024
2023
% Change
(GWh)
Residential
1,866
1,906
(2)
Commercial
1,600
1,647
(3)
Industrial
307
325
(6)
Governmental
606
600
1
Total retail
4,379
4,478
(2)
Sales for resale:
Non-associated companies
1,407
2,194
(36)
Total
5,786
6,672
(13)
See Note 12 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Other Income Statement Variances
Third Quarter 2024 Compared to Third Quarter 2023
Other operation and maintenance expenses decreased primarily due to a decrease of $2.7 million in power delivery expenses primarily due to a lower scope of work performed in 2024 as compared to 2023 and the timing of vegetation maintenance costs.
Interest expense increased primarily due to the issuances of $35 million of 6.25% Series mortgage bonds, $65 million of 6.41% Series mortgage bonds, and $50 million of 6.54% Series mortgage bonds, each in May 2024, partially offset by the repayment of an $85 million unsecured term loan in June 2024.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Other operation and maintenance expenses increased primarily due to:
•an increase of $2.4 million in bad debt expense;
•an increase of $2.2 million in energy efficiency expenses primarily due to higher energy efficiency costs;
•an increase of $2.2 million in contract costs related to operational performance, customer service, and organizational health initiatives; and
•an increase of $1.4 million in costs recognized related to credits provided to customers as part of the rate mitigation plan approved in the settlement of the 2023 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan filing.
Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes as a result of lower retail revenues in 2024 as compared to 2023.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includes a regulatory charge of $78.5 million, recorded in first quarter 2024, primarily to reflect a settlement in principle between Entergy New Orleans and the City Council in April 2024 for additional sharing with customers of income tax benefits from the resolution of the 2016-2018 IRS
audit.See Note 10 to the financial statements herein for discussion of the April 2024 settlement in principle and Note 3 to the financial statements in the Form 10-K for discussion of the resolution of the 2016-2018 IRS audit.
Other income decreased primarily due to lower interest earned on money pool investments, partially offset by a decrease of $2.5 million in non-service pension costs primarily as a result of pension settlement charges recorded in 2023 and a reduction in 2024 in the amortization of deferred pension losses as a result of an amendment to a qualified pension plan spinning-off predominantly inactive participants into a new qualified plan, extending the amortization period for deferred losses. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs.
Interest expense increased primarily due to the issuances of $35 million of 6.25% Series mortgage bonds, $65 million of 6.41% Series mortgage bonds, and $50 million of 6.54% Series mortgage bonds, each in May 2024. The increase was partially offset by the repayment of $100 million of 3.90% Series mortgage bonds in July 2023.
Income Taxes
The effective income tax rate was 27.0% for the third quarter 2024. The difference in the effective income tax rate for the third quarter 2024 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes.
The effective income tax rate was 18.7% for the nine months ended September 30, 2024. The difference in the effective income tax rate for the nine months ended September 30, 2024 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items, the amortization of state accumulated deferred income taxes as a result of a tax rate change, the amortization of investment tax credits, and book and tax differences related to the allowance for equity funds used during construction, partially offset by the accrual for state income taxes.
The effective income tax rates were 27.3% for the third quarter 2023 and 28.5% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Planned Sale of Gas Distribution Business
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Planned Sale of Gas Distribution Businesses” in the Form 10-K for discussion of the planned sale of Entergy New Orleans’s gas distribution business. The following are updates to that discussion.
In July 2024 the LPSC staff issued a report recommending LPSC approval of the application of Delta States Utilities LA, LLC (a Bernhard Capital Partners Management LP affiliate) and Entergy Louisiana and the transaction described therein as being in the public interest and proposing certain conditions. In August 2024 the LPSC issued an order accepting the LPSC staff’s report and recommendation.
As discussed in the Form 10-K, in December 2023, Entergy New Orleans and the buyer of Entergy New Orleans’s gas distribution business filed their joint application with the City Council seeking approval for the
proposed transaction. In September 2024 the hearing officer certified the record of the proceeding for City Council consideration. A decision is targeted for first quarter 2025.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 2024 and 2023 were as follows:
2024
2023
(In Thousands)
Cash and cash equivalents at beginning of period
$26
$4,464
Net cash provided by (used in):
Operating activities
123,928
185,632
Investing activities
(124,564)
1,914
Financing activities
35,123
(77,203)
Net increase in cash and cash equivalents
34,487
110,343
Cash and cash equivalents at end of period
$34,513
$114,807
Operating Activities
Net cash flow provided by operating activities decreased $61.7 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the refund of $34 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC and lower collections from customers. The decrease was partially offset by lower fuel payments in 2024 as compared to 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the refund and the related proceedings.
Investing Activities
Entergy New Orleans’s investing activities used $124.6 million of cash for the nine months ended September 30, 2024 compared to providing $1.9 million of cash for the nine months ended September 30, 2023 primarily due to money pool activity and a decrease of $14.7 million in transmission construction expenditures primarily due to higher spending in 2023 related to Entergy New Orleans’s construction of the New Orleans Sewerage and Water Board Sullivan substation.
Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’s receivable from the money pool increased $3.6 million for the nine months ended September 30, 2024 compared to decreasing by $135.4 million for the nine months ended September 30, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.
Entergy New Orleans’s financing activities provided $35.1 million of cash for the nine months ended September 30, 2024 compared to using $77.2 million of cash for the nine months ended September 30, 2023 primarily due to the following activity:
•the issuances of $35 million of 6.25% Series mortgage bonds, $65 million of 6.41% Series mortgage bonds, and $50 million of 6.54% mortgage bonds, each in May 2024;
•the repayment, at maturity, of $100 million of 3.90% Series mortgage bonds in July 2023;
•a $15 million advance received in 2023 related to Entergy New Orleans’s construction of the New Orleans Sewerage and Water Board Sullivan substation;
•money pool activity; and
•the repayment, at maturity, of an $85 million unsecured term loan in June 2024 as compared to additional borrowings of $15 million on the unsecured term loan in May 2023.
Decreases in Entergy New Orleans’s payable to the money pool are a use of cash flow, and Entergy New Orleans’s payable to the money pool decreased $21.7 million for the nine months ended September 30, 2024.
Capital Structure
Entergy New Orleans’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy New Orleans is primarily due to the net issuance of long-term debt in 2024.
September 30, 2024
December 31, 2023
Debt to capital
47.6
%
45.8
%
Effect of excluding securitization bonds
—
%
(0.2
%)
Debt to capital, excluding securitization bonds (non-GAAP) (a)
47.6
%
45.6
%
Effect of subtracting cash
(1.2
%)
—
%
Net debt to net capital, excluding securitization bonds (non-GAAP) (a)
46.4
%
45.6
%
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, long-term debt, including the currently maturing portion, and the long-term payable due to an associated company. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. Entergy New Orleans uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. The following are updates to the information provided in the Form 10-K.
Entergy New Orleans is developing its capital investment plan for 2025 through 2027 and currently anticipates making $585 million in capital investments during that period. In addition to routine capital spending to maintain operations, the preliminary estimate includes distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to improve reliability and resilience; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, government actions, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
September 30, 2024
December 31, 2023
September 30, 2023
December 31, 2022
(In Thousands)
$3,601
($21,651)
$11,827
$147,254
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in June 2027. The credit facility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of September 30, 2024, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2024, a $0.5 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Resilience and Grid Hardening
As discussed in the Form 10-K, in October 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening. In July 2022, Entergy New Orleans filed with the City Council a response identifying a preliminary plan for storm hardening and resiliency projects, including microgrids, to be implemented over ten years at an approximate cost of $1.5 billion. In February 2023 the City Council approved a revised procedural schedule requiring Entergy New Orleans to make a filing in April 2023 containing a narrowed list of proposed hardening projects. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking City Council approval of the first phase (five years and $559 million) of a ten-year infrastructure hardening plan totaling approximately $1 billion. Entergy New Orleans also sought, among other relief, City Council approval of a rider to recover from customers the costs of the infrastructure hardening plan. In February 2024 the City Council approved a resolution authorizing Entergy New Orleans to implement a resilience project to be partially funded by $55 million of matching funding through the DOE’s Grid Resilience and Innovation Partnerships program. The resolution also required Entergy New Orleans to submit, no later than July 2024, a revised resilience plan consisting of projects over a three-year period. In March 2024, Entergy New Orleans filed with the City Council for approval the requested three-year resilience plan, which includes $168 million in hardening projects. The three-year resilience plan is in addition to the previously authorized resilience project to be partially funded by the DOE’s Grid Resilience and Innovation Partnerships program. In July 2024 the City Council held a technical conference regarding Entergy New Orleans’s three-year resilience plan. In October 2024 the City Council approved a resolution authorizing a two-year resilience plan
totaling $100 million. The resolution directs Entergy New Orleans to notify the City Council of the subset of hardening projects from the revised three-year resilience plan to be included in the two-year resilience plan.
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –State and Local Rate Regulation”in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.
Retail Rates
2024 Formula Rate Plan Filing
In April 2024, Entergy New Orleans submitted to the City Council its formula rate plan 2023 test year filing. Without the requested rate change in 2024, the 2023 test year evaluation report produced an electric earned return on equity of 8.66% and a gas earned return on equity of 5.87% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans sought approval of a $12.6 million rate increase based on the formula set by the City Council in the 2018 rate case and approved again by the City Council in 2023. The formula would result in an increase in authorized electric revenues of $7.0 million and an increase in authorized gas revenues of $5.6 million. Following City Council review, the City Council’s advisors issued a report in July 2024 seeking a reduction in Entergy New Orleans’s requested formula rate plan revenues in an aggregate amount of approximately $1.6 million for electric and gas together due to alleged errors. Effective with the first billing cycle of September 2024, Entergy New Orleans implemented rates reflecting an amount agreed upon by Entergy New Orleans and the City Council, per the approved process for formula rate plan implementation. The total formula rate plan increase implemented was $11.2 million, which includes an increase of $5.8 million in electric revenues and an increase of $5.4 million in gas revenues.
Reliability Investigation
As discussed in the Form 10-K, in August 2017 the City Council established a docket to investigate the reliability of the Entergy New Orleans distribution system and to consider implementing certain reliability standards and possible financial penalties for not meeting any such standards. In April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in the management and maintenance of the reliability of its distribution system. The City Council also approved a resolution that opened a prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation asserting that it had been prudent in managing system reliability. In April 2019 the City Council advisors filed comments and testimony asserting that Entergy New Orleans did not act prudently in maintaining and improving its distribution system reliability in recent years and recommending that a financial penalty in the range of $1.5 million to $2 million should be assessed. Entergy New Orleans disagreed with the recommendation and submitted rebuttal testimony and rebuttal comments in June 2019. In November 2019 the City Council passed a resolution that penalized Entergy New Orleans $1 million for alleged imprudence in the maintenance of its distribution system. In December 2019, Entergy New Orleans filed suit in Louisiana state court seeking judicial review of the City Council’s resolution. In June 2022 the Orleans Civil District Court issued a written judgment that the penalty be set aside, reversed, and vacated. In August 2022 the Orleans Civil District Court issued written reasons for its judgment and also granted a post-judgment motion to remand for the City Council to take actions consistent with its judgment.
In April 2023 the City Council approved a resolution that established a procedural schedule to allow for the submission of additional evidence regarding the penalty imposed in 2019. In May 2023, Entergy New Orleans filed with the Orleans Civil District Court a petition for judicial review and (or alternatively) declaratory judgment of, together with a request for injunctive relief from, the City Council’s April 2023 resolution. In June 2023 the City
Council filed exceptions requesting the Orleans Civil District Court dismiss the suit as premature, and a hearing date was set on the exceptions. In September 2023, Entergy New Orleans filed an unopposed motion to continue the hearing on the City Council’s exceptions without date, which was granted. In May 2024 the City Council approved a settlement in which Entergy New Orleans agreed to $500 thousand in unrecovered distribution investment and will recover all verifiable regulatory costs associated with any reliability-related investigation, as well as any costs associated with the judicial reviews. In June 2024, Entergy New Orleans filed with the Orleans Civil District Court an unopposed motion to dismiss with prejudice and an order regarding its petition for judicial review. In July 2024 the dismissal order was signed.
Renewable Portfolio Standard Rulemaking
As discussed in the Form 10-K, in May 2021 the City Council established the Renewable and Clean Portfolio Standard. In May 2023, Entergy New Orleans submitted its compliance demonstration report to the City Council for the 2022 compliance year, which describes and demonstrates Entergy New Orleans’s compliance with the Renewable and Clean Portfolio Standard in 2022 and satisfies certain informational requirements. Entergy New Orleans requested, among other things, that the City Council determine that Entergy New Orleans achieved the target under the portfolio standard for 2022 and remains within the customer protection cost cap, and that the City Council approve a proposal to recover costs associated with 2022 compliance. In April 2024 the City Council approved a resolution finding Entergy New Orleans was in compliance with the 2022 requirements and that Entergy New Orleans did not exceed the customer protection cost cap, as well as approving Entergy New Orleans’s proposal to recover costs.
Income Tax Audits
As discussed in Note 3 to the financial statements herein and in the Form 10-K, in November 2023 the IRS completed its examination of the 2016 through 2018 tax years and issued a Revenue Agent Report for each federal filer under audit. Based on prior regulatory agreements and general rate-making principles, in fourth quarter 2023 Entergy New Orleans recorded a regulatory liability and associated regulatory charge of $60 million ($44 million net-of-tax). In April 2024, Entergy New Orleans and the City Council entered into a settlement in principle whereby Entergy New Orleans agreed to share with customers $138 million of income tax benefits from the resolution of the 2016–2018 IRS audit. Based on this settlement in principle, in first quarter 2024, Entergy New Orleans increased the associated regulatory liability from $60 million to $138 million and recorded a corresponding $78 million regulatory charge ($57 million net-of-tax). The settlement in principle requires that the regulatory liability be amortized over 25 years with the unamortized balance included in rate base and the amortization treated as a reduction to Entergy New Orleans’s retail revenue requirement. In May 2024 the City Council approved the settlement.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Federal Regulation”in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for utility regulatory accounting, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
Net income decreased $31.8 million primarily due to lower volume/weather.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net income decreased $34.9 million primarily due to higher depreciation and amortization expenses and higher other operation and maintenance expenses, partially offset by higher other income.
Operating Revenues
Third Quarter 2024 Compared to Third Quarter 2023
Following is an analysis of the change in operating revenues comparing the third quarter 2024 to the third quarter 2023:
Amount
(In Millions)
2023 operating revenues
$616.6
Fuel, rider, and other revenues that do not significantly affect net income
12.7
Volume/weather
(33.7)
Retail electric price
1.4
2024 operating revenues
$597.0
Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales and a decrease in weather-adjusted residential usage. The decrease in weather-adjusted residential usage is primarily due to the effects of Hurricane Beryl in the third quarter 2024.
The retail electric price variance is insignificant and primarily due to the effect on unbilled revenue resulting from the implementation of the distribution cost recovery factor rider effective with the first billing cycle in October 2024. See Note 2 to the financial statements herein for discussion of the distribution cost recovery factor rider filing.
Total electric energy sales for Entergy Texas for the three months ended September 30, 2024 and 2023 are as follows:
2024
2023
% Change
(GWh)
Residential
2,138
2,474
(14)
Commercial
1,455
1,485
(2)
Industrial
2,506
2,459
2
Governmental
71
73
(3)
Total retail
6,170
6,491
(5)
Sales for resale:
Non-associated companies
141
128
10
Total
6,311
6,619
(5)
See Note 12 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023:
Amount
(In Millions)
2023 operating revenues
$1,588.5
Fuel, rider, and other revenues that do not significantly affect net income
(23.1)
Volume/weather
(10.4)
Retail electric price
5.6
2024 operating revenues
$1,560.6
Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The volume/weather variance is primarily due to the effect of less favorable weather on residential sales and a decrease in weather-adjusted residential usage. The decrease in weather-adjusted residential usage is primarily due to the effects of Hurricane Beryl in the third quarter 2024.
The retail electric price variance is primarily due to an increase in base rates effective June 2023, partially offset by the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective over three months beginning in May 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case and the generation cost recovery rider filings.
Total electric energy sales for Entergy Texas for the nine months ended September 30, 2024 and 2023 are as follows:
2024
2023
% Change
(GWh)
Residential
5,205
5,388
(3)
Commercial
3,764
3,726
1
Industrial
6,996
7,051
(1)
Governmental
201
203
(1)
Total retail
16,166
16,368
(1)
Sales for resale:
Non-associated companies
487
367
33
Total
16,653
16,735
—
See Note 12 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Other Income Statement Variances
Third Quarter 2024 Compared to Third Quarter 2023
Other operation and maintenance expenses decreased primarily due to a decrease of $5.8 million in power delivery expenses primarily due to the timing of vegetation maintenance costs.
Other regulatory charges (credits) - net includes the reversal in third quarter 2023 of $21.9 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case.
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 2024, including the Orange County Advanced Power Station project.
Interest expense increased primarily due to the issuance of $350 million of 5.55% Series mortgage bonds in August 2024 and the issuance of $350 million of 5.80% Series mortgage bonds in August 2023, partially offset by an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Other operation and maintenance expenses increased primarily due to:
•a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding;
•an increase of $5.2 million in contract costs related to operational performance, customer service, and organizational health initiatives;
•an increase of $3.9 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;
•an increase of $3.8 million in bad debt expense;
•an increase of $3.7 million in non-nuclear generation expenses primarily due to a higher scope of work performed in 2024 as compared to 2023; and
•an increase of $3.2 million in storm damage provisions.
Depreciation and amortization expenses increased primarily due to:
•the recognition of $27.6 million in depreciation expense in 2024 for the 2022 base rate case relate back period, effective over six months beginning January 2024. The recognition of depreciation expense for the relate back period is effective over the same period as collections from the relate back surcharge rider and results in no effect on net income;
•additions to plant in service; and
•an increase in depreciation rates effective with an increase in base rates in June 2023.
See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case.
Other regulatory charges (credits) - net includes the reversal in third quarter 2023 of $21.9 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case.
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 2024, including the Orange County Advanced Power Station project, and higher interest earned on money pool investments. The increase was partially offset by an increase of $5 million in net periodic pension and other postretirement benefit non-service costs as a result of an increase in amortizations of the previously deferred surplus and deferrals of the deficit in the annual amount of actuarially determined pension and other postretirement benefits chargeable under the Entergy Texas reserve. See Note 11 to the financial statements in the Form 10-K for discussion of the Entergy Texas reserve.
Interest expense increased primarily due to the issuance of $350 million of 5.80% Series mortgage bonds in August 2023 and the issuance of $350 million of 5.55% Series mortgage bonds in August 2024, partially offset by an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project.
Income Taxes
The effective income tax rates were 18.8% for the third quarter 2024 and 18.7% for the nine months ended September 30, 2024. The differences in the effective income tax rates for the third quarter 2024 and the nine months ended September 30, 2024 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items.
The effective income tax rates were 20.1% for the third quarter 2023 and 19.8% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Cash flows for the nine months ended September 30, 2024 and 2023 were as follows:
2024
2023
(In Thousands)
Cash and cash equivalents at beginning of period
$21,986
$3,497
Net cash provided by (used in):
Operating activities
550,819
498,457
Investing activities
(576,495)
(608,945)
Financing activities
357,333
357,787
Net increase in cash and cash equivalents
331,657
247,299
Cash and cash equivalents at end of period
$353,643
$250,796
Operating Activities
Net cash flow provided by operating activities increased $52.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to lower fuel and purchased power costs, the timing of recovery of fuel and purchased power costs, and a decrease of $23.7 million in income taxes paid in 2024 as a result of lower estimated income tax payments in comparison to 2023. The increase was partially offset by:
•the timing of payments to vendors;
•lower collections from customers; and
•an increase of $46 million in interest paid.
See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery.
Investing Activities
Net cash flow used in investing activities decreased $32.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to money pool activity. The decrease was partially offset by:
•an increase of $100 million in transmission construction expenditures primarily due to higher capital expenditures as a result of increased development in Entergy Texas’s service area and increased spending on various transmission projects in 2024; and
•an increase of $83.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2024 and higher capital expenditures as a result of increased development in Entergy Texas’s service area. The increase in storm restoration expenditures is primarily due to Hurricane Beryl restoration efforts in 2024.
Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased $280.9 million for the nine months ended September 30, 2024 compared to decreasing by $73.7 million for the nine months ended September 30, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements,
and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities decreased $0.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the issuance of $350 million of 5.80% Series mortgage bonds in August 2023 and other insignificant activity, substantially offset by the issuance of $350 million of 5.55% Series mortgage bonds in August 2024.
Capital Structure
Entergy Texas’s debt to capital ratio is shown in the following table.
September 30, 2024
December 31, 2023
Debt to capital
51.5
%
50.9
%
Effect of excluding securitization bonds
(1.8
%)
(2.1
%)
Debt to capital, excluding securitization bonds (non-GAAP) (a)
49.7
%
48.8
%
Effect of subtracting cash
(2.8
%)
(0.2
%)
Net debt to net capital, excluding securitization bonds (non-GAAP) (a)
46.9
%
48.6
%
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.
Net debt consists of debt less cash and cash equivalents. Debt consists of finance lease obligations and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. The following are updates to the information provided in the Form 10-K.
Entergy Texas is developing its capital investment plan for 2025 through 2027 and currently anticipates making $4.8 billion in capital investments during that period. In addition to routine capital spending to maintain operations, the preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Texas’s portfolio, including Orange County Advanced Power Station, Lone Star Power Station, Segno Solar, and Votaw Solar; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, government actions, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Texas’s receivables from the money pool were as follows:
September 30, 2024
December 31, 2023
September 30, 2023
December 31, 2022
(In Thousands)
$36,978
$317,882
$25,808
$99,468
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Texas has a credit facility in the amount of $300 million scheduled to expire in June 2029. The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of September 30, 2024, there were no cash borrowings and $1.1 million in letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2024, $86.4 million in letters of credit were outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Legend Power Station and Lone Star Power Station
In June 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Legend Power Station, a 754 MW combined-cycle combustion turbine facility, which will be enabled with both carbon capture and storage and hydrogen co-firing optionality, to be located in Jefferson County, Texas, and the Lone Star Power Station, a 453 MW simple-cycle combustion turbine facility, which will be enabled with hydrogen co-firing optionality, to be located in Liberty County, Texas. In its application, Entergy Texas noted that the Legend Power Station was expected to cost an estimated $1.46 billion and the Lone Star Power Station was expected to cost an estimated $735.3 million, in each case inclusive of the estimated costs of the generation facilities, interconnection costs, transmission network upgrades, and an allowance for funds used during construction. As described in the application, Entergy Texas is considering alternative financing approaches for the Legend Power Station and plans to pursue the financing option that is in the best interest of its customers. In July 2024 the PUCT referred the proceeding to the State Office of Administrative Hearings and, also in July 2024, the ALJ with the State Office of Administrative Hearings adopted a procedural schedule, with a hearing on the merits scheduled to begin in October 2024. In September 2024, Entergy Texas filed, and the ALJ with the State Office of Administrative Hearings granted, a motion to extend the procedural schedule in this proceeding in order to address certain developments relating to the cost and scope of the Legend Power Station and the Lone Star Power Station. As soon as the required information is developed, Entergy Texas plans to update the economic analyses in the application for both projects and to file a proposed updated procedural schedule. Subject to receipt of required regulatory approval and other conditions, both facilities are expected to be in service by mid-2028.
Segno Solar and Votaw Solar
In July 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Segno Solar facility, a 170 MW solar facility to be located in Polk County, Texas, and the Votaw Solar facility, a 141 MW solar facility to be located in Hardin County, Texas. The Segno Solar facility will cost an estimated $351.6 million, and the Votaw Solar facility will cost an estimated $303.8 million, in each case inclusive of estimated transmission interconnection and upgrade costs. In September 2024 the PUCT referred the proceeding to the State Office of Administrative Hearings and the ALJ with the State Office of Administrative Hearings adopted an agreed procedural schedule, with a hearing on the merits to be held in March 2025. A PUCT decision is expected in third quarter 2025. Subject to receipt of required regulatory approval and other conditions, the Segno Solar facility is expected to be in service by early 2027, and the Votaw Solar facility is expected to be in service by mid-2028.
In June 2024, Entergy Texas filed an application with the PUCT requesting approval of Phase I of its Texas Future Ready Resiliency Plan, a cost-effective set of measures to begin accelerating the resiliency of Entergy Texas’s transmission and distribution system. Phase I is comprised of projects totaling approximately $335.1 million, including approximately $198 million of projects contingent upon Entergy Texas’s receipt of grant funds in that amount from the Texas Energy Fund. The projects in Phase I include distribution and transmission hardening and modernization projects and targeted vegetation management projects to mitigate the risk of wildfire. These projects are expected to be implemented within approximately three years of PUCT approval. The PUCT referred the proceeding to the State Office of Administrative Hearings in June 2024. In July 2024, Entergy Texas filed a motion, on behalf of the parties to the proceeding, requesting the ALJ with the State Office of Administrative Hearings adopt an agreed proposed procedural schedule, with a hearing on the merits scheduled for September 2024. The ALJ with the State Office of Administrative Hearings adopted the agreed procedural schedule in August 2024. In September 2024, Entergy Texas filed, on behalf of the parties to the proceeding, and the ALJ with the State Office of Administrative Hearings granted, an unopposed motion to abate the procedural schedule, including the hearing on the merits, noting the parties had reached a settlement in principle and to allow the parties time to finalize a settlement agreement. In October 2024, Entergy Texas filed an unopposed settlement that would resolve all issues in the proceeding, supporting testimony, and a motion to admit evidence and remand the proceeding to the PUCT. Also in October 2024, the PUCT staff filed testimony in support of the unopposed settlement. A PUCT decision is expected in fourth quarter 2024.
Hurricane Beryl
In July 2024, Hurricane Beryl caused extensive damage to Entergy Texas’s service area. The storm resulted in widespread power outages, as a result of extensive debris and damage to distribution and transmission infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy Texas’s electric facilities damaged by Hurricane Beryl are currently estimated to be approximately $85 million. Based on the historic treatment of such costs in Entergy Texas’s service area, management believes that recovery of restoration costs is probable. There are well established mechanisms and precedent for addressing these catastrophic events and providing for recovery of prudently incurred storm costs in accordance with applicable regulatory and legal principles. Entergy Texas expects to recover the majority of the restoration costs associated with Hurricane Beryl through its transmission and distribution cost recovery factor riders.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Retail Rates
2022 Base Rate Case
As discussed in the Form 10-K, in August 2023 the PUCT issued an order severing issues related to electric vehicle charging infrastructure in the 2022 base rate case proceeding to a separate proceeding. In December 2023 the PUCT referred the separate proceeding to resolve the issues related to electric vehicle charging infrastructure to the State Office of Administrative Hearings. A hearing on the merits was held in April 2024. In June 2024 the ALJ with the State Office of Administrative Hearings issued a proposal for decision concluding that it is appropriate for a vertically integrated electric utility, and Entergy Texas specifically, to own vehicle-charging facilities or other transportation electrification and charging infrastructure and recommending that both of Entergy Texas’s proposed
transportation electrification riders be approved. In October 2024 the PUCT issued an order concluding that it is appropriate for Entergy Texas to own transportation electrification and charging infrastructure, including charging stations, and approving both of Entergy Texas’s proposed transportation electrification riders with a limitation that Entergy Texas’s infrastructure rider be applied only to publicly-available charging infrastructure and Entergy Texas not recover any outstanding fees from customers not taking service under the rider.
Distribution Cost Recovery Factor (DCRF) Rider
In June 2024, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The new rider was designed to collect from Entergy Texas’s retail customers approximately $40.3 million annually based on its capital invested in distribution between January 1, 2022 and March 31, 2024. In September 2024, the PUCT approved the DCRF rider, consistent with Entergy Texas’s as-filed request, and rates became effective with the first billing cycle in October 2024.
In September 2024, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $48.9 million annually, or $8.6 million in incremental annual revenues beyond Entergy Texas’s currently effective DCRF rider based on its capital invested in distribution between April 1, 2024 and June 30, 2024. In October 2024 the PUCT staff filed a recommendation that the PUCT approve Entergy Texas’s as-filed application. A PUCT decision is expected in fourth quarter 2024.
Transmission Cost Recovery Factor (TCRF) Rider
In October 2024, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $9.7 million annually based on its capital invested in transmission between January 1, 2022 and June 30, 2024 and changes in other transmission charges. Entergy Texas requested that the PUCT issue a decision in fourth quarter 2024, unless a hearing on the merits is requested.
Fuel and purchased power cost recovery
In September 2024, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2022 through March 2024. During the reconciliation period, Entergy Texas incurred approximately $1.6 billion in eligible fuel and purchased power expenses to generate and purchase electricity to serve its customers, net of certain revenues credited to such expenses and other adjustments. Entergy Texas’s cumulative under-recovery balance for the reconciliation period was approximately $30 million, including interest, which Entergy Texas requested authority to carry over as part of the cumulative fuel balance for the subsequent reconciliation period beginning April 2024.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Federal Regulation”in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Texas’s accounting for utility regulatory accounting, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
System Energy’s principal asset consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues. As discussed in “Complaints Against System Energy” below and in Note 2 to the financial statements in the Form 10-K, System Energy and the Unit Power Sales Agreement are currently the subject of several litigation proceedings at the FERC (or on appeal from the FERC to the United States Court of Appeals for the Fifth Circuit).
Results of Operations
Net Income
Third Quarter 2024 Compared to Third Quarter 2023
Net income decreased $1.6 million primarily due to the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy Arkansas effective with the November 2023 service month per the settlement agreement with the APSC and the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy New Orleans effective with the June 2024 service month per the settlement agreement with the City Council, substantially offset by an increase in operating revenues resulting from changes in rate base. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC. See Note 2 to the financial statements herein for discussion of the settlement with the City Council.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Net income increased $1 million primarily due to an increase in operating revenues resulting from changes in rate base, partially offset by the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy Arkansas effective with the November 2023 service month per the settlement agreement with the APSC and the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy New Orleans effective with the June 2024 service month per the settlement agreement with the City Council. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC. See Note 2 to the financial statements herein for discussion of the settlement with the City Council.
Income Taxes
The effective income tax rates were 24% for the third quarter 2024 and 22.5% for the nine months ended September 30, 2024. The differences in the effective income tax rates for the third quarter 2024 and the nine months ended September 30, 2024 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rates were 22.5% for the third quarter 2023 and 22.9% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for
state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.
Income Tax Legislation and Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation and Regulation” herein and in the Form 10-K for discussion of income tax legislation and regulation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 2024 and 2023 were as follows:
2024
2023
(In Thousands)
Cash and cash equivalents at beginning of period
$60
$2,940
Net cash provided by (used in):
Operating activities
113,280
155,190
Investing activities
(241,229)
(27,165)
Financing activities
206,084
(35,172)
Net increase in cash and cash equivalents
78,135
92,853
Cash and cash equivalents at end of period
$78,195
$95,793
Operating Activities
Net cash flow provided by operating activities decreased $41.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to:
•the refund of $92.7 million made in 2024 to Entergy Arkansas as a result of the settlement with the APSC. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC;
•an increase of $21.2 million in spending on nuclear refueling outage costs in 2024 as compared to 2023; and
•the timing of collection of receivables.
The decrease was partially offset by:
•aggregate refunds of $103.5 million made in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements in the Form 10-K for further discussion of the refunds and the related proceedings; and
•refunds of $19.3 million included in May 2023 service month bills under the Unit Power Sales Agreement to reflect the effects of the partial settlement agreement approved by the FERC in April 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the Unit Power Sales Agreement complaint.
Net cash flow used in investing activities increased $214.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to:
•money pool activity;
•an increase in cash used of $85.8 million as a result of fluctuations in nuclear fuel activity 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; and
•an increase of $43.5 million in nuclear construction expenditures primarily due to higher spending in 2024 on Grand Gulf outage projects and upgrades.
Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased $8.1 million for the nine months ended September 30, 2024 compared to decreasing by $85.2 million for the nine months ended September 30, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.
Financing Activities
System Energy’s financing activities provided $206.1 million of cash for the nine months ended September 30, 2024 compared to using $35.2 million of cash for the nine months ended September 30, 2023 primarily due to the following activity:
•the repayment, at maturity, of $250 million of 4.10% Series mortgage bonds in April 2023;
•a capital contribution of $150 million received from Entergy Corporation in January 2024 in order to maintain System Energy’s capital structure;
•net long-term borrowings of $68.5 million in 2024 compared to net repayments of $43.4 million in 2023 on the nuclear fuel company variable interest entity’s credit facility;
•the repayment, prior to maturity, in March 2023 of a $50 million term loan due in November 2023;
•the issuance of $325 million of 6.00% Series mortgage bonds in March 2023; and
•money pool activity.
Decreases in System Energy’s payable to the money pool are a use of cash flow, and System Energy’s payable to the money pool decreased $12.2 million for the nine months ended September 30, 2024.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
System Energy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for System Energy is primarily due to the capital contribution of $150 million received from Entergy Corporation in 2024, partially offset by the net issuance of long-term debt in 2024.
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. The net debt to net capital ratio is a non-GAAP measure. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. The following are updates to the information provided in the Form 10-K.
System Energy is developing its capital investment plan for 2025 through 2027 and currently anticipates making $385 million in capital investments during that period. The preliminary estimate includes amounts associated with Grand Gulf investments and initiatives.
System Energy’s receivables from or (payables to) the money pool were as follows:
September 30, 2024
December 31, 2023
September 30, 2023
December 31, 2022
(In Thousands)
$8,119
($12,246)
$9,772
$94,981
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in June 2027. As of September 30, 2024, $90 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
Complaints Against System Energy
See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. System Energy and the Unit Power Sales Agreement are currently the subject of several litigation proceedings at the FERC (or on appeal from the FERC to the United States Court of Appeals for the Fifth Circuit), including challenges with respect to System Energy’s authorized return on equity and capital structure, renewal of its sale-leaseback arrangement, treatment of uncertain tax positions, a broader investigation of rates under the Unit Power Sales Agreement, and two prudence complaints, one challenging the extended power uprate completed at Grand Gulf in 2012 and the operation and management of Grand Gulf, particularly in the 2016-2020 time period, and the second challenging the operation and management of Grand Gulf in the 2021-2022 time period. Settlements that resolve all significant aspects of these complaints have been reached with the MPSC, the APSC, and the City Council and approved by the FERC. A settlement has been reached with the LPSC and is pending FERC approval, as described in “System Energy Settlement with the LPSC” below. If the settlement with the
LPSC is approved by the FERC, it would resolve all significant aspects of these pending complaints. The following are updates to the discussion in the Form 10-K.
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the FERC’s Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $11.6 million, which includes interest through September 30, 2024, and the estimated resulting annual rate reduction would be approximately $6.8 million. As a result of the settlement agreements with the MPSC, the APSC, and the City Council, the estimated refund and rate reduction only includes the portion related to Entergy Louisiana, whose settlement with the LPSC is pending FERC approval. See “System Energy Settlement with the MPSC” in the Form 10-K, see “System Energy Settlement with the APSC” below and in the Form 10-K, and see “System Energy Settlement with the City Council” below for discussion of the settlements. The estimated refund will continue to accrue interest until a final FERC decision is issued.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021 the LPSC, the APSC, the MPSC, the City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions were filed in May 2021 by System Energy, the FERC trial staff, the LPSC, the APSC, the MPSC, and the City Council. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
In August 2022 the D.C. Circuit issued an order addressing appeals of FERC’s Opinion No. 569 and 569-A, which established the methodology applied in the ALJ’s initial decision in the proceeding against System Energy discussed above and in the Form 10-K. The appellate order addressed the methodology for determining the return on equity applicable to transmission owners in MISO. The D.C. Circuit found the FERC’s use of the risk premium model as part of the methodology to be arbitrary and capricious and remanded the case back to the FERC. In October 2024 the FERC issued a remand order in the MISO transmission owners’ case, concluding that the record supported the methodology that it originally directed in Opinion No. 569 utilizing an equal weighting of the two-step discounted cash flow model and capital asset pricing model. As a result, it determined that the just and reasonable return on equity for the MISO transmission owners is 9.98%. In light of the System Energy settlements described below, the FERC’s changes to its return on equity methodology in the decision on the MISO transmission owners’ return on equity will not have any immediate effect on System Energy’s return on equity because System Energy’s return on equity is locked-in through the end of June 2026.
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue
As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. The APSC, the MPSC, and the City Council subsequently intervened in the proceeding. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision, and in December 2022 the FERC issued an order on the ALJ’s initial decision, which affirmed it in part and modified it in part. The FERC’s order directed System Energy to calculate refunds on three issues, and to provide a compliance report detailing the calculations. The FERC’s order also disallows the future recovery of sale-leaseback renewal costs, which is estimated at approximately $11.5 million annually for purchases from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans through July 2036. The three refund issues are rental expenses related to the renewal of the sale-leaseback arrangements; refunds, if any, for the revenue requirement impact of including accumulated deferred income taxes resulting from the decommissioning uncertain tax positions from 2004 through the present; and refunds for the net effect of correcting the depreciation inputs for capital additions attributable to the portion of plant subject to the sale-leaseback.
In January 2023, System Energy filed its compliance report with the FERC. With respect to the sale-leaseback renewal costs, System Energy calculated a refund of $89.8 million, which represented all of the sale-leaseback renewal rental costs that System Energy recovered in rates, with interest. With respect to the decommissioning uncertain tax position issue, System Energy calculated that no additional refunds are owed because it had already provided a one-time historical credit (for the period January 2016 through September 2020) of $25.2 million based on the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position, and because it has been providing an ongoing rate base credit for the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position since October 2020. With respect to the depreciation refund, System Energy calculated a refund of $13.7 million, which is the net total of a refund to customers for excess depreciation expense previously collected, plus interest, offset by the additional return on rate base that System Energy previously did not collect, without interest.
In January 2023, System Energy filed a request for rehearing of the FERC’s determinations in the December 2022 order on sale-leaseback refund issues and future lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the proper accounting of System Energy’s accumulated deferred income taxes adjustment for the Tax Cuts and Jobs Act of 2017; and a motion for confirmation of its interpretation of the December 2022 order’s remedy concerning the decommissioning tax position. In January 2023 the retail regulators filed a motion for confirmation of their interpretation of the refund requirement in the December 2022 FERC order and a provisional request for rehearing. In February 2023 the FERC issued a notice that the rehearing requests have been deemed denied by operation of law. The deemed denial of the rehearing request initiated a sixty-day period in which aggrieved parties could petition for federal appellate court review of the underlying FERC orders; however, the FERC may issue a substantive order on rehearing as long as it continues to have jurisdiction over the case. In March 2023, System Energy filed in the United States Court of Appeals for the Fifth Circuit a petition for review of the December 2022 order. In March 2023, System Energy also filed an unopposed motion to stay the proceeding in the Fifth Circuit pending the FERC’s disposition of the pending motions, and the court granted the motion to stay.
In August 2023 the FERC issued an order addressing arguments raised on rehearing and partially setting aside the prior order (rehearing order). The rehearing order addresses rehearing requests that were filed in January 2023 separately by System Energy and the LPSC, the APSC, and the City Council.
In the rehearing order, the FERC directs System Energy to recalculate refunds for two issues: (1) refunds of rental expenses related to the renewal of the sale-leaseback arrangements and (2) refunds for the net effect of correcting the depreciation inputs for capital additions associated with the sale-leaseback. With regard to the sale-leaseback renewal rental expenses, the rehearing order allows System Energy to recover an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback as of the expiration of the initial lease
term. With regard to the depreciation input issue, the rehearing order allows System Energy to offset refunds so that System Energy may collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. The rehearing order further directs System Energy to submit within 60 days of the date of the rehearing order an additional compliance filing to revise the total refunds for these two issues. As discussed above, System Energy’s January 2023 compliance filing calculated $103.5 million in total refunds, and the refunds were paid in January 2023. In October 2023, System Energy filed its compliance report with the FERC as directed in the August 2023 rehearing order. The October 2023 compliance report reflected recalculated refunds totaling $35.7 million for the two issues resulting in $67.8 million in refunds that could be recouped by System Energy. As discussed below in “System Energy Settlement with the APSC,” System Energy reached a settlement in principle with the APSC to resolve several pending cases under the FERC’s jurisdiction, including this one, pursuant to which it has agreed not to recoup the $27.3 million calculated for Entergy Arkansas in the compliance filing. Consistent with the compliance filing, in October 2023, Entergy Louisiana and Entergy New Orleans paid recoupment amounts of $18.2 million and $22.3 million, respectively, to System Energy.
On the third refund issue identified in the rehearing requests, concerning the decommissioning uncertain tax positions, the rehearing order denied all rehearing requests, re-affirmed the remedy contained in the December 2022 order, and did not direct System Energy to recalculate refunds or to submit an additional compliance filing. On this issue, as reflected in its January 2023 compliance filing, System Energy believes it has already paid the refunds due under the remedy that the FERC outlined for the uncertain tax positions issue in its December 2022 order. In August 2023 the LPSC issued a media release in which it stated that it disagrees with System Energy’s determination that the rehearing order requires no further refunds to be made on this issue.
In September 2023, System Energy filed a protective appeal of the rehearing order with the United States Court of Appeals for the Fifth Circuit. The appeal was consolidated with System Energy’s prior appeal of the December 2022 order.
In September 2023 the LPSC filed with the FERC a request for rehearing and clarification of the rehearing order. The LPSC requests that the FERC reverse its determination in the rehearing order that System Energy may collect an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback, as of the expiration of the initial lease term, as well as its determination in the rehearing order that System Energy may offset the refunds for the depreciation rate input issue and collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. In addition, the LPSC requests that the FERC either confirm the LPSC’s interpretation of the refund associated with the decommissioning uncertain tax positions or explain why it is not doing so. In October 2023 the FERC issued a notice that the rehearing request has been deemed denied by operation of law. In November 2023 the FERC issued a further notice stating that it would not issue any further order addressing the rehearing request.Also in November 2023 the LPSC filed with the United States Court of Appeals for the Fifth Circuit a petition for review of the FERC’s August 2023 rehearing order and denials of the September 2023 rehearing request.
In December 2023 the United States Court of Appeals for the Fifth Circuit lifted the abeyance on the consolidated System Energy appeals, and it also consolidated the LPSC’s appeal with the System Energy appeals. In March 2024, separate petition briefs were filed by System Energy and by the LPSC.Also in March 2024, the City Council filed an intervenor brief supporting the LPSC. In June 2024 counsel for the FERC filed the respondent’s brief, arguing that the FERC’s August 2023 rehearing order concerning the sale-leaseback and depreciation rate remedy issues should be affirmed and arguing that the dispute over the uncertain tax position issue is not yet ripe. In July 2024, System Energy and the LPSC each filed separate reply briefs. In September 2024 the parties filed a joint motion to continue and stay oral argument, previously scheduled for October 2024, pending the FERC’s decision whether to approve the settlement between System Energy and the LPSC, and the United States Court of Appeals for the Fifth Circuit granted the motion.
As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at the FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement. The following are updates to that discussion.
Unit Power Sales Agreement Complaint
As discussed in the Form 10-K, the first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in September 2020. The first complaint raises two sets of rate allegations: violations of the filed rate and a corresponding request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales Agreement prospectively. In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of September 21, 2020, establishing hearing procedures, and holding those procedures in abeyance pending the FERC’s review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above.
In November 2021 the LPSC, the APSC, and the City Council filed direct testimony and requested the FERC to order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement. System Energy filed answering testimony in January 2022. In March 2022 the FERC trial staff filed direct and answering testimony recommending refunds and prospective modifications to the Unit Power Sales Agreement.
In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations. In June 2022 the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the FERC trial staff’s testimony and oppose its revised recommendation.
In May 2022 the LPSC, the APSC, and the City Council filed rebuttal testimony and asserted new claims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony and for the hearing to begin in September 2022. The hearing concluded in December 2022. Also in December 2022, a motion to extend the briefing schedule and the May 2023 deadline for the initial decision was granted.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolved the following issues raised in the Unit Power Sales Agreement complaint: advance collection of lease payments, aircraft costs, executive incentive compensation, money pool borrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and termination of the capital funds agreement. The settlement provided that System Energy would provide a black box refund of $18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the Utility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales Agreement. The settlement further provided that if the APSC, the City Council, or the LPSC agrees to the global settlement System Energy entered into with the MPSC (see “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement), and such global settlement includes a black box refund amount, then the black box refund for this settlement agreement shall not be incremental or in addition to the global black box refund amount. The settlement agreement addressed other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023 the FERC approved the settlement agreement. The refund provided for in the settlement agreement was included in the May 2023 service month bills under the Unit Power Sales Agreement.
In May 2023 the presiding ALJ issued an initial decision finding that System Energy should have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power
Sales Agreement bills. Based on this finding, the initial decision recommended refunds; System Energy estimates that those refunds for Entergy Louisiana would total approximately $31.5 million plus $45.6 million of interest through September 30, 2024. The initial decision also finds that the Unit Power Sales Agreement should be modified such that a cash working capital allowance of negative $36.4 million is applied prospectively. If the FERC ultimately orders these modifications to cash working capital be implemented, the estimated annual revenue requirement impact is expected to be immaterial. On the other non-settled issues for which the complainants sought refunds or changes to the Unit Power Sales Agreement, the initial decision ruled against the complainants.
The initial decision is an interim step in the FERC litigation process, and an ALJ’s determination made in an initial decision is not controlling on the FERC. System Energy disagrees with the ALJ’s findings concerning the accumulated deferred income taxes issues and cash working capital. In July 2023, System Energy filed a brief on exceptions to the initial decision’s accumulated deferred income taxes findings. Also in July 2023, the APSC, the LPSC, the City Council, and the FERC trial staff filed separate briefs on exceptions. The APSC’s brief on exceptions challenges the ALJ’s determinations on the money pool interest and retained earnings issues. The LPSC’s brief on exceptions challenges the ALJ’s determinations regarding the sale-leaseback transaction costs, legal fees, and retained earnings issues. The City Council’s brief on exceptions challenges the ALJ’s determinations on the money pool and cash management issues. The FERC trial staff’s brief on exceptions challenges the ALJ’s determinations on the cash working capital issue as well as certain of the accumulated deferred income taxes issues. In August 2023 all parties filed separate briefs opposing exceptions. System Energy filed a brief opposing the exceptions of the APSC, the LPSC, and the City Council. The APSC, the LPSC, and the City Council filed separate briefs opposing the exceptions raised by System Energy and the FERC trial staff. The FERC trial staff filed its own brief opposing certain exceptions raised by System Energy, the APSC, the LPSC, and the City Council. The case is now pending a decision by the FERC. Refunds, if any, that might be required will become due only after the FERC issues its order reviewing the initial decision.
LPSC Petition for a Writ of Mandamus
In March 2024 the LPSC filed a petition for a writ of mandamus, requesting that the United States Court of Appeals for the Fifth Circuit direct the FERC to take action on (1) System Energy’s pending compliance filings (and the LPSC’s protests) in response to the FERC’s orders on the uncertain tax position rate base issue, as discussed above; and (2) the ALJ’s pending initial decision in the return on equity and capital structure proceeding, also as discussed above. System Energy filed a notice of intervention in the proceeding.
In March 2024 the United States Court of Appeals for the Fifth Circuit directed the FERC to respond to the LPSC’s petition. Also in March 2024, System Energy filed its response to the LPSC’s petition, in which it opposed the LPSC’s mandamus request on the compliance filing and took no position on the request for action on the return on equity and capital structure case. Later in March 2024, the FERC responded opposing both parts of the LPSC’s petition, and the LPSC filed an opposed motion for leave to answer and its answer to the FERC’s and System Energy’s responses. In July 2024 the Fifth Circuit held oral argument on the petition. During oral argument, the FERC’s counsel represented that the FERC intends to issue an order in the return on equity and capital structure proceeding by the end of the year. Later in July 2024 the Fifth Circuit issued an order denying the LPSC’s petition.
System Energy Settlement with the APSC
As discussed in the Form 10-K, in October 2023, System Energy, Entergy Arkansas, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the APSC to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. System Energy, Entergy Arkansas, additional Entergy parties, and the APSC filed the settlement agreement and supporting materials with the FERC in November 2023. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from
System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. System Energy previously settled with the MPSC with respect to these complaints before the FERC.
The terms of the settlement with the APSC align with the $588 million global black box settlement reached between System Energy and the MPSC in June 2022 and provide for Entergy Arkansas to receive a black box refund of $142 million from System Energy, inclusive of $49.5 million already received by Entergy Arkansas from System Energy.
In addition to the black box refund of $142 million described above, beginning with the November 2023 service month, the settlement provides for Entergy Arkansas’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.
In December 2023 the FERC trial staff and the LPSC filed comments. The FERC trial staff commented that it “believes that the settlement is fair, and in the public interest,” and neither it nor the LPSC oppose the settlement. In December 2023 the remaining black box refund to Entergy Arkansas was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet. In March 2024 the FERC approved the settlement “because it appears to be fair and reasonable and in the public interest.” System Energy paid the remaining black box refund of $92 million to Entergy Arkansas in May 2024.
System Energy Settlement with the City Council
In April 2024, System Energy, Entergy New Orleans, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the City Council to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. In May 2024, System Energy, Entergy New Orleans, additional named Entergy parties, and the City Council filed the settlement agreement and supporting materials with the FERC. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans.
The terms of the settlement with the City Council align with the $588 million global black box settlement amount reflected in the prior settlements reached between System Energy and the MPSC in June 2022 and between System Energy and the APSC in November 2023. The settlement provides for Entergy New Orleans to receive a black box refund of $116 million from System Energy, inclusive of approximately $18 million already received by Entergy New Orleans from System Energy. In March 2024 the $98 million black box refund to Entergy New Orleans was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet.
In addition to the black box refund of $116 million described above, beginning with the June 2024 service month, the settlement provides for Entergy New Orleans’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.
In August 2024 the FERC approved the settlement “because it appears to be fair and reasonable and in the public interest.” System Energy paid the remaining black box refund of $98 million to Entergy New Orleans in October 2024. As discussed above and in Note 2 to the financial statements in the Form 10-K, System Energy previously settled with the MPSC and the APSC with respect to these complaints before the FERC. The settlements with the APSC, the MPSC, and the City Council represent almost 85% of System Energy’s share of the output of Grand Gulf.
In July 2024, System Energy and the LPSC staff reached a settlement in principle to globally resolve all of the LPSC’s actual and potential claims in multiple docketed proceedings pending before the FERC (including all docketed proceedings resolved by the MPSC, the APSC, and the City Council settlements) and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. In August 2024 the LPSC approved the settlement. In September 2024 the settling parties filed the settlement for approval by the FERC.
The terms of the settlement with the LPSC align with the $588 million global black box settlement amount reflected in the prior settlements reached between System Energy and the MPSC in June 2022, between System Energy and the APSC in November 2023, and between System Energy and the City Council in April 2024. The settlement provides for Entergy Louisiana to receive a black box refund of $95 million from System Energy, inclusive of approximately $15 million already received by Entergy Louisiana from System Energy. In June 2024 the remaining $80 million black box refund to Entergy Louisiana was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet.
In addition to the black box refund of $95 million described above, beginning with the September 2024 service month, the settlement provides for Entergy Louisiana’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.
The settlement also includes an agreement that, subject to the receipt of necessary regulatory approvals, Entergy Louisiana will divest to Entergy Mississippi all of its interest in Grand Gulf capacity and energy under the Unit Power Sales Agreement and its purchases from Entergy Arkansas under the MSS-4 replacement tariff. Subject to the receipt of all required regulatory approvals, divestiture will be effective on January 1, 2025. In October 2024 Entergy Louisiana and Entergy Mississippi filed with the FERC a power purchase agreement under which Entergy Mississippi would purchase Entergy Louisiana’s purchases of Grand Gulf capacity and energy. The power purchase agreement is governed by the MSS-4 replacement tariff, a tariff governing the sales of energy and capacity among the Utility operating companies. The parties requested that the FERC issue an order accepting the power purchase agreement no later than December 2024.
System Energy Regulatory Liability for Pending Complaints
As discussed in the Form 10-K, System Energy had recorded a regulatory liability related to complaints against System Energy, which was consistent with the settlement agreements reached with the MPSC and the APSC, taking into account amounts already or expected to be refunded. System Energy’s remaining regulatory liability related to complaints against System Energy as of December 31, 2023 was $178 million. As discussed above in “System Energy Settlement with the City Council,” in first quarter 2024 the $98 million black box refund to Entergy New Orleans was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet. As discussed above in “System Energy Settlement with the LPSC,” in second quarter 2024 the $80 million black box refund to Entergy Louisiana was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet.
Unit Power Sales Agreement
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2022 Calendar Year Bills
In February 2024, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC and the City Council filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2022. The formal challenge alleges: (1) that the equity ratio charged in rates was excessive; and (2) that all issues in the pending Unit Power Sales Agreement complaint
proceeding should also be reflected in calendar year 2022 bills. These allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 and 2021 bills.
In March 2024, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.
Pension Costs Amendment Proceeding
As discussed in the Form 10-K, in October 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to include in the rate base the prepaid and accrued pension costs associated with System Energy’s qualified pension plans. Based on data ending in 2020, the increased annual revenue requirement associated with the filing is approximately $8.9 million. In March 2022 the FERC accepted System Energy’s proposed amendments with an effective date of December 1, 2021, subject to refund pending the outcome of the settlement and/or hearing procedures. In August 2023 the FERC chief ALJ terminated settlement procedures and designated a presiding ALJ to oversee hearing procedures. In October 2023, System Energy filed direct testimony in support of its proposed amendments. Under the procedural schedule, testimony was filed through April 2024, and the hearing occurred in late May and early June 2024.
In September 2024 the presiding ALJ issued an initial decision recommending that the FERC approve inclusion of a line item for prepaid and accrued pension costs; however, the presiding ALJ did not agree with System Energy’s proposed methodology to calculate the value of the prepaid and accrued pension cost input. Instead, the presiding ALJ recommended limiting System Energy’s recovery to the prepaid and accrued pension costs that were incurred beginning in 2015 and later.
System Energy disputes the presiding ALJ's determination concerning the methodology used to calculate the prepaid and accrued pension input, and System Energy filed exceptions to these rulings in October 2024. If the ALJ’s determination is affirmed by the FERC, System Energy estimates refunds, including interest through September 30, 2024, of approximately $15 million to $19 million would be owed related to the ALJ’s findings. The ALJ's initial decision is not binding on the FERC and is an interim step in the hearing process. No refunds will be owed in connection with this proceeding and no changes to System Energy’s pension cost recovery methodology will be implemented unless and until the FERC requires them in a final order. This proceeding is not covered by the global settlements described above.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information - Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.
See “PART I, Item 1,Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy. Also see Notes 1 and 2 to the financial statements herein and “Item 5, Other Information,Environmental Regulation” below for updates regarding environmental proceedings and regulation.
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in "Part I, Item 1A. RISK FACTORS" in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (1)
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of a Publicly Announced Plan
Maximum $ Amount of Shares that May Yet be Purchased Under a Plan (2)
7/01/2024-7/31/2024
—
$—
—
$350,052,918
8/01/2024-8/31/2024
—
$—
—
$350,052,918
9/01/2024-9/30/2024
—
$—
—
$350,052,918
Total
—
$—
—
In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities. In addition, in the first quarter 2024, Entergy withheld 101,960 shares of its common stock at $99.31 per share, 75,018 shares of its common stock at $98.86 per share, 1,731 shares of its common stock at $103.94 per share, 316 shares of its common stock at $102.64 per share, 232 shares of its common stock at $102.77 per share, 41 shares of its common stock at $100.15 per share, and 6 shares of its common stock at $104.68 per share to pay income taxes due upon vesting of restricted stock granted and payout of performance units as part of its long-term incentive program.
(1)See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans.
(2)Maximum amount of shares that may yet be repurchased relates only to the $500 million share repurchase program plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.
U.S. Securities and Exchange Commission Investigation
The Staff of the Division of Enforcement of the U.S. Securities and Exchange Commission has been conducting an investigation regarding Entergy’s processes and controls relating to its accounting for materials and supplies inventory. Entergy is cooperating with the SEC staff’s investigation and has engaged in discussions with the staff regarding a possible resolution of the investigation. There can be no assurance regarding the timing or terms of any potential resolution, by settlement or otherwise, and any potential impact of a resolution cannot be predicted. Management does not believe, however, that any resolution will have a material impact on Entergy’s business, financial condition, or results of operations.
Rule 10b5-1 Trading Arrangements
During the three months ended September 30, 2024, the following directors or officers of Entergy or the Registrant Subsidiaries adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K:
Name and Title
Action
Date of Action
Type of Trading Arrangement (a)
Aggregate Number of Shares to be Purchased or Sold
Expiration Date (b)
Deanna D. Rodriguez, Chair of the Board, President and Chief Executive Officer of Entergy New Orleans, LLC
Adopted
09/09/2024
Rule 10b5-1 trading arrangement
Up to 3,044 shares to be sold (c)
12/08/2025
(a)Each trading arrangement marked as a Rule 10b5-1 trading arrangement is intended to satisfy the affirmative defense of Rule 10b5-1(c).
(b)Except as indicated by footnote, each trading arrangement permitted or permits transactions through and including the earlier to occur of (a) the completion of all purchases or sales or (b) the expiration date listed in the table. Each trading arrangement marked as a “Rule 10b5-1 Plan” only permitted or only permits transactions upon expiration of the applicable mandatory cooling-off period under Rule 10b5-1(c), as amended.
(c)This trading arrangement provides for the sale of up to 3,044 shares upon the exercise of outstanding options.
Other than those disclosed above, no director or officer of Entergy or any of the Registrant Subsidiaries adopted, modified, or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” during the three months ended September 30, 2024.
Regulation of the Nuclear Power Industry
The following is an update to the “Regulation of the Nuclear Power Industry” section of Part I, Item 1 of the Form 10-K.
As discussed in the Form 10-K, in April 2021, President Biden announced a target for the United States in connection with the United Nations’ “Paris Agreement” on climate change. The target consists of a 50-52 percent reduction in economy-wide net greenhouse gas emissions from 2005 levels by 2030. President Biden has also stated that a goal of his administration is for the electric power industry to decarbonize fully by 2035.
Consistent with the Biden administration’s stated climate goals, in May 2024 the EPA finalized rules regulating greenhouse gas emissions from new combustion turbine electric generating units (EGUs) under Section 111(b) of the Clean Air Act and from certain existing coal- and gas-fired EGUs under Section 111(d) of the Clean Air Act.
For new gas combustion turbine EGUs, the final rule includes three subcategories of emission standards based on the unit’s annual capacity factor. Applicable emission standards for each subcategory are: a heat-input based CO2 emission standard for low load (<20% annual capacity factor) EGUs; an output-based CO2 efficiency standard for intermediate load (>20% but <40% annual capacity factor) EGUs; and, for base load (>40% annual capacity factor) EGUs, a Phase 1 output-based CO2 efficiency standard followed by a more stringent Phase 2 CO2 standard which will apply beginning January 1, 2032. The Phase 2 standard was established based on an EPA determination that carbon capture and sequestration (CCS) represents the best system of emission reduction (BSER) for new base load combustion turbine EGUs. The final rule allows for a possible one-year extension to the compliance date for the Phase 2 standard in circumstances where a source faces a delay in installation of controls due to factors outside of the control of the EGU owner/operator.
For existing generating units, the final rule includes emission guidelines issued under Section 111(d) of the Clean Air Act and allows states two years to develop a plan to implement the new emission guidelines with respect to subject emission units within their state. The final emission guidelines require reductions in CO2 emissions from existing coal-fired generating units which plan to operate beyond January 1, 2032 and exempts coal-fired units which plan to permanently cease operations prior to this date. Due to Entergy’s commitment to cease burning coal by the end of 2030, Entergy’s coal-fired generating units are expected to be exempt from this aspect of the final rule. The emission guidelines also include CO2 efficiency standards for existing gas-fired steam EGUs. These emission standards will apply beginning January 1, 2030. Entergy’s existing gas-fired steam generating units are expected to meet these CO2 emission standards. The EPA did not finalize emission guidelines for existing gas turbine EGUs and has announced plans to conduct a subsequent rulemaking for such units.
In September 2020, Entergy announced a commitment to achieve net-zero greenhouse gas emissions by 2050 inclusive of all businesses, all applicable gases, and all emission scopes. In 2022, Entergy enhanced its commitment to include an interim goal of 50% carbon-free energy generating capacity by 2030 and expanded its interim emission rate goal to include all purchased power. Due to stronger than initially expected sales growth, likely necessitating the development of new generation capacity that is not carbon-free, Entergy expects that achievement of the 50% carbon-free energy generating capacity goal will be delayed for a period beyond 2030 that has not been determined. In addition, while current planning assumptions indicate the 2030 emission rate goal remains achievable, its achievement could also be challenged as a result of the forecasted sales growth. See “Risk Factors” in Part I, Item 1A of the Form 10-K for discussion of the risks associated with achieving these climate goals.
As discussed in the Form 10-K, in April 2015 the EPA published the final coal combustion residuals (CCR) rule regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes regulated under Resource Conservation and Recovery Act Subtitle D.
Pursuant to the 2015 CCR rule, Entergy operates groundwater monitoring systems surrounding its CCR landfills located at White Bluff, Independence, and Nelson. In May 2024 the EPA finalized a rule establishing management standards for legacy CCR surface impoundments (i.e., inactive surface impoundments at inactive power plants) and establishing a new class of units referred to as CCR management units (CCRMUs) (i.e., non-containerized CCR located at a regulated CCR facility). CCR utilized in roadbeds and embankments is excluded from the CCRMU definition. Entergy does not have any legacy impoundments; however, the definition of CCR management units includes on-site areas where CCR was beneficially used. This is contrary to the 2015 CCR rule which exempted beneficial uses that met certain criteria. Under this expanded rule, all facilities must identify and delineate any CCRMU greater than one ton and submit a facility evaluation report by February 2026. Any potential requirements for corrective action or operational changes under the various CCR rules continue to be assessed. Notably, ongoing litigation has resulted in the EPA’s continuing review of the rules. Consequently, the nature and cost of additional corrective action requirements may depend, in part, on the outcome of the litigation and further EPA review. Given the complexity and recency of the EPA guidance, Entergy is still evaluating the level of work that will ultimately be required to comply with the rule. Based on initial estimates of multiple possible remediation scenarios, Entergy recorded a $42 million increase in its decommissioning cost liabilities for White Bluff and Independence, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining useful lives of the unit. Entergy will continue to update the asset retirement obligation as the requirements of the 2024 CCR rule are clarified. As of September 30, 2024, Entergy has recorded asset retirement obligations related to CCR management of $72 million. Additionally, all three sites (White Bluff, Independence, and Nelson) are preparing to implement measures to meet the new and updated Effluent Limitation Guidelines discussed below.
Effluent Limitation Guidelines
The 2015 Steam Electric Effluent Limitations Guidelines required, among other things, that there be no discharge of bottom ash transport water. In 2020 the EPA finalized the Reconsideration Rule, allowing limited discharges of bottom ash transport water up to 10% of system volume, under certain defined circumstances including significant (10-year, 24-hour) rain events. The 2020 rule also created a subcategory for units that permanently cease coal combustion by December 31, 2028. Entergy’s White Bluff facility filed a notice of planned participation for this subcategory in October 2021. In May 2024 the EPA finalized a supplemental rule that retains the “retirement by 2028” subcategory, creates a new “retirement by 2034” subcategory, otherwise reinstates the zero-discharge requirement for bottom ash transport water, and imposes new requirements for leachate after the facility ceases to burn coal. Thus, units which permanently cease combustion of coal by December 31, 2028 or December 31, 2034 are exempt from the zero-discharge requirement. However, for units in the 2034 subcategory, the 10% discharge allowance must be incorporated into the facility’s discharge permit. To be covered by this exemption, both Independence and Nelson Unit 6 will need to file Notices of Planned Participation in the 2034 subcategory by December 31, 2025. To help ensure facilities cease combustion of coal by the required subcategory 2028 and 2034 dates, zero discharge of bottom ash transport water is required after April 30, 2029 and April 30, 2035, respectively. Entergy continues to evaluate the compliance pathways and obligations of this rule.
Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibits 101).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
ENTERGY CORPORATION ENTERGY ARKANSAS, LLC ENTERGY LOUISIANA, LLC ENTERGY MISSISSIPPI, LLC ENTERGY NEW ORLEANS, LLC ENTERGY TEXAS, INC. SYSTEM ENERGY RESOURCES, INC.
/s/ Reginald T. Jackson
Reginald T. Jackson Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer)