NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predict with certainty the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report. Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein.
Vidalia Purchased Power Agreement
See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.
ANO Damage, Outage, and NRC Reviews
See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews, and the deferral of replacement power costs.
Spent Nuclear Fuel Litigation
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.
In January 2021 the U.S. Court of Federal Claims issued a final judgment in the amount of $23.1 million in favor of Entergy Nuclear Palisades and against the DOE in the second round Palisades damages case. Entergy received payment from the U.S. Treasury in February 2021. The effects of recording the judgment were reductions to plant, other operation and maintenance expense, and taxes other than income taxes. The Palisades damages awarded included $15.7 million related to costs previously capitalized, $7.1 million related to costs previously recorded as other operation and maintenance expenses, and $0.3 million related to costs previously recorded as taxes other than income taxes. Of the $15.7 million previously capitalized, Entergy recorded $9.1 million as a reduction to previously-recorded depreciation expense.
Nuclear Insurance
See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy’s nuclear power plants.
Non-Nuclear Property Insurance
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Employment and Labor-related Proceedings
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.
Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation.
Grand Gulf-Related Agreements
See Note 8 to the financial statements in the Form 10-K for information regarding Grand Gulf-related agreements.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets and Regulatory Liabilities
See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets and regulatory liabilities in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries. The following are updates to that discussion.
Fuel and purchased power cost recovery
Entergy Arkansas
Energy Cost Recovery Rider
In March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01052 per kWh to $0.00959 per kWh. The redetermined rate calculation also included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. The redetermined rate became effective with the first billing cycle in April 2021 through the normal operation of the tariff.
Entergy Louisiana
In February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021 Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over 5 months beginning in April 2021. The incremental fuel costs remain subject to review for reasonableness and eligibility for recovery through the fuel adjustment clause mechanism. At its April 2021 meeting, the LPSC authorized its staff to review the prudence of the February 2021 fuel costs incurred by all LPSC jurisdictional utilities.
In March 2021 the LPSC staff provided notice of an audit of Entergy Louisiana’s purchased gas adjustment clause filings covering the period January 2018 through December 2020. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period. No audit report has been filed.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas
In February 2021, Entergy Texas filed an application to implement a fuel refund for a cumulative over-recovery of approximately $75 million that is primarily attributable to settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas planned to issue the refund over the period of March through August 2021. On February 22, 2021, Entergy Texas filed a motion to abate its fuel refund proceeding to assess how the February 2021 winter storm impacted Entergy Texas’s fuel over-recovery position. In March 2021, Entergy Texas withdrew its application to implement the fuel refund. Entergy Texas is continuing to evaluate its fuel balance and will file a subsequent refund or surcharge application consistent with the requirements of the PUCT’s rules.
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for information regarding retail rate proceedings involving the Utility operating companies. The following are updates to that discussion.
Filings with the APSC (Entergy Arkansas)
Retail Rates
2020 Formula Rate Plan Filing
As discussed in the Form 10-K, in December 2020, Entergy Arkansas filed a petition for rehearing of the APSC’s decision in the 2020 formula rate plan proceeding regarding the 2019 netting adjustment, and in January 2021 the APSC granted further consideration of Entergy Arkansas’s petition. Based on the progress of the proceeding to date, in December 2020, Entergy Arkansas recorded a regulatory liability of $43.5 million to reflect the netting adjustment for 2019, as included in the APSC’s December 2020 order, which would be returned to customers in 2021. Entergy Arkansas also requested an extension of the formula rate plan rider for a second five-year term. In March 2021 the Arkansas Governor signed HB1662 into law (Act 404). Act 404 clarified aspects of the original formula rate plan legislation enacted in 2015, including with respect to the extension of a formula rate plan, the methodology for the netting adjustment, and debt and equity levels; it also reaffirmed the customer protections of the original formula rate plan legislation, including the cap on annual formula rate plan rate changes. Pursuant to Act 404, Entergy Arkansas’s formula rate plan rider is extended for a second five-year term. Entergy Arkansas filed a compliance tariff in its formula rate plan docket in April 2021 to effectuate the netting provisions of Act 404, which reflected a net change in required formula rate plan rider revenue of $39.8 million, effective with the first billing cycle of May 2021. In April 2021 the APSC issued an order approving the compliance tariff and recognizing the formula rate plan extension. Also in April 2021, Entergy Arkansas filed for approval of modifications to the formula rate plan tariff incorporating the provisions in Act 404, and the APSC approved the tariff modifications in April 2021. Given the APSC general staff’s support for the expedited approval of these filings by the APSC, Entergy Arkansas supported an amendment to Act 404 to achieve a reduced return on equity from 9.75% to 9.65% to apply for years applicable to the extension term; that amendment was signed by the Arkansas Governor in April 2021 and is now Act 894. Based on the APSC’s order issued in April 2021, in the first quarter 2021 Entergy Arkansas reversed the remaining regulatory liability for the netting adjustment for 2019.
COVID-19 Orders
See the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. In March 2021 the APSC issued an order confirming the lifting of the moratorium on service disconnects effective in May 2021. As of March 31, 2021, Entergy Arkansas recorded a regulatory asset of $11.4 million for costs associated with the COVID-19 pandemic.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
2017 Formula Rate Plan Filing
As discussed in the Form 10-K, in May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station (formerly St. Charles Power Station). In February 2021, LPSC staff filed testimony that substantially all the costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for recovery from customers. LPSC staff further recommended that the LPSC consider monitoring the remaining $3.1 million that was estimated to be incurred for completion of the project in the event the final costs exceed the estimated amounts. Settlement discussions are in progress.
Request for Extension and Modification of Formula Rate Plan
As discussed in the Form 10-K, in May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate plan. The parties reached a settlement in April 2021 regarding Entergy Louisiana’s proposed FRP extension. Entergy Louisiana and the LPSC staff filed a joint motion asking the LPSC to consider and approve the uncontested settlement at the May 2021 LPSC meeting. Key terms of the settlement include: a three year term (test years 2020, 2021, and 2022) covering a rate-effective period of September 2021 through August 2024; a 9.50% return on equity, with a smaller, 50 basis point deadband above and below (9.0%-10.0%); elimination of sharing if earnings are outside the deadband; a $63 million rate increase for test year 2020 (exclusive of riders); continuation of existing riders (transmission, additional capacity, etc.); addition of a distribution recovery mechanism permitting $225 million per year of distribution investment above a baseline level to be recovered dollar for dollar; modification of the tax mechanism to allow timely rate changes in the event the federal corporate income tax rate is changed from 21%; a cumulative rate increase limit of $70 million (exclusive of riders) for test years 2021 and 2022; and deferral of up to $7 million per year in 2021 and 2022 of expenditures on vegetation management for outside of right of way hazard trees.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees and disconnects for non-payment was extended until the first billing cycle after July 16, 2020. In January 2021, Entergy Louisiana resumed disconnections for customers in all customer classes with past-due balances that have not made payment arrangements. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of March 31, 2021, Entergy Louisiana recorded a regulatory asset of $47.8 million for costs associated with the COVID-19 pandemic.
Filings with the MPSC (Entergy Mississippi)
2021 Formula Rate Plan Filing
In March 2021, Entergy Mississippi submitted its formula rate plan 2021 test year filing and 2020 look-back filing showing Entergy Mississippi’s earned return for the historical 2020 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2021 calendar year to be below the formula rate plan bandwidth. The 2020 test year filing shows a $95.4 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.69% return on rate base,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $44.3 million. The 2021 evaluation report also includes $3.9 million in demand side management costs for which the MPSC approved realignment of recovery from the energy efficiency rider to the formula rate plan. These costs are not subject to the 4% cap and result in a total change in formula rate plan revenues of $48.2 million. The 2020 look-back filing compares actual 2020 results to the approved benchmark return on rate base and reflects the need for a $16.8 million interim increase in formula rate plan revenues. In addition, the 2020 look-back filing includes an interim capacity adjustment true-up for the Choctaw Generating Station, which increases the look-back interim rate adjustment by $1.7 million. These interim rate adjustments total $18.5 million. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $22.1 million interim rate increase, reflecting a cap equal to 2% of 2020 retail revenues, effective with the April 2021 billing cycle, subject to refund, pending a final MPSC order. The $3.9 million of demand side management costs and the Choctaw Generating Station true-up of $1.7 million, which are not subject to the 2% cap of 2020 retail revenues, were included in the April 2021 rate adjustments. A final order is expected in the second quarter 2021, with the resulting final rates, including amounts above the 2% cap of 2020 retail revenues, effective July 2021.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. In December 2020, Entergy Mississippi resumed disconnections for commercial, industrial, and governmental customers with past-due balances that have not made payment arrangements. In January 2021, Entergy Mississippi resumed disconnecting service for residential customers with past-due balances that have not made payment arrangements. As of March 31, 2021, Entergy Mississippi recorded a regulatory asset of $16.3 million for costs associated with the COVID-19 pandemic.
Filings with the City Council (Entergy New Orleans)
COVID-19 Orders
As discussed in the Form 10-K, in June 2020 the City Council established the City Council Cares Program and directed Entergy New Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC proceeding, currently being held in escrow, and approximately $15 million of non-securitized storm reserves to fund this program, which was intended to provide temporary bill relief to customers who became unemployed during the COVID-19 pandemic. The program became effective July 1, 2020 and offered qualifying residential customers bill credits of $100 per month for up to four months, for a maximum of $400 in residential customer bill credits. As of March 31, 2021 the program expired and credits of $4.3 million have been applied to customer bills under the City Council Cares Program.
Additionally, as discussed in the Form 10-K, in February 2021 the City Council adopted a resolution suspending residential customer disconnections for non-payment of utility bills and suspending the assessment and accumulation of late fees on residential customers with past-due balances through May 15, 2021. As of March 31, 2021, Entergy New Orleans recorded a regulatory asset of $14.8 million for costs associated with the COVID-19 pandemic.
Filings with the PUCT and Texas Cities (Entergy Texas)
Distribution Cost Recovery Factor (DCRF) Rider
As discussed in the Form 10-K, in October 2020, 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 $26.3 million annually, or $6.8 million in incremental annual revenues beyond Entergy Texas’s currently effective
Entergy Corporation and Subsidiaries
Notes to Financial Statements
DCRF rider based on its capital invested in distribution between January 1, 2020 and August 31, 2020. In February 2021 the administrative law judge with the State Office of Administrative Hearings approved Entergy Texas’s agreed motion for interim rates, which went into effect in March 2021. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding. This case has been remanded to the PUCT for consideration of a final order at a future open meeting.
Transmission Cost Recovery Factor (TCRF) Rider
As discussed in the Form 10-K, in October 2020, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $51 million annually, or $31.6 million in incremental annual revenues beyond Entergy Texas’s currently effective TCRF rider based on its capital invested in transmission between July 1, 2019 and August 31, 2020. A procedural schedule was established with a hearing scheduled in March 2021. In February 2021, Entergy Texas filed an agreed motion to abate the procedural schedule, noting that the parties had reached a settlement in principle, and the administrative law judge granted the motion to abate. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2021 and resolving all issues in the proceeding. In March 2021 the administrative law judge granted the motion for interim rates, admitted evidence, and remanded this case to the PUCT for consideration of a final order at a future open meeting.
COVID-19 Orders
As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. In January 2021, Entergy Texas resumed disconnections for customers with past-due balances that have not made payment arrangements. As of March 31, 2021, Entergy Texas recorded a regulatory asset of $10.7 million for costs associated with the COVID-19 pandemic.
Generation Cost Recovery Rider
As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider with an initial annual revenue requirement of approximately $91 million to begin recovering a return of and on its capital investment in the Montgomery County Power Station through August 31, 2020. In December 2020, Entergy Texas filed an unopposed settlement supporting a generation cost recovery rider with an annual revenue requirement of approximately $86 million. On January 14, 2021, the PUCT approved the generation cost recovery rider settlement rates on an interim basis and abated the proceeding. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include investment in Montgomery County Power Station after August 31, 2020. In April 2021 the ALJ issued an order unabating the proceeding to consider Entergy Texas’s updated application and establishing a procedural schedule that will result in administrative approval of Entergy Texas’s application in June 2021 if it is unopposed by parties to the proceeding.
In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which is expected to close in June 2021. The initial generation cost recovery rider rates proposed in the application represent no change from the generation cost recovery rider rates to be established in Entergy Texas’s previous generation cost recovery rider proceeding. Once Entergy Texas has acquired the Hardin County Peaking Facility, its investment in the facility will be reflected in an updated filing to Entergy Texas’s application, which will be made within 60 days of the acquisition’s closing.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas Opportunity Sales Proceeding
As discussed in the Form 10-K, in May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting approval of a special rider tariff to recover from its retail customers the costs of the opportunity sales payments made to the other Utility operating companies, and in July 2020 the APSC issued a decision finding that Entergy Arkansas’s application is not in the public interest. In September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of these payments. The court held a hearing in February 2021 regarding issues addressed in the pre-trial conference report, and the parties await further instructions from the court.
Complaints Against System Energy
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule in the System Energy proceeding was further revised in order to allow parties to address the Opinion No. 569-A methodology. The parties and FERC trial staff filed final rounds of testimony in August 2020. The hearing before a FERC ALJ occurred in late-September through early-October 2020, post-hearing briefing took place in November and December 2020.
In March 2021 the FERC ALJ issued an initial decision. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $59 million, which includes interest through March 31, 2021, and the estimated resulting annual rate reduction would be approximately $46 million. The estimated refund will continue to accrue interest until a final FERC decision is issued. Based on the course of the proceeding to date, System Energy has recorded a provision of $36 million, including interest, as of March 31, 2021.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021, the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions are due in May 2021. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue
As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through March 31, 2021, is approximately $422 million, plus interest, which is approximately $115 million through March 31, 2021. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through March 31, 2021.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before the FERC, which will review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
Also as discussed in the Form 10-K, in November 2020 the IRS issued a Revenue Agent’s Report (RAR) for the 2014/2015 tax year and in December 2020 Entergy executed it. The RAR contained an adjustment to System Energy’s uncertain nuclear decommissioning tax position. As a result of the RAR, in December 2020, System Energy filed amendments to its new Federal Power Act section 205 filings to establish an ongoing rate base credit for the accumulated deferred income taxes resulting from the decommissioning uncertain tax position and to credit excess accumulated deferred income taxes arising from the successful portion of the decommissioning uncertain tax position. The amendments both propose the inclusion of the RAR as support for the filings. In December 2020 the LPSC, APSC, and City Council filed a protest in response to the amendments, reiterating their prior objections to the filings. In February 2021 the FERC issued an order accepting System Energy’s Federal Power Act section 205 filings subject to refund, setting them for hearing, and holding the hearing in abeyance.
In December 2020, System Energy filed a new Federal Power Act section 205 filing to provide a one-time, historical credit to customers of $25.2 million for the accumulated deferred income taxes that would have been created by the decommissioning uncertain tax position if the IRS’s decision had been known in 2016. In January 2021 the LPSC, APSC, MPSC, and City Council filed a protest to the filing. In February 2021, the FERC issued an order accepting System Energy’s Federal Power Act section 205 filing subject to refund, setting it for hearing, and holding the hearing in abeyance. The one-time credit was made during the first quarter 2021.
LPSC Authorization of Additional Complaints
As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at 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, and the first of the additional complaints was filed by the LPSC, the APSC, the MPSC and the City Council in September 2020. The second of the additional complaints was filed at the FERC in March 2021 by the LPSC, the APSC, and the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. The second complaint contains two primary allegations. First, it alleges that, based on the plant’s capacity factor and alleged safety performance, System Energy and the other
Entergy Corporation and Subsidiaries
Notes to Financial Statements
respondents imprudently operated Grand Gulf during the period 2016-2020, and it seeks refunds of at least $360 million in alleged replacement energy costs, in addition to other costs, including those that can only be identified upon further investigation. Second, it alleges that the performance and/or management of the 2012 extended power uprate of Grand Gulf was imprudent, and it seeks refunds of all costs of the 2012 uprate that are determined to result from imprudent planning or management of the project. In addition to the requested refunds, the complaint asks that the FERC modify the Unit Power Sales Agreement to provide for full cost recovery only if certain performance indicators are met and to require pre-authorization of capital improvement projects in excess of $125 million before related costs may be passed through to customers in rates. In April 2021, System Energy and the other respondents filed their motion to dismiss and answer to the complaint. System Energy requested that the FERC dismiss the claims within the complaint. With respect to the claim concerning operations, System Energy argues that the complaint does not meet its legal burden because, among other reasons, it fails to allege any specific imprudent conduct. With respect to the claim concerning the uprate, System Energy argues that the complaint fails because, among other reasons, the complainants’ own conduct prevents them from raising a serious doubt as to the prudence of the uprate. System Energy also requests that the FERC dismiss other elements of the complaint, including the proposed modifications to the Unit Power Sales Agreement, because they are not warranted.
Storm Cost Recovery Filings with Retail Regulators
Entergy Louisiana
Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri
In August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild.
In October 2020, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments to facilitate issuance of shorter-term bonds to provide interim financing for restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy Louisiana’s capital structure and cost rate of debt for ratemaking purposes, including the allowance for funds used during construction, shorter-term debt up to $1.1 billion issued by Entergy Louisiana to fund costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta costs on an interim basis. In November 2020 the LPSC issued an order approving the joint motion, and Entergy Louisiana issued $1.1 billion of 0.62% Series mortgage bonds due November 2023. Also in November 2020, Entergy Louisiana drew $257 million from its funded storm reserves.
In February 2021, two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing incremental outages. As discussed above in “Fuel and purchased power recovery,” Entergy Louisiana is recovering the incremental fuel costs associated with Winter Storm Uri over a five-month period from April 2021 through August 2021.
In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by the storms are currently estimated to be approximately $2.05 billion, including approximately $1.74 billion in capital costs and approximately $310 million in non-capital costs. Including carrying costs through January 2022, Entergy Louisiana is seeking an LPSC determination that $2.10 billion was prudently incurred and, therefore, is eligible for recovery from customers. Additionally, Entergy Louisiana is requesting that the LPSC determine that re-establishment of a storm escrow
Entergy Corporation and Subsidiaries
Notes to Financial Statements
account to the previously authorized amount of $290 million is appropriate. Entergy Louisiana intends to supplement this application with a request regarding the financing and recovery of the recoverable storm restoration costs.
Entergy New Orleans
Hurricane Zeta
In October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Zeta are currently estimated to be approximately $36 million, including approximately $28 million in capital costs and approximately $8 million in non-capital costs. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. Entergy New Orleans expects to initiate its storm cost recovery proceeding in May 2021.
Entergy Texas
Hurricane Laura, Hurricane Delta, and Winter Storm Uri
In August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In April 2021, Entergy Texas filed an application with the PUCT requesting a determination that its system restoration costs associated with Hurricane Laura, Hurricane Delta, and Winter Storm Uri of approximately $250 million, including approximately $200 million in capital costs and approximately $50 million in non-capital costs were reasonable and necessary to enable Entergy Texas to restore electric service to its customers and Entergy Texas’s electric utility infrastructure. The filing currently includes only a portion of the Winter Storm Uri costs. Entergy Texas expects to initiate a proceeding later in 2021 to securitize the costs approved by the PUCT.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)
Common Stock
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
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(In Millions, Except Per Share Data)
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$/share
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Entergy Corporation
|
$334.6
|
|
|
200.5
|
|
|
$1.67
|
|
|
$118.7
|
|
|
199.8
|
|
|
$0.59
|
|
|
Average dilutive effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
0.4
|
|
|
(0.01)
|
|
|
|
|
0.7
|
|
|
—
|
|
|
Other equity plans
|
|
|
0.2
|
|
|
—
|
|
|
|
|
0.4
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
$334.6
|
|
|
201.1
|
|
|
$1.66
|
|
|
$118.7
|
|
|
200.9
|
|
|
$0.59
|
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 1.0 million for the three months ended March 31, 2021 and approximately 0.5 million for the three months ended March 31, 2020.
Entergy’s stock options and other equity compensation plans are discussed in Note 5 to the financial statements herein and in Note 12 to the financial statements in the Form 10-K.
Dividends declared per common share were $0.95 for the three months ended March 31, 2021 and $0.93 for the three months ended March 31, 2020.
Treasury Stock
During the three months ended March 31, 2021, Entergy Corporation issued 388,330 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the three months ended March 31, 2021.
Retained Earnings
On April 12, 2021, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.95 per share, payable on June 1, 2021, to holders of record as of May 6, 2021.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2021 by component:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow
hedges
net
unrealized
gain (loss)
|
|
Pension
and
other
postretirement
liabilities
|
|
Net
unrealized
investment
gain (loss)
|
|
Total
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
(In Thousands)
|
|
Beginning balance, January 1, 2021
|
$28,719
|
|
|
($534,576)
|
|
|
$56,650
|
|
|
($449,207)
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
1,482
|
|
|
—
|
|
|
(45,301)
|
|
|
(43,819)
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
(31,062)
|
|
|
22,967
|
|
|
614
|
|
|
(7,481)
|
|
|
Net other comprehensive income (loss) for the period
|
(29,580)
|
|
|
22,967
|
|
|
(44,687)
|
|
|
(51,300)
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2021
|
($861)
|
|
|
($511,609)
|
|
|
$11,963
|
|
|
($500,507)
|
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 2020 by component:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow
hedges
net
unrealized
gain (loss)
|
|
Pension
and
other
postretirement
liabilities
|
|
Net
unrealized
investment
gain (loss)
|
|
|
|
Total
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance, January 1, 2020
|
$84,206
|
|
|
($557,072)
|
|
|
$25,946
|
|
|
|
|
($446,920)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
52,846
|
|
|
34,349
|
|
|
17,713
|
|
|
|
|
104,908
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
(74,556)
|
|
|
19,550
|
|
|
(1,969)
|
|
|
|
|
(56,975)
|
|
|
Net other comprehensive income (loss) for the period
|
(21,710)
|
|
|
53,899
|
|
|
15,744
|
|
|
|
|
47,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31, 2020
|
$62,496
|
|
|
($503,173)
|
|
|
$41,690
|
|
|
|
|
($398,987)
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and Other
Postretirement Liabilities
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
Beginning balance, January 1,
|
|
$4,327
|
|
|
$4,562
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
—
|
|
|
10,050
|
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
(407)
|
|
|
(583)
|
|
|
Net other comprehensive income (loss) for the period
|
|
(407)
|
|
|
9,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance, March 31,
|
|
$3,920
|
|
|
$14,029
|
|
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified
from AOCI
|
|
Income Statement Location
|
|
|
2021
|
|
2020
|
|
|
|
|
(In Thousands)
|
|
|
|
Cash flow hedges net unrealized gain (loss)
|
|
|
|
|
|
|
Power contracts
|
$39,367
|
|
|
$94,423
|
|
|
Competitive business operating revenues
|
|
Interest rate swaps
|
(48)
|
|
|
(48)
|
|
|
Miscellaneous - net
|
|
Total realized gain (loss) on cash flow hedges
|
39,319
|
|
|
94,375
|
|
|
|
|
Income taxes
|
(8,257)
|
|
|
(19,819)
|
|
|
Income taxes
|
|
Total realized gain (loss) on cash flow hedges (net of tax)
|
$31,062
|
|
|
$74,556
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities
|
|
|
|
|
|
|
Amortization of prior-service credit
|
$5,248
|
|
|
$3,719
|
|
|
(a)
|
|
Amortization of loss
|
(34,529)
|
|
|
(27,318)
|
|
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortization
|
(29,281)
|
|
|
(23,599)
|
|
|
|
|
Income taxes
|
6,314
|
|
|
4,049
|
|
|
Income taxes
|
|
Total amortization (net of tax)
|
($22,967)
|
|
|
($19,550)
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized investment gain (loss)
|
|
|
|
|
|
|
Realized gain (loss)
|
($972)
|
|
|
$3,116
|
|
|
Interest and investment income
|
|
Income taxes
|
358
|
|
|
(1,147)
|
|
|
Income taxes
|
|
Total realized investment gain (loss) (net of tax)
|
($614)
|
|
|
$1,969
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax)
|
$7,481
|
|
|
$56,975
|
|
|
|
(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional
Entergy Corporation and Subsidiaries
Notes to Financial Statements
details.
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified
from AOCI
|
|
Income Statement Location
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(In Thousands)
|
|
|
|
Pension and other postretirement liabilities
|
|
|
|
|
|
|
|
Amortization of prior-service credit
|
|
$1,230
|
|
|
$1,089
|
|
|
(a)
|
|
Amortization of loss
|
|
(679)
|
|
|
(301)
|
|
|
(a)
|
|
|
|
|
|
|
|
|
|
Total amortization
|
|
551
|
|
|
788
|
|
|
|
|
Income taxes
|
|
(144)
|
|
|
(205)
|
|
|
Income taxes
|
|
Total amortization (net of tax)
|
|
407
|
|
|
583
|
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax)
|
|
$407
|
|
|
$583
|
|
|
|
(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2024. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the three months ended March 31, 2021 was 1.63% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capacity
|
|
Borrowings
|
|
Letters
of Credit
|
|
Capacity
Available
|
|
(In Millions)
|
|
$3,500
|
|
$55
|
|
$6
|
|
$3,439
|
Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Registrant Subsidiaries (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of March 31, 2021, Entergy Corporation had approximately $1,028 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 2021 was 0.34%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 2021 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Expiration
Date
|
|
Amount of
Facility
|
|
Interest Rate (a)
|
|
Amount Drawn
as of
March 31, 2021
|
|
Letters of Credit
Outstanding as of
March 31, 2021
|
|
Entergy Arkansas
|
|
April 2022
|
|
$25 million (b)
|
|
2.75%
|
|
$—
|
|
$—
|
|
Entergy Arkansas
|
|
September 2024
|
|
$150 million (c)
|
|
1.21%
|
|
$—
|
|
$—
|
|
Entergy Louisiana
|
|
September 2024
|
|
$350 million (c)
|
|
1.21%
|
|
$—
|
|
$—
|
|
Entergy Mississippi
|
|
April 2022
|
|
$37.5 million (d)
|
|
1.58%
|
|
$—
|
|
$—
|
|
Entergy Mississippi
|
|
April 2022
|
|
$35 million (d)
|
|
1.58%
|
|
$—
|
|
$—
|
|
Entergy Mississippi
|
|
April 2022
|
|
$10 million (d)
|
|
1.58%
|
|
$—
|
|
$—
|
|
Entergy New Orleans
|
|
November 2021
|
|
$25 million (c)
|
|
1.36%
|
|
$—
|
|
$—
|
|
Entergy Texas
|
|
September 2024
|
|
$150 million (c)
|
|
1.58%
|
|
$—
|
|
$1.3 million
|
(a)The interest rate is the estimated interest rate as of March 31, 2021 that would have been applied to outstanding borrowings under the facility.
(b)Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
(d)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.
The commitment fees on the credit facilities range from 0.075% to 0.225% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities primarily as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Amount of
Uncommitted Facility
|
|
Letter of Credit Fee
|
|
MISO Letters of Credit
Issued as of
March 31, 2021 (a) (b)
|
|
Entergy Arkansas
|
|
$25 million
|
|
0.78%
|
|
$1 million
|
|
Entergy Louisiana
|
|
$125 million
|
|
0.78%
|
|
$12.8 million
|
|
Entergy Mississippi
|
|
$65 million
|
|
0.78%
|
|
$1 million
|
|
Entergy New Orleans
|
|
$15 million
|
|
1.00%
|
|
$2 million
|
|
Entergy Texas
|
|
$50 million
|
|
0.70%
|
|
$30.2 million
|
(a)As of March 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Arkansas, $0.2 million for Entergy Louisiana, $0.4 million for Entergy Mississippi, and $0.1 million for Entergy New Orleans. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of March 31, 2021, in addition to the $1 million MISO letter of credit, Entergy Mississippi has $1 million of non-MISO letters of credit outstanding under this facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are effective through July 14, 2022. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements. The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from internal and external short-term borrowings combined may not exceed the FERC-authorized limits. The following were the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of March 31, 2021 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Authorized
|
|
Borrowings
|
|
|
(In Millions)
|
|
Entergy Arkansas
|
$250
|
|
$—
|
|
Entergy Louisiana
|
$450
|
|
$—
|
|
Entergy Mississippi
|
$175
|
|
$—
|
|
Entergy New Orleans
|
$150
|
|
$25
|
|
Entergy Texas
|
$200
|
|
$31
|
|
System Energy
|
$200
|
|
$—
|
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
See Note 17 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs have commercial paper programs in place. Following is a summary as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Expiration
Date
|
|
Amount
of
Facility
|
|
Weighted
Average Interest
Rate on
Borrowings (a)
|
|
Amount
Outstanding as of
March 31, 2021
|
|
|
|
|
|
(Dollars in Millions)
|
|
Entergy Arkansas VIE
|
|
September 2022
|
|
$80
|
|
1.26%
|
|
$4.8
|
|
Entergy Louisiana River Bend VIE
|
|
September 2022
|
|
$105
|
|
1.24%
|
|
$70.5
|
|
Entergy Louisiana Waterford VIE
|
|
September 2022
|
|
$105
|
|
1.25%
|
|
$73.2
|
|
System Energy VIE
|
|
September 2022
|
|
$120
|
|
1.23%
|
|
$63.4
|
(a)Includes letter of credit fees and bank fronting fees on commercial paper issuances, if any, by the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company variable interest entity for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.
The commitment fees on the credit facilities are 0.125% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, and System Energy VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entities had notes payable that were included in debt on the respective balance sheets as of March 31, 2021 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
Description
|
|
Amount
|
|
Entergy Arkansas VIE
|
|
3.65% Series L due July 2021
|
|
$90 million
|
|
Entergy Arkansas VIE
|
|
3.17% Series M due December 2023
|
|
$40 million
|
|
Entergy Louisiana River Bend VIE
|
|
2.51% Series V due June 2027
|
|
$70 million
|
|
Entergy Louisiana Waterford VIE
|
|
3.22% Series I due December 2023
|
|
$20 million
|
|
System Energy VIE
|
|
2.05% Series K due September 2027
|
|
$90 million
|
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained financing authorizations from the FERC that extend through July 14, 2022 for issuances by its nuclear fuel company variable interest entities.
Debt Issuances and Retirements
(Entergy Corporation)
In March 2021, Entergy Corporation issued $650 million of 1.90% Series senior notes due June 2028 and $650 million of 2.40% Series senior notes due June 2031. Entergy Corporation used the proceeds to repay a portion of its outstanding commercial paper and for general corporate purposes.
(Entergy Arkansas)
In March 2021, Entergy Arkansas issued $400 million of 3.35% Series mortgage bonds due June 2052. Entergy Arkansas expects to use, or has used, the proceeds, together with other funds, to finance in part the purchase of the Searcy Solar Facility, to repay a portion of the debt outstanding under its $150 million long-term revolving credit facility, to repay a portion of the debt outstanding under its $25 million short-term revolving credit facility, and for general corporate purposes.
(Entergy Louisiana)
In March 2021, Entergy Louisiana issued $500 million of 2.35% Series mortgage bonds due June 2032 and $500 million of 3.10% Series mortgage bonds due June 2041. Entergy Louisiana used the proceeds, together with other funds, to repay on or prior to maturity, its $200 million of 4.80% Series mortgage bonds due May 2021, to finance, on an interim basis, storm restoration costs related to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and the winter storms of February 2021, and for general corporate purposes.
In April 2021, Entergy Louisiana arranged for the issuance by the Louisiana Local Government Environmental Facilities and Community Development Authority of (i) $16.2 million of 2.00% pollution control revenue bonds Series 2021A due June 2030, and (ii) $182.480 million of 2.50% pollution control revenue bonds Series 2021B due April 2036, each of which is evidenced by a separate series of collateral trust mortgage bonds of Entergy Louisiana. A portion of the proceeds were applied in April 2021 to the refunding of $83.680 million of outstanding pollution control revenue bonds previously issued on behalf of Entergy Louisiana. The remainder of the proceeds were held in trust as of April 1, 2021 and are expected to be applied in June 2021 to the refunding of $115 million of outstanding pollution control revenue bonds previously issued on behalf of Entergy Louisiana.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(Entergy Mississippi)
In March 2021, Entergy Mississippi issued $200 million of 3.50% Series mortgage bonds due June 2051. Entergy Mississippi used the proceeds, together with other funds, to repay a portion of the debt outstanding under its three short-term revolving credit facilities with an aggregate commitment of $82.5 million and for general corporate purposes.
(Entergy Texas)
In May 2021, Entergy Texas redeemed $125 million of 2.55% Series mortgage bonds due June 2021.
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value
of Long-Term Debt
|
|
Fair Value
of Long-Term Debt (a)
|
|
|
(In Thousands)
|
|
Entergy
|
$24,704,475
|
|
|
$25,716,967
|
|
|
Entergy Arkansas
|
$3,958,751
|
|
|
$4,126,514
|
|
|
Entergy Louisiana
|
$10,059,885
|
|
|
$10,681,713
|
|
|
Entergy Mississippi
|
$1,981,429
|
|
|
$2,084,891
|
|
|
Entergy New Orleans
|
$642,412
|
|
|
$584,475
|
|
|
Entergy Texas
|
$2,465,827
|
|
|
$2,545,973
|
|
|
System Energy
|
$768,969
|
|
|
$785,758
|
|
(a)Fair values were classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein.
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value
of Long-Term Debt
|
|
Fair Value
of Long-Term Debt (a)
|
|
|
(In Thousands)
|
|
Entergy
|
$22,369,776
|
|
|
$24,813,818
|
|
|
Entergy Arkansas
|
$3,967,507
|
|
|
$4,355,632
|
|
|
Entergy Louisiana
|
$9,027,451
|
|
|
$10,258,294
|
|
|
Entergy Mississippi
|
$1,780,577
|
|
|
$2,021,432
|
|
|
Entergy New Orleans
|
$642,233
|
|
|
$620,634
|
|
|
Entergy Texas
|
$2,493,708
|
|
|
$2,765,193
|
|
|
System Energy
|
$805,274
|
|
|
$840,540
|
|
(a)Fair values were classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. STOCK-BASED COMPENSATION (Entergy Corporation)
Entergy grants stock and stock-based awards, which are described more fully in Note 12 to the financial statements in the Form 10-K. Awards under Entergy’s plans generally vest over three years.
Stock Options
Entergy granted options on 508,704 shares of its common stock under the 2019 Omnibus Incentive Plan during the first quarter 2021 with a fair value of $12.27 per option. As of March 31, 2021, there were options on 2,890,582 shares of common stock outstanding with a weighted-average exercise price of $90.75. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of March 31, 2021. The aggregate intrinsic value of the stock options outstanding as of March 31, 2021 was $41.6 million.
The following table includes financial information for outstanding stock options for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Millions)
|
|
Compensation expense included in Entergy’s net income
|
$1.0
|
|
|
$1.0
|
|
|
Tax benefit recognized in Entergy’s net income
|
$0.3
|
|
|
$0.3
|
|
|
Compensation cost capitalized as part of fixed assets and materials and supplies
|
$0.4
|
|
|
$0.4
|
|
Other Equity Awards
In January 2021 the Board approved and Entergy granted 392,382 restricted stock awards and 203,983 long-term incentive awards under the 2019 Omnibus Incentive Plan. The restricted stock awards were made effective on January 28, 2021 and were valued at $95.87 per share, which was the closing price of Entergy’s common stock on that date. Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the three-year vesting period. One-third of the restricted stock awards and accrued dividends will vest upon each anniversary of the grant date.
In addition, long-term incentive awards were also granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned. To emphasize the importance of strong cash generation for the long-term health of its business, Entergy Corporation is replacing the cumulative adjusted earnings per share metric with a credit measure – adjusted funds from operations/debt ratio for the 2021-2023 performance period. Performance will be measured based eighty percent on relative total shareholder return and twenty percent on the credit measure. The performance units were granted on January 28, 2021 and eighty percent were valued at $110.74 per share based on various factors, primarily market conditions; and twenty percent were valued at $95.87 per share, the closing price of Entergy’s common stock on that date. Performance units have the same dividend rights as shares of Entergy common stock and are considered issued and outstanding shares of Entergy upon vesting. Performance units are expensed ratably over the three-year vesting period and compensation cost for the portion of the award based on cumulative adjusted earnings per share will be adjusted based on the number of units that ultimately vest. See Note 12 to the financial statements in the Form 10-K for a description of the Long-Term Performance Unit Program.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for other outstanding equity awards for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Millions)
|
|
Compensation expense included in Entergy’s net income
|
$10.8
|
|
|
$9.4
|
|
|
Tax benefit recognized in Entergy’s net income
|
$2.7
|
|
|
$2.4
|
|
|
Compensation cost capitalized as part of fixed assets and materials and supplies
|
$4.0
|
|
|
$3.4
|
|
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Components of Qualified Net Pension Cost
Entergy’s qualified pension cost, including amounts capitalized, for the first quarters of 2021 and 2020, included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Service cost - benefits earned during the period
|
$45,241
|
|
|
$40,379
|
|
|
Interest cost on projected benefit obligation
|
46,099
|
|
|
60,799
|
|
|
Expected return on assets
|
(105,713)
|
|
|
(103,565)
|
|
|
|
|
|
|
|
Amortization of net loss
|
104,392
|
|
|
87,259
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension costs
|
$90,019
|
|
|
$84,872
|
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the first quarters of 2021 and 2020, included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New Orleans
|
|
Entergy
Texas
|
|
System
Energy
|
|
|
|
(In Thousands)
|
|
Service cost - benefits earned during the period
|
|
$7,418
|
|
|
$10,043
|
|
|
$2,364
|
|
|
$796
|
|
|
$1,801
|
|
|
$2,314
|
|
|
Interest cost on projected benefit obligation
|
|
8,341
|
|
|
9,562
|
|
|
2,462
|
|
|
1,029
|
|
|
1,949
|
|
|
2,142
|
|
|
Expected return on assets
|
|
(19,670)
|
|
|
(22,538)
|
|
|
(5,587)
|
|
|
(2,622)
|
|
|
(5,237)
|
|
|
(4,778)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
19,303
|
|
|
19,204
|
|
|
5,668
|
|
|
2,270
|
|
|
3,711
|
|
|
5,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net pension cost
|
|
$15,392
|
|
|
$16,271
|
|
|
$4,907
|
|
|
$1,473
|
|
|
$2,224
|
|
|
$5,004
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New Orleans
|
|
Entergy
Texas
|
|
System
Energy
|
|
|
|
(In Thousands)
|
|
Service cost - benefits earned during the period
|
|
$6,566
|
|
|
$8,794
|
|
|
$2,023
|
|
|
$663
|
|
|
$1,546
|
|
|
$1,965
|
|
|
Interest cost on projected benefit obligation
|
|
11,433
|
|
|
12,841
|
|
|
3,340
|
|
|
1,456
|
|
|
2,782
|
|
|
2,814
|
|
|
Expected return on assets
|
|
(19,622)
|
|
|
(22,402)
|
|
|
(5,757)
|
|
|
(2,627)
|
|
|
(5,486)
|
|
|
(4,663)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of net loss
|
|
16,897
|
|
|
16,627
|
|
|
4,748
|
|
|
2,005
|
|
|
3,265
|
|
|
4,279
|
|
|
Net pension cost
|
|
$15,274
|
|
|
$15,860
|
|
|
$4,354
|
|
|
$1,497
|
|
|
$2,107
|
|
|
$4,395
|
|
Non-Qualified Net Pension Cost
Entergy recognized $4.6 million and $4.5 million in pension cost for its non-qualified pension plans in the first quarters of 2021 and 2020, respectively.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the first quarters of 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New Orleans
|
|
Entergy
Texas
|
|
|
(In Thousands)
|
|
2021
|
$90
|
|
|
$44
|
|
|
$96
|
|
|
$8
|
|
|
$115
|
|
|
2020
|
$83
|
|
|
$37
|
|
|
$90
|
|
|
$8
|
|
|
$117
|
|
Components of Net Other Postretirement Benefit Cost (Income)
Entergy’s other postretirement benefit cost (income), including amounts capitalized, for the first quarters of 2021 and 2020, included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Service cost - benefits earned during the period
|
$6,645
|
|
|
$5,801
|
|
|
Interest cost on accumulated postretirement benefit obligation (APBO)
|
5,320
|
|
|
7,932
|
|
|
Expected return on assets
|
(10,805)
|
|
|
(10,328)
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
(8,267)
|
|
|
(5,922)
|
|
|
Amortization of net loss
|
713
|
|
|
468
|
|
|
Net other postretirement benefit income
|
($6,394)
|
|
|
($2,049)
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the first quarters of 2021 and 2020, included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New Orleans
|
|
Entergy
Texas
|
|
System
Energy
|
|
|
|
(In Thousands)
|
|
Service cost - benefits earned during the period
|
|
$1,034
|
|
|
$1,544
|
|
|
$362
|
|
|
$109
|
|
|
$346
|
|
|
$335
|
|
|
Interest cost on APBO
|
|
932
|
|
|
1,130
|
|
|
278
|
|
|
130
|
|
|
317
|
|
|
220
|
|
|
Expected return on assets
|
|
(4,505)
|
|
|
—
|
|
|
(1,384)
|
|
|
(1,438)
|
|
|
(2,548)
|
|
|
(789)
|
|
|
Amortization of prior service credit
|
|
(280)
|
|
|
(1,230)
|
|
|
(444)
|
|
|
(229)
|
|
|
(936)
|
|
|
(109)
|
|
|
Amortization of net (gain) loss
|
|
49
|
|
|
(91)
|
|
|
19
|
|
|
(178)
|
|
|
100
|
|
|
15
|
|
|
Net other postretirement benefit cost (income)
|
|
($2,770)
|
|
|
$1,353
|
|
|
($1,169)
|
|
|
($1,606)
|
|
|
($2,721)
|
|
|
($328)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New Orleans
|
|
Entergy
Texas
|
|
System
Energy
|
|
|
|
(In Thousands)
|
|
Service cost - benefits earned during the period
|
|
$828
|
|
|
$1,423
|
|
|
$351
|
|
|
$105
|
|
|
$303
|
|
|
$294
|
|
|
Interest cost on APBO
|
|
1,217
|
|
|
1,723
|
|
|
422
|
|
|
227
|
|
|
582
|
|
|
307
|
|
|
Expected return on assets
|
|
(4,326)
|
|
|
—
|
|
|
(1,307)
|
|
|
(1,355)
|
|
|
(2,435)
|
|
|
(748)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
(661)
|
|
|
(1,089)
|
|
|
(321)
|
|
|
(76)
|
|
|
(550)
|
|
|
(219)
|
|
|
Amortization of net (gain) loss
|
|
55
|
|
|
(199)
|
|
|
29
|
|
|
(38)
|
|
|
212
|
|
|
20
|
|
|
Net other postretirement benefit cost (income)
|
|
($2,887)
|
|
|
$1,858
|
|
|
($826)
|
|
|
($1,137)
|
|
|
($1,888)
|
|
|
($346)
|
|
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the first quarters of 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Qualified
Pension
Costs
|
|
Other
Postretirement
Costs
|
|
Non-Qualified
Pension Costs
|
|
Total
|
|
|
|
(In Thousands)
|
|
|
|
Entergy
|
|
|
|
|
|
|
|
|
|
Amortization of prior service (cost) credit
|
|
$—
|
|
|
$5,288
|
|
|
($40)
|
|
|
$5,248
|
|
|
Amortization of net loss
|
|
(33,439)
|
|
|
(495)
|
|
|
(595)
|
|
|
(34,529)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($33,439)
|
|
|
$4,793
|
|
|
($635)
|
|
|
($29,281)
|
|
|
Entergy Louisiana
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
$—
|
|
|
$1,230
|
|
|
$—
|
|
|
$1,230
|
|
|
Amortization of net gain (loss)
|
|
(769)
|
|
|
91
|
|
|
(1)
|
|
|
(679)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($769)
|
|
|
$1,321
|
|
|
($1)
|
|
|
$551
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Qualified
Pension
Costs
|
|
Other
Postretirement
Costs
|
|
Non-Qualified
Pension Costs
|
|
Total
|
|
|
|
(In Thousands)
|
|
|
|
Entergy
|
|
|
|
|
|
|
|
|
|
Amortization of prior service (cost) credit
|
|
$—
|
|
|
$3,776
|
|
|
($57)
|
|
|
$3,719
|
|
|
Amortization of net gain (loss)
|
|
(26,462)
|
|
|
(25)
|
|
|
(831)
|
|
|
(27,318)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($26,462)
|
|
|
$3,751
|
|
|
($888)
|
|
|
($23,599)
|
|
|
Entergy Louisiana
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credit
|
|
$—
|
|
|
$1,089
|
|
|
$—
|
|
|
$1,089
|
|
|
Amortization of net gain (loss)
|
|
(499)
|
|
|
199
|
|
|
(1)
|
|
|
(301)
|
|
|
|
|
($499)
|
|
|
$1,288
|
|
|
($1)
|
|
|
$788
|
|
Accounting for Pension and Other Postretirement Benefits
In accordance with ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” the other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations and are presented by Entergy in miscellaneous - net in other income.
Other Postretirement Benefits
In March 2020, Entergy announced changes to its other postretirement benefits. Effective January 1, 2021, certain retired, former non-bargaining employees age 65 and older who are eligible for Entergy-sponsored retiree welfare benefits, and their eligible spouses who are age 65 and older (collectively, Medicare-eligible participants), are eligible to participate in a new Entergy-sponsored retiree health plan, and are no longer eligible for retiree coverage under the Entergy Corporation Companies’ Benefits Plus Medical, Dental and Vision Plans. Under the new Entergy retiree health plan, Medicare-eligible participants are eligible to participate in a health reimbursement arrangement which they may use towards the purchase of various types of qualified insurance offered through a Medicare exchange provider and for other qualified medical expenses. In accordance with accounting standards, the effects of this change were reflected in the March 31, 2020 other postretirement obligation.
Employer Contributions
Based on current assumptions, Entergy expects to contribute $356 million to its qualified pension plans in 2021. As of March 31, 2021, Entergy had contributed $152.2 million to its pension plans. Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans for their employees in 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New Orleans
|
|
Entergy
Texas
|
|
System
Energy
|
|
|
(In Thousands)
|
|
Expected 2021 pension contributions
|
$66,649
|
|
|
$59,882
|
|
|
$13,715
|
|
|
$5,395
|
|
|
$6,955
|
|
|
$18,663
|
|
|
Pension contributions made through March 2021
|
$21,361
|
|
|
$29,159
|
|
|
$4,799
|
|
|
$2,629
|
|
|
$2,935
|
|
|
$6,675
|
|
|
Remaining estimated pension contributions to be made in 2021
|
$45,288
|
|
|
$30,723
|
|
|
$8,916
|
|
|
$2,766
|
|
|
$4,020
|
|
|
$11,988
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 7. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy’s reportable segments as of March 31, 2021 were Utility and Entergy Wholesale Commodities. Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana. Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. “All Other” includes the parent company, Entergy Corporation, and other business activity.
Entergy’s segment financial information for the first quarters of 2021 and 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Utility
|
|
Entergy
Wholesale
Commodities
|
|
All Other
|
|
Eliminations
|
|
Consolidated
|
|
|
|
(In Thousands)
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$2,596,616
|
|
|
$248,219
|
|
|
$23
|
|
|
($20)
|
|
|
$2,844,838
|
|
|
Income taxes
|
|
$59,734
|
|
|
$15,560
|
|
|
($9,352)
|
|
|
$—
|
|
|
$65,942
|
|
|
Consolidated net income (loss)
|
|
$360,600
|
|
|
$38,124
|
|
|
($27,680)
|
|
|
($31,899)
|
|
|
$339,145
|
|
|
Total assets as of March 31, 2021
|
|
$56,086,185
|
|
|
$3,793,754
|
|
|
$867,301
|
|
|
($2,079,612)
|
|
|
$58,667,628
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$2,094,629
|
|
|
$332,549
|
|
|
$11
|
|
|
($10)
|
|
|
$2,427,179
|
|
|
Income taxes
|
|
($52,949)
|
|
|
($30,540)
|
|
|
$12,295
|
|
|
$—
|
|
|
($71,194)
|
|
|
Consolidated net income (loss)
|
|
$323,849
|
|
|
($110,428)
|
|
|
($58,228)
|
|
|
($31,899)
|
|
|
$123,294
|
|
|
Total assets as of December 31, 2020
|
|
$55,940,153
|
|
|
$3,800,378
|
|
|
$552,632
|
|
|
($2,053,951)
|
|
|
$58,239,212
|
|
The Entergy Wholesale Commodities business is sometimes referred to as the “competitive businesses.” Eliminations were primarily intersegment activity. Almost all of Entergy’s goodwill was related to the Utility segment.
As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to shut down and sell all of the remaining plants in the merchant nuclear fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total restructuring charges for the first quarters of 2021 and 2020 were comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Employee retention and severance
expenses and other benefits-related costs
|
|
Contracted economic development costs
|
|
Total
|
|
Employee retention and severance
expenses and other benefits-related costs
|
|
Contracted economic development costs
|
|
Total
|
|
|
(In Millions)
|
|
Balance as of January 1,
|
$145
|
|
|
$14
|
|
|
$159
|
|
|
$129
|
|
|
$14
|
|
|
$143
|
|
|
Restructuring costs accrued
|
13
|
|
|
—
|
|
|
13
|
|
|
21
|
|
|
—
|
|
|
21
|
|
|
Cash paid out
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance as of March 31,
|
$157
|
|
|
$14
|
|
|
$171
|
|
|
$150
|
|
|
$14
|
|
|
$164
|
|
In addition, Entergy Wholesale Commodities incurred $3 million in the first quarter 2021 and $5 million in the first quarter 2020 of impairment and other related charges associated with these strategic decisions and transactions.
Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses associated with management’s strategy to exit the merchant power business of approximately $40 million in 2021, of which $13 million has been incurred as of March 31, 2021, and a total of approximately $15 million in 2022.
Registrant Subsidiaries
Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business. Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas
Entergy Corporation and Subsidiaries
Notes to Financial Statements
contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.
Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.
Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation. Entergy Wholesale Commodities is hedging the variability in future cash flows with derivatives for forecasted power transactions through April 30, 2021. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 98% for the remainder of 2021, of which approximately 12% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for the remainder of 2021 is 5.8 TWh.
Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of all positions in the event of a failure or inability to post collateral.
Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of March 31, 2021, a derivative contract with one counterparty is in a liability position (approximately $1 million total). In addition to the corporate guarantee, $6 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $7 million in letters of credit
Entergy Corporation and Subsidiaries
Notes to Financial Statements
were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2020, there were no derivative contracts with counterparties in a liability position. In addition to the corporate guarantee, $5 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $39 million in letters of credit were required to be posted by it counterparties to the Entergy subsidiary. If the Entergy Corporation credit rating falls below investment grade, Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy had executed natural gas swaps and options as of March 31, 2021 was 3 years for Entergy Louisiana and the maximum length of time over which Entergy had executed natural gas swaps as of March 31, 2021 was 7 months for Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of March 31, 2021 was 41,296,000 MMBtu for Entergy, including 21,920,000 MMBtu for Entergy Louisiana and 19,376,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.
During the second quarter 2020, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2020 through May 31, 2021. Financial transmission rights are derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of March 31, 2021 was 23,009 GWh for Entergy, including 5,765 GWh for Entergy Arkansas, 10,716 GWh for Entergy Louisiana, 2,576 GWh for Entergy Mississippi, 1,055 GWh for Entergy New Orleans, and 2,820 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of March 31, 2021 and December 31, 2020. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans as of March 31, 2021 and for Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of December 31, 2020.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31, 2021 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Balance Sheet Location
|
|
Gross Fair Value (a)
|
|
Offsetting Position (b)
|
|
Net Fair Value (c) (d)
|
|
Business
|
|
|
|
|
|
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Prepayments and other (current portion)
|
|
$1
|
|
$—
|
|
$1
|
|
Utility
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$4
|
|
$—
|
|
$4
|
|
Utility and Entergy Wholesale Commodities
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Other current liabilities (current portion)
|
|
$2
|
|
$—
|
|
$2
|
|
Utility
|
|
Natural gas swaps and options
|
|
Other non-current liabilities (non-current portion)
|
|
$1
|
|
$—
|
|
$1
|
|
Utility
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2020 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Balance Sheet Location
|
|
Gross Fair Value (a)
|
|
Offsetting Position (b)
|
|
Net Fair Value (c) (d)
|
|
Business
|
|
|
|
|
|
(In Millions)
|
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Electricity swaps and options
|
|
Prepayments and other (current portion)
|
|
$39
|
|
($1)
|
|
$38
|
|
Entergy Wholesale Commodities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Electricity swaps and options
|
|
Other current liabilities (current portion)
|
|
$1
|
|
($1)
|
|
$—
|
|
Entergy Wholesale Commodities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Prepayments and other (current portion)
|
|
$1
|
|
$—
|
|
$1
|
|
Utility
|
|
Natural gas swaps and options
|
|
Other deferred debits and other assets (non-current portion)
|
|
$1
|
|
$—
|
|
$1
|
|
Utility
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$9
|
|
$—
|
|
$9
|
|
Utility and Entergy Wholesale Commodities
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Other current liabilities (current portion)
|
|
$6
|
|
$—
|
|
$6
|
|
Utility
|
|
Natural gas swaps and options
|
|
Other non-current liabilities (non-current portion)
|
|
$1
|
|
$—
|
|
$1
|
|
Utility
|
(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)Excludes cash collateral in the amount of $6 million posted as of March 31, 2021 and $5 million posted as of December 31, 2020. Also excludes letters of credit in the amount of $1 million posted and $7 million held as of March 31, 2021 and $1 million posted and $39 million held as of December 31, 2020.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Amount of gain (loss)
recognized in other
comprehensive income
|
|
Income Statement location
|
|
Amount of gain
(loss)
reclassified from
accumulated
other
comprehensive
income into
income (a)
|
|
|
|
(In Millions)
|
|
|
|
(In Millions)
|
|
2021
|
|
|
|
|
|
|
|
Electricity swaps and options
|
|
$2
|
|
Competitive businesses operating revenues
|
|
$39
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
Electricity swaps and options
|
|
$67
|
|
Competitive businesses operating revenues
|
|
$94
|
(a)Before taxes of $8 million and $20 million for the three months ended March 31, 2021 and 2020, respectively
Based on market prices as of March 31, 2021, unrealized gains (losses) recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled $0.3 million, which are expected to be reclassified from accumulated other comprehensive income to operating revenues in the next twelve months. The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices.
Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Income Statement
location
|
|
Amount of gain (loss)
recorded in the income statement
|
|
|
|
|
|
(In Millions)
|
|
2021
|
|
|
|
|
|
Natural gas swaps and options
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
(a)
|
$7
|
|
Financial transmission rights
|
|
Purchased power expense
|
(b)
|
$128
|
|
Electricity swaps and options (c)
|
|
Competitive business operating revenues
|
|
($2)
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
Natural gas swaps
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
(a)
|
($7)
|
|
Financial transmission rights
|
|
Purchased power expense
|
(b)
|
$13
|
|
Electricity swaps and options (c)
|
|
Competitive business operating revenues
|
|
$—
|
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
(c)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options.
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of March 31, 2021 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Balance Sheet Location
|
|
Gross Fair Value (a)
|
|
Offsetting Position (b)
|
|
Net Fair Value (c) (d)
|
|
Registrant
|
|
|
|
|
|
(In Millions)
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Prepayments and other
|
|
$1.0
|
|
$—
|
|
$1.0
|
|
Entergy Louisiana
|
|
Natural gas swaps and options
|
|
Other deferred debits and other assets (non-current portion)
|
|
$0.4
|
|
$—
|
|
$0.4
|
|
Entergy Louisiana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$1.5
|
|
($0.1)
|
|
$1.4
|
|
Entergy Arkansas
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$1.3
|
|
($0.1)
|
|
$1.2
|
|
Entergy Louisiana
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$0.3
|
|
$—
|
|
$0.3
|
|
Entergy Mississippi
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$0.1
|
|
$—
|
|
$0.1
|
|
Entergy New Orleans
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$0.5
|
|
$—
|
|
$0.5
|
|
Entergy Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Other non-current liabilities
|
|
$0.8
|
|
$—
|
|
$0.8
|
|
Entergy Louisiana
|
|
Natural gas swaps
|
|
Other current liabilities
|
|
$2.3
|
|
$—
|
|
$2.3
|
|
Entergy Mississippi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Balance Sheet Location
|
|
Gross Fair Value (a)
|
|
Offsetting Position (b)
|
|
Net Fair Value (c) (d)
|
|
Registrant
|
|
|
|
|
|
(In Millions)
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Prepayments and other
|
|
$0.8
|
|
$—
|
|
$0.8
|
|
Entergy Louisiana
|
|
Natural gas swaps and options
|
|
Other deferred debits and other assets
|
|
$0.5
|
|
$—
|
|
$0.5
|
|
Entergy Louisiana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$2.9
|
|
($0.2)
|
|
$2.7
|
|
Entergy Arkansas
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$4.3
|
|
($0.1)
|
|
$4.2
|
|
Entergy Louisiana
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$0.6
|
|
$—
|
|
$0.6
|
|
Entergy Mississippi
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$0.2
|
|
($0.1)
|
|
$0.1
|
|
Entergy New Orleans
|
|
Financial transmission rights
|
|
Prepayments and other
|
|
$1.6
|
|
$—
|
|
$1.6
|
|
Entergy Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Other current liabilities
|
|
$0.3
|
|
$—
|
|
$0.3
|
|
Entergy Louisiana
|
|
Natural gas swaps and options
|
|
Other non-current liabilities
|
|
$1.3
|
|
$—
|
|
$1.3
|
|
Entergy Louisiana
|
|
Natural gas swaps
|
|
Other current liabilities
|
|
$5.0
|
|
$—
|
|
$5.0
|
|
Entergy Mississippi
|
|
Natural gas swaps
|
|
Other current liabilities
|
|
$0.3
|
|
$—
|
|
$0.3
|
|
Entergy New Orleans
|
(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)As of March 31, 2021, letters of credit posted with MISO covered financial transmission rights exposure of $0.4 million for Entergy Arkansas, $0.2 million for Entergy Louisiana, $0.4 million for Entergy Mississippi, and $0.1 million for Entergy New Orleans. As of December 31, 2020, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Louisiana, $0.2 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, and $0.5 million for Entergy Texas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instrument
|
|
Income Statement Location
|
|
Amount of gain
(loss) recorded
in the income statement
|
|
Registrant
|
|
|
|
|
|
(In Millions)
|
|
|
|
2021
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
$1.8
|
(a)
|
Entergy Louisiana
|
|
Natural gas swaps
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
$5.2
|
(a)
|
Entergy Mississippi
|
|
Natural gas swaps
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
($0.1)
|
(a)
|
Entergy New Orleans
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$26.1
|
(b)
|
Entergy Arkansas
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$12.3
|
(b)
|
Entergy Louisiana
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$7.2
|
(b)
|
Entergy Mississippi
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$1.3
|
(b)
|
Entergy New Orleans
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$77.9
|
(b)
|
Entergy Texas
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
Natural gas swaps and options
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
($1.3)
|
(a)
|
Entergy Louisiana
|
|
Natural gas swaps
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
($5.2)
|
(a)
|
Entergy Mississippi
|
|
Natural gas swaps
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
($0.4)
|
(a)
|
Entergy New Orleans
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$4.6
|
(b)
|
Entergy Arkansas
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$5.3
|
(b)
|
Entergy Louisiana
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
($0.1)
|
(b)
|
Entergy Mississippi
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$0.4
|
(b)
|
Entergy New Orleans
|
|
Financial transmission rights
|
|
Purchased power expense
|
|
$2.4
|
(b)
|
Entergy Texas
|
(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.
Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.
Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.
The three levels of the fair value hierarchy are:
•Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.
•Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following:
–quoted prices for similar assets or liabilities in active markets;
–quoted prices for identical assets or liabilities in inactive markets;
–inputs other than quoted prices that are observable for the asset or liability; or
–inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs.
•Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities. For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.
The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes. Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.
On a daily basis, the Office of Corporate Risk Oversight calculates the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis. The scenario analysis is communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis is completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects are calculated for this analysis. This analysis is communicated to senior management within Entergy and Entergy Wholesale Commodities.
The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities
Entergy Corporation and Subsidiaries
Notes to Financial Statements
are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group review these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$1,675
|
|
|
$—
|
|
|
$—
|
|
|
$1,675
|
|
|
|
|
|
|
|
|
|
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
807
|
|
|
—
|
|
|
—
|
|
|
807
|
|
|
Debt securities (b)
|
|
1,489
|
|
|
1,947
|
|
|
—
|
|
|
3,436
|
|
|
Common trusts (c)
|
|
|
|
|
|
|
|
3,102
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization recovery trust account
|
|
44
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
Escrow accounts
|
|
103
|
|
|
—
|
|
|
—
|
|
|
103
|
|
|
Gas hedge contracts
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
4
|
|
|
4
|
|
|
|
|
$4,119
|
|
|
$1,947
|
|
|
$4
|
|
|
$9,172
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$2
|
|
|
$1
|
|
|
$—
|
|
|
$3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$1,630
|
|
|
$—
|
|
|
$—
|
|
|
$1,630
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
1,533
|
|
|
—
|
|
|
—
|
|
|
1,533
|
|
|
Debt securities (b)
|
|
919
|
|
|
1,698
|
|
|
—
|
|
|
2,617
|
|
|
Common trusts (c)
|
|
|
|
|
|
|
|
3,103
|
|
|
Power contracts
|
|
—
|
|
|
—
|
|
|
38
|
|
|
38
|
|
|
Securitization recovery trust account
|
|
42
|
|
|
—
|
|
|
—
|
|
|
42
|
|
|
Escrow accounts
|
|
148
|
|
|
—
|
|
|
—
|
|
|
148
|
|
|
Gas hedge contracts
|
|
1
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|
|
|
$4,273
|
|
|
$1,699
|
|
|
$47
|
|
|
$9,122
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$6
|
|
|
$1
|
|
|
$—
|
|
|
$7
|
|
|
|
|
|
|
|
|
|
|
|
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b)The decommissioning trust funds fair values presented herein do not include the recognition of a credit loss valuation allowance of $6.4 million as of March 31, 2021 and $0.1 million as of December 31, 2020 on debt securities due to the adoption of ASU 2016-13. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses.
(c)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Power Contracts
|
|
Financial transmission rights
|
|
Power Contracts
|
|
Financial transmission rights
|
|
|
(In Millions)
|
|
Balance as of January 1,
|
$38
|
|
|
$9
|
|
|
$118
|
|
|
$10
|
|
|
Total gains (losses) for the period (a)
|
|
|
|
|
|
|
|
|
Included in earnings
|
(2)
|
|
|
4
|
|
|
(18)
|
|
|
—
|
|
|
Included in other comprehensive income
|
2
|
|
|
—
|
|
|
67
|
|
|
—
|
|
|
Included as a regulatory liability/asset
|
—
|
|
|
119
|
|
|
—
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements
|
(38)
|
|
|
(128)
|
|
|
(82)
|
|
|
(13)
|
|
|
Balance as of March 31,
|
$—
|
|
|
$4
|
|
|
$85
|
|
|
$4
|
|
(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period was $0.7 million for the three months ended March 31, 2021 and $1 million for the three months ended March 31, 2020.
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO.
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
Unobservable
Input
|
|
Transaction Type
|
|
Position
|
|
Change to Input
|
|
Effect on
Fair Value
|
|
Unit contingent discount
|
|
Electricity swaps
|
|
Sell
|
|
Increase (Decrease)
|
|
Decrease (Increase)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2021 and December 31, 2020. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$123.7
|
|
|
$—
|
|
|
$—
|
|
|
$123.7
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
53.3
|
|
|
—
|
|
|
—
|
|
|
53.3
|
|
|
Debt securities
|
|
89.9
|
|
|
336.0
|
|
|
—
|
|
|
425.9
|
|
|
Common trusts (b)
|
|
|
|
|
|
|
|
831.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
1.4
|
|
|
1.4
|
|
|
|
|
$266.9
|
|
|
$336.0
|
|
|
$1.4
|
|
|
$1,436.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$168.0
|
|
|
$—
|
|
|
$—
|
|
|
$168.0
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
Debt securities
|
|
98.2
|
|
|
349.7
|
|
|
—
|
|
|
447.9
|
|
|
Common trusts (b)
|
|
|
|
|
|
|
|
824.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
2.7
|
|
|
|
|
$267.5
|
|
|
$349.7
|
|
|
$2.7
|
|
|
$1,444.6
|
|
Entergy Louisiana
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$601.6
|
|
|
$—
|
|
|
$—
|
|
|
$601.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
68.8
|
|
|
—
|
|
|
—
|
|
|
68.8
|
|
|
Debt securities
|
|
218.9
|
|
|
413.9
|
|
|
—
|
|
|
632.8
|
|
|
Common trusts (b)
|
|
|
|
|
|
|
|
1,177.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization recovery trust account
|
|
8.8
|
|
|
—
|
|
|
—
|
|
|
8.8
|
|
|
Gas hedge contracts
|
|
1.0
|
|
|
0.4
|
|
|
—
|
|
|
1.4
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
1.2
|
|
|
1.2
|
|
|
|
|
$899.1
|
|
|
$414.3
|
|
|
$1.2
|
|
|
$2,492.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$—
|
|
|
$0.8
|
|
|
$—
|
|
|
$0.8
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$726.7
|
|
|
$—
|
|
|
$—
|
|
|
$726.7
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
8.7
|
|
|
—
|
|
|
—
|
|
|
8.7
|
|
|
Debt securities
|
|
172.4
|
|
|
459.8
|
|
|
—
|
|
|
632.2
|
|
|
Common trusts (b)
|
|
|
|
|
|
|
|
1,153.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization recovery trust account
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
Gas hedge contracts
|
|
0.8
|
|
|
0.5
|
|
|
—
|
|
|
1.3
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
4.2
|
|
|
4.2
|
|
|
|
|
$911.3
|
|
|
$460.3
|
|
|
$4.2
|
|
|
$2,528.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$0.3
|
|
|
$1.3
|
|
|
$—
|
|
|
$1.6
|
|
Entergy Mississippi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$76.7
|
|
|
$—
|
|
|
$—
|
|
|
$76.7
|
|
|
Escrow accounts
|
|
64.6
|
|
|
—
|
|
|
—
|
|
|
64.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|
|
|
$141.3
|
|
|
$—
|
|
|
$0.3
|
|
|
$141.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$2.3
|
|
|
$—
|
|
|
$—
|
|
|
$2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Escrow accounts
|
|
$64.6
|
|
|
$—
|
|
|
$—
|
|
|
$64.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
0.6
|
|
|
|
|
$64.6
|
|
|
$—
|
|
|
$0.6
|
|
|
$65.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$5.0
|
|
|
$—
|
|
|
$—
|
|
|
$5.0
|
|
Entergy New Orleans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization recovery trust account
|
|
$6.8
|
|
|
$—
|
|
|
$—
|
|
|
$6.8
|
|
|
Escrow accounts
|
|
38.8
|
|
|
—
|
|
|
—
|
|
|
38.8
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
$45.6
|
|
|
$—
|
|
|
$0.1
|
|
|
$45.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization recovery trust account
|
|
$3.4
|
|
|
$—
|
|
|
$—
|
|
|
$3.4
|
|
|
Escrow accounts
|
|
83.0
|
|
|
—
|
|
|
—
|
|
|
83.0
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
|
|
$86.4
|
|
|
$—
|
|
|
$0.1
|
|
|
$86.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
Gas hedge contracts
|
|
$0.3
|
|
|
$—
|
|
|
$—
|
|
|
$0.3
|
|
Entergy Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securitization recovery trust account
|
|
$28.1
|
|
|
$—
|
|
|
$—
|
|
|
$28.1
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
0.5
|
|
|
|
|
$28.1
|
|
|
$—
|
|
|
$0.5
|
|
|
$28.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$248.6
|
|
|
$—
|
|
|
$—
|
|
|
$248.6
|
|
|
Securitization recovery trust account
|
|
36.2
|
|
|
—
|
|
|
—
|
|
|
36.2
|
|
|
Financial transmission rights
|
|
—
|
|
|
—
|
|
|
1.6
|
|
|
1.6
|
|
|
|
|
$284.8
|
|
|
$—
|
|
|
$1.6
|
|
|
$286.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
System Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$132.1
|
|
|
$—
|
|
|
$—
|
|
|
$132.1
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
60.6
|
|
|
—
|
|
|
—
|
|
|
60.6
|
|
|
Debt Securities
|
|
179.4
|
|
|
227.0
|
|
|
—
|
|
|
406.4
|
|
|
Common trusts (b)
|
|
|
|
|
|
|
|
782.8
|
|
|
|
|
$372.1
|
|
|
$227.0
|
|
|
$—
|
|
|
$1,381.9
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
|
|
(In Millions)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Temporary cash investments
|
|
$216.4
|
|
|
$—
|
|
|
$—
|
|
|
$216.4
|
|
|
Decommissioning trust funds (a):
|
|
|
|
|
|
|
|
|
|
Equity securities
|
|
3.8
|
|
|
—
|
|
|
—
|
|
|
3.8
|
|
|
Debt securities
|
|
177.3
|
|
|
250.4
|
|
|
—
|
|
|
427.7
|
|
|
Common trusts (b)
|
|
|
|
|
|
|
|
784.4
|
|
|
|
|
$397.5
|
|
|
$250.4
|
|
|
$—
|
|
|
$1,432.3
|
|
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New
Orleans
|
|
Entergy
Texas
|
|
|
(In Millions)
|
|
Balance as of January 1,
|
$2.7
|
|
|
$4.2
|
|
|
$0.6
|
|
|
$0.1
|
|
|
$1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) included as a regulatory liability/asset
|
24.8
|
|
|
9.3
|
|
|
6.9
|
|
|
1.2
|
|
|
76.8
|
|
|
Settlements
|
(26.1)
|
|
|
(12.3)
|
|
|
(7.2)
|
|
|
(1.2)
|
|
|
(77.9)
|
|
|
Balance as of March 31,
|
$1.4
|
|
|
$1.2
|
|
|
$0.3
|
|
|
$0.1
|
|
|
$0.5
|
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New
Orleans
|
|
Entergy
Texas
|
|
|
(In Millions)
|
|
Balance as of January 1,
|
$3.3
|
|
|
$4.5
|
|
|
$0.8
|
|
|
$0.3
|
|
|
$0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) included as a regulatory liability/asset
|
2.4
|
|
|
2.7
|
|
|
(0.6)
|
|
|
0.1
|
|
|
1.8
|
|
|
Settlements
|
(4.6)
|
|
|
(5.3)
|
|
|
0.1
|
|
|
(0.4)
|
|
|
(2.4)
|
|
|
Balance as of March 31,
|
$1.1
|
|
|
$1.9
|
|
|
$0.3
|
|
|
$—
|
|
|
$0.3
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
The NRC requires Entergy subsidiaries to maintain nuclear decommissioning trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Indian Point 1, Indian Point 2, Indian Point 3, and Palisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant. Decommissioning trust funds for the Entergy Wholesale Commodities nuclear plants do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. A portion of Entergy’s decommissioning trust funds were held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company were recognized in earnings. Generally, Entergy records gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 were $200 million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.
The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
Total
Unrealized
Gains
|
|
Total
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
2021
|
|
|
|
|
|
|
|
Debt Securities
|
|
$3,436
|
|
|
$102
|
|
|
$43
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
Debt Securities
|
|
$2,617
|
|
|
$197
|
|
|
$3
|
|
The unrealized gains/(losses) above are reported before deferred taxes of $5 million as of March 31, 2021 and $31 million as of December 31, 2020 for debt securities. The amortized cost of available-for-sale debt securities was $3,376 million as of March 31, 2021 and $2,423 million as of December 31, 2020. As of March 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.59%, an average duration of approximately 5.98 years, and an average maturity of approximately 8.45 years.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
Less than 12 months
|
|
$1,748
|
|
|
$43
|
|
|
$187
|
|
|
$3
|
|
|
More than 12 months
|
|
3
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
Total
|
|
$1,751
|
|
|
$43
|
|
|
$189
|
|
|
$3
|
|
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Millions)
|
|
Less than 1 year
|
$—
|
|
|
($4)
|
|
|
1 year - 5 years
|
1,027
|
|
|
672
|
|
|
5 years - 10 years
|
1,257
|
|
|
852
|
|
|
10 years - 15 years
|
492
|
|
|
377
|
|
|
15 years - 20 years
|
128
|
|
|
144
|
|
|
20 years+
|
532
|
|
|
576
|
|
|
Total
|
$3,436
|
|
|
$2,617
|
|
During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $524 million and $400 million, respectively. During the three months ended March 31, 2021 and 2020, gross gains of $11 million and $14 million, respectively, and gross losses of $11 million and $3 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2021 were $631 million for Indian Point 1, $760 million for Indian Point 2, $970 million for Indian Point 3, and $545 million for Palisades. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2020 were $631 million for Indian Point 1, $794 million for Indian Point 2, $991 million for Indian Point 3, and $554 million for Palisades. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
Total
Unrealized
Gains
|
|
Total
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
2021
|
|
|
|
|
|
|
|
Debt Securities
|
|
$425.9
|
|
|
$13.2
|
|
|
$6.8
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
Debt Securities
|
|
$447.9
|
|
|
$27.7
|
|
|
$0.3
|
|
The amortized cost of available-for-sale debt securities was $419.5 million as of March 31, 2021 and $420.4 million as of December 31, 2020. As of March 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.42%, an average duration of approximately 6.40 years, and an average maturity of approximately 7.62 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 was $45.2 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
Less than 12 months
|
|
$139.1
|
|
|
$6.8
|
|
|
$29.9
|
|
|
$0.3
|
|
|
More than 12 months
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$139.1
|
|
|
$6.8
|
|
|
$29.9
|
|
|
$0.3
|
|
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Millions)
|
|
Less than 1 year
|
$—
|
|
|
$—
|
|
|
1 year - 5 years
|
84.7
|
|
|
113.1
|
|
|
5 years - 10 years
|
179.2
|
|
|
189.8
|
|
|
10 years - 15 years
|
100.8
|
|
|
81.4
|
|
|
15 years - 20 years
|
26.7
|
|
|
28.5
|
|
|
20 years+
|
34.5
|
|
|
35.1
|
|
|
Total
|
$425.9
|
|
|
$447.9
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $13.8 million and $48.6 million, respectively. During the three months ended March 31, 2021 and 2020, gross gains of $0.8 million and $4.5 million, respectively, and gross losses of $0.1 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Louisiana
Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
Total
Unrealized
Gains
|
|
Total
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
2021
|
|
|
|
|
|
|
|
Debt Securities
|
|
$632.8
|
|
|
$31.2
|
|
|
$4.6
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
Debt Securities
|
|
$632.2
|
|
|
$51.3
|
|
|
$0.5
|
|
The amortized cost of available-for-sale debt securities was $606.3 million as of March 31, 2021 and $581.4 million as of December 31, 2020. As of March 31, 2021, the available-for-sale debt securities had an average coupon rate of approximately 3.25%, an average duration of approximately 6.59 years, and an average maturity of approximately 11.56 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 was $64.9 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
Less than 12 months
|
|
$171.7
|
|
|
$4.6
|
|
|
$36.4
|
|
|
$0.5
|
|
|
More than 12 months
|
|
2.3
|
|
|
—
|
|
|
0.8
|
|
|
—
|
|
|
Total
|
|
$174.0
|
|
|
$4.6
|
|
|
$37.2
|
|
|
$0.5
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Millions)
|
|
Less than 1 year
|
$—
|
|
|
$—
|
|
|
1 year - 5 years
|
89.3
|
|
|
117.0
|
|
|
5 years - 10 years
|
186.0
|
|
|
159.4
|
|
|
10 years - 15 years
|
113.7
|
|
|
101.2
|
|
|
15 years - 20 years
|
63.4
|
|
|
66.9
|
|
|
20 years+
|
180.4
|
|
|
187.7
|
|
|
Total
|
$632.8
|
|
|
$632.2
|
|
During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $108.4 million and $67.4 million, respectively. During the three months ended March 31, 2021 and 2020, gross gains of $3.3 million and $2.9 million, respectively, and gross losses of $3.2 million and $0.6 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
System Energy
System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2021 and December 31, 2020 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
|
|
Total
Unrealized
Gains
|
|
Total
Unrealized
Losses
|
|
|
|
(In Millions)
|
|
2021
|
|
|
|
|
|
|
|
Debt Securities
|
|
$406.4
|
|
|
$14.3
|
|
|
$5.0
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
|
|
Debt Securities
|
|
$427.7
|
|
|
$30.0
|
|
|
$0.8
|
|
The amortized cost of available-for-sale debt securities was $397 million as of March 31, 2021 and $398.4 million as of December 31, 2020. As of March 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.36%, an average duration of approximately 6.31 years, and an average maturity of approximately 9.62 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2021 on equity securities still held as of March 31, 2021 was $43.1 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
|
Gross
Unrealized
Losses
|
|
|
(In Millions)
|
|
Less than 12 months
|
|
$157.5
|
|
|
$5.0
|
|
|
$28.9
|
|
|
$0.8
|
|
|
More than 12 months
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$157.5
|
|
|
$5.0
|
|
|
$28.9
|
|
|
$0.8
|
|
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2021 and December 31, 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Millions)
|
|
Less than 1 year
|
$—
|
|
|
($1.1)
|
|
|
1 year - 5 years
|
136.2
|
|
|
134.7
|
|
|
5 years - 10 years
|
120.4
|
|
|
141.5
|
|
|
10 years - 15 years
|
35.1
|
|
|
31.5
|
|
|
15 years - 20 years
|
4.5
|
|
|
5.3
|
|
|
20 years+
|
110.2
|
|
|
115.8
|
|
|
Total
|
$406.4
|
|
|
$427.7
|
|
During the three months ended March 31, 2021 and 2020, proceeds from the dispositions of available-for-sale securities amounted to $74.1 million and $92 million, respectively. During the three months ended March 31, 2021 and 2020, gross gains of $1.2 million and $1.7 million, respectively, and gross losses of $1.6 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Allowance for expected credit losses
Entergy estimates the expected credit losses for its available-for-sale securities based on the current credit rating and remaining life of the securities. To the extent an individual security is determined to be uncollectible it is written off against this allowance. Entergy’s available-for-sale securities are held in trusts managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. Specifically, available-for-sale securities are subject to credit worthiness restrictions, with requirements for both the average credit rating of the portfolio and minimum credit ratings for individual debt securities. As of March 31, 2021 and December 31, 2020, Entergy’s allowance for expected credit losses related to available-for-sale securities were $6.4 million and $0.1 million, respectively. Entergy did not record any impairments of available-for-sale debt securities for the three months ended March 31, 2021 and 2020.
NOTE 10. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See “Income Tax Audits” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax audits, the Tax Cuts and Jobs Act, and other income tax matters involving Entergy. The following are updates to that discussion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Tax Cuts and Jobs Act
During the second quarter 2018, the Registrant Subsidiaries began returning unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders and other means approved by their respective regulatory commissions. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This manner of regulatory accounting affects the effective tax rate for the period as compared to the statutory tax rate. The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended March 31,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(In Millions)
|
|
Entergy
|
$41
|
|
|
$30
|
|
|
|
|
|
|
Entergy Arkansas
|
$8
|
|
|
$13
|
|
|
|
|
|
|
Entergy Louisiana
|
$8
|
|
|
$8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy New Orleans
|
$—
|
|
|
$3
|
|
|
|
|
|
|
Entergy Texas
|
$7
|
|
|
$6
|
|
|
|
|
|
|
System Entergy
|
$18
|
|
|
$—
|
|
|
|
|
|
NOTE 11. PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Construction Expenditures in Accounts Payable
Construction expenditures included in accounts payable at March 31, 2021 were $496.4 million for Entergy, $39.6 million for Entergy Arkansas, $330.4 million for Entergy Louisiana, $24.1 million for Entergy Mississippi, $4 million for Entergy New Orleans, $44.6 million for Entergy Texas, and $17.7 million for System Energy. Construction expenditures included in accounts payable at December 31, 2020 were $745 million for Entergy, $59.7 million for Entergy Arkansas, $460.5 million for Entergy Louisiana, $31.4 million for Entergy Mississippi, $9.2 million for Entergy New Orleans, $116.8 million for Entergy Texas, and $17.7 million for System Energy.
NOTE 12. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 17 to the financial statements in the Form 10-K for a discussion of variable interest entities. See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facilities, commercial paper borrowings, and long-term debt.
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 5 to the financial statements in the Form 10-K. System Energy made payments under this arrangement, including interest, of $8.6 million in the three months ended March 31, 2021 and in the three months ended March 31, 2020.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 13. REVENUE (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Operating Revenues
See Note 19 to the financial statements in the Form 10-K for a discussion of revenue recognition. Entergy’s total revenues for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
|
Utility:
|
|
|
|
|
|
|
|
|
Residential
|
|
$966,855
|
|
|
$798,028
|
|
|
|
|
|
Commercial
|
|
572,676
|
|
|
538,940
|
|
|
|
|
|
Industrial
|
|
597,652
|
|
|
557,515
|
|
|
|
|
|
Governmental
|
|
56,798
|
|
|
52,582
|
|
|
|
|
|
Total billed retail
|
|
2,193,981
|
|
|
1,947,065
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales for resale (a)
|
|
205,075
|
|
|
53,725
|
|
|
|
|
|
Other electric revenues (b)
|
|
80,261
|
|
|
50,166
|
|
|
|
|
|
Revenues from contracts with customers
|
|
2,479,317
|
|
|
2,050,956
|
|
|
|
|
|
Other revenues (c)
|
|
59,103
|
|
|
(318)
|
|
|
|
|
|
Total electric revenues
|
|
2,538,420
|
|
|
2,050,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas
|
|
58,168
|
|
|
43,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy Wholesale Commodities:
|
|
|
|
|
|
|
|
|
Competitive businesses sales from contracts with customers (a)
|
|
232,113
|
|
|
216,002
|
|
|
|
|
|
Other revenues (c)
|
|
16,137
|
|
|
116,563
|
|
|
|
|
|
Total competitive businesses revenues
|
|
248,250
|
|
|
332,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$2,844,838
|
|
|
$2,427,179
|
|
|
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ total revenues for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New
Orleans
|
|
Entergy
Texas
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$237,182
|
|
|
$335,760
|
|
|
$147,636
|
|
|
$66,427
|
|
|
$179,850
|
|
|
Commercial
|
|
106,416
|
|
|
224,649
|
|
|
97,936
|
|
|
47,799
|
|
|
95,876
|
|
|
Industrial
|
|
103,412
|
|
|
347,009
|
|
|
33,980
|
|
|
6,789
|
|
|
106,462
|
|
|
Governmental
|
|
4,256
|
|
|
18,616
|
|
|
10,543
|
|
|
16,380
|
|
|
7,003
|
|
|
Total billed retail
|
|
451,266
|
|
|
926,034
|
|
|
290,095
|
|
|
137,395
|
|
|
389,191
|
|
|
Sales for resale (a)
|
|
110,085
|
|
|
80,428
|
|
|
40,311
|
|
|
4,696
|
|
|
74,073
|
|
|
Other electric revenues (b)
|
|
19,583
|
|
|
43,910
|
|
|
3,950
|
|
|
(3,359)
|
|
|
17,529
|
|
|
Revenues from contracts with customers
|
|
580,934
|
|
|
1,050,372
|
|
|
334,356
|
|
|
138,732
|
|
|
480,793
|
|
|
Other revenues (c)
|
|
2,452
|
|
|
29,291
|
|
|
2,263
|
|
|
416
|
|
|
(573)
|
|
|
Total electric revenues
|
|
583,386
|
|
|
1,079,663
|
|
|
336,619
|
|
|
139,148
|
|
|
480,220
|
|
|
Natural gas
|
|
—
|
|
|
27,981
|
|
|
—
|
|
|
30,187
|
|
|
—
|
|
|
Total operating revenues
|
|
$583,386
|
|
|
$1,107,644
|
|
|
$336,619
|
|
|
$169,335
|
|
|
$480,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New
Orleans
|
|
Entergy
Texas
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
$219,688
|
|
|
$259,860
|
|
|
$127,102
|
|
|
$50,899
|
|
|
$140,480
|
|
|
Commercial
|
|
111,245
|
|
|
202,246
|
|
|
96,798
|
|
|
45,505
|
|
|
83,146
|
|
|
Industrial
|
|
101,088
|
|
|
322,342
|
|
|
36,390
|
|
|
7,347
|
|
|
90,348
|
|
|
Governmental
|
|
4,030
|
|
|
16,754
|
|
|
10,327
|
|
|
15,851
|
|
|
5,620
|
|
|
Total billed retail
|
|
436,051
|
|
|
801,202
|
|
|
270,617
|
|
|
119,602
|
|
|
319,594
|
|
|
Sales for resale (a)
|
|
41,140
|
|
|
78,530
|
|
|
14,422
|
|
|
10,170
|
|
|
8,629
|
|
|
Other electric revenues (b)
|
|
1,596
|
|
|
32,008
|
|
|
6,443
|
|
|
763
|
|
|
10,702
|
|
|
Revenues from contracts with customers
|
|
478,787
|
|
|
911,740
|
|
|
291,482
|
|
|
130,535
|
|
|
338,925
|
|
|
Other revenues (c)
|
|
3,125
|
|
|
801
|
|
|
2,440
|
|
|
(7,104)
|
|
|
411
|
|
|
Total electric revenues
|
|
481,912
|
|
|
912,541
|
|
|
293,922
|
|
|
123,431
|
|
|
339,336
|
|
|
Natural gas
|
|
—
|
|
|
18,106
|
|
|
—
|
|
|
25,871
|
|
|
—
|
|
|
Total operating revenues
|
|
$481,912
|
|
|
$930,647
|
|
|
$293,922
|
|
|
$149,302
|
|
|
$339,336
|
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(a)Sales for resale and competitive businesses sales include day-ahead sales of energy in a market administered by an ISO. These sales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actual power generated and delivered in the real time market. Given the short duration of these transactions, Entergy does not consider them to be derivatives subject to fair value adjustments, and includes them as part of customer revenues.
(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market and unbilled revenue.
(c)Other revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees.
Allowance for doubtful accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of expected losses on its accounts receivable balances. Due to the essential nature of utility services, Entergy has historically experienced a low rate of default on its accounts receivables. Due to the effect of the COVID-19 pandemic on customer receivables, however, Entergy recorded increases in its allowance for doubtful accounts in 2020. The following table sets forth a reconciliation of changes in the allowance for doubtful accounts for the three months ended March 31, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New
Orleans
|
|
Entergy
Texas
|
|
|
(In Millions)
|
|
Balance as of December 31, 2020
|
$117.7
|
|
|
$18.3
|
|
|
$45.7
|
|
|
$19.5
|
|
|
$17.4
|
|
|
$16.8
|
|
|
Provisions
|
3.2
|
|
|
2.4
|
|
|
2.3
|
|
|
(2.2)
|
|
|
1.8
|
|
|
(1.1)
|
|
|
Write-offs
|
(3.8)
|
|
|
(0.1)
|
|
|
(2.1)
|
|
|
(0.8)
|
|
|
—
|
|
|
(0.8)
|
|
|
Recoveries
|
1.9
|
|
|
0.6
|
|
|
0.7
|
|
|
0.3
|
|
|
0.2
|
|
|
0.1
|
|
|
Balance as of March 31, 2021
|
$119.0
|
|
|
$21.2
|
|
|
$46.6
|
|
|
$16.8
|
|
|
$19.4
|
|
|
$15.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entergy
|
|
Entergy
Arkansas
|
|
Entergy
Louisiana
|
|
Entergy
Mississippi
|
|
Entergy
New
Orleans
|
|
Entergy
Texas
|
|
|
(In Millions)
|
|
Balance as of December 31, 2019
|
$7.4
|
|
|
$1.2
|
|
|
$1.9
|
|
|
$0.6
|
|
|
$3.2
|
|
|
$0.5
|
|
|
Provisions
|
6.6
|
|
|
1.2
|
|
|
3.0
|
|
|
0.9
|
|
|
0.8
|
|
|
0.7
|
|
|
Write-offs
|
(8.4)
|
|
|
(1.8)
|
|
|
(3.5)
|
|
|
(1.2)
|
|
|
(0.8)
|
|
|
(1.1)
|
|
|
Recoveries
|
2.9
|
|
|
0.9
|
|
|
1.1
|
|
|
0.3
|
|
|
0.2
|
|
|
0.5
|
|
|
Balance as of March 31, 2020
|
$8.5
|
|
|
$1.5
|
|
|
$2.5
|
|
|
$0.6
|
|
|
$3.4
|
|
|
$0.6
|
|
The allowance for currently expected credit losses is calculated as the historical rate of customer write-offs multiplied by the current accounts receivable balance, taking into account the length of time the receivable balances have been outstanding. Although the rate of customer write-offs has historically experienced minimal variation, management monitors the current condition of individual customer accounts to manage collections and ensure bad debt expense is recorded in a timely manner.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial
Entergy Corporation and Subsidiaries
Notes to Financial Statements
statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Cash and cash equivalents at beginning of period
|
$192,128
|
|
|
$3,519
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
Operating activities
|
91,573
|
|
|
209,674
|
|
|
Investing activities
|
(162,611)
|
|
|
(190,551)
|
|
|
Financing activities
|
2,690
|
|
|
114,850
|
|
|
Net increase (decrease) in cash and cash equivalents
|
(68,348)
|
|
|
133,973
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$123,780
|
|
|
$137,492
|
|
Operating Activities
Net cash flow provided by operating activities decreased $118.1 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:
•lower collections of receivables from customers, in part due to the COVID-19 pandemic;
•increased fuel costs as a result of Winter Storm Uri. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•$25 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
•an increase of $11.2 million in pension contributions in 2021. 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 decrease was partially offset by the timing of payments to vendors and a decrease of $6.3 million in spending on nuclear refueling outages in 2021.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $27.9 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:
•a decrease of $33.4 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle;
•a decrease of $14.3 million in nuclear construction expenditures primarily as a result of work performed in 2020 on various ANO 2 outage projects;
•a decrease of $13.4 million in transmission construction expenditures primarily due to a lower scope of work performed in 2021 as compared to 2020; and
•money pool activity.
The decrease was partially offset by $55 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
Increases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increased by $12.5 million for the three months ended March 31, 2021 compared to increasing by $24.9 million for the three months ended March 31, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities decreased $112.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:
•the repayment, at maturity, of $350 million of 3.75% Series mortgage bonds due February 2021;
•issuance of $100 million of 4.00% Series mortgage bonds in March 2020;
•the repayment, at maturity, of $45 million of 2.375% governmental bonds due January 2021; and
•net repayments of long-term borrowings of $7.4 million in 2021 compared to net long-term borrowings of $28.7 million in 2020 on the Entergy Arkansas nuclear fuel company variable interest entity credit facility.
The decrease was partially offset by the issuance of $400 million of 3.35% Series mortgage bonds in March 2021 and money pool activity.
Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $21.6 million for the three months ended March 31, 2020.
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.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy Arkansas’s debt to capital ratio is shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
Debt to capital
|
54.1
|
%
|
|
54.8
|
%
|
|
Effect of subtracting cash
|
(0.8
|
%)
|
|
(1.2
|
%)
|
|
Net debt to net capital
|
53.3
|
%
|
|
53.6
|
%
|
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratio in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition. Entergy Arkansas also uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Arkansas’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In Thousands)
|
|
$15,610
|
|
$3,110
|
|
$24,935
|
|
($21,634)
|
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in September 2024. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2022. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of March 31, 2021, no cash borrowings and no letters of credit were outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2021, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in September 2022. As of March 31, 2021, $4.8 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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
2020 Formula Rate Plan Filing
As discussed in the Form 10-K, in December 2020, Entergy Arkansas filed a petition for rehearing of the APSC’s decision in the 2020 formula rate plan proceeding regarding the 2019 netting adjustment, and in January 2021 the APSC granted further consideration of Entergy Arkansas’s petition. Based on the progress of the proceeding to date, in December 2020, Entergy Arkansas recorded a regulatory liability of $43.5 million to reflect the netting adjustment for 2019, as included in the APSC’s December 2020 order, which would be returned to customers in 2021. Entergy Arkansas also requested an extension of the formula rate plan rider for a second five-year term. In March 2021, the Arkansas Governor signed HB1662 into law (Act 404). Act 404 clarified aspects of the original formula rate plan legislation enacted in 2015, including with respect to the extension of a formula rate plan, the methodology for the netting adjustment, and debt and equity levels; it also reaffirmed the customer protections of the original formula rate plan legislation, including the cap on annual formula rate plan rate changes. Pursuant to Act 404, Entergy Arkansas’s formula rate plan rider is extended for a second five-year term. Entergy Arkansas filed a compliance tariff in its formula rate plan docket in April 2021 to effectuate the netting provisions of Act 404, which reflected a net change in required formula rate plan rider revenue of $39.8 million, effective with the first billing cycle of May 2021. In April 2021 the APSC issued an order approving the compliance tariff and recognizing the formula rate plan extension. Also in April 2021, Entergy Arkansas filed for approval of modifications to the formula rate plan tariff incorporating the provisions in Act 404, and the APSC approved the tariff modifications in April 2021. Given the APSC general staff’s support for the expedited approval of these filings by the APSC, Entergy Arkansas supported an amendment to Act 404 to achieve a reduced return on equity from 9.75% to 9.65% to apply for years applicable to the extension term; that amendment was signed by the Arkansas Governor in April 2021 and is now Act 894. Based on the APSC’s order issued in April 2021, in the first quarter 2021, Entergy Arkansas reversed the remaining regulatory liability for the netting adjustment for 2019.
Energy Cost Recovery Rider
In March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01052 per kWh to $0.00959 per kWh. The redetermined rate calculation also included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. The redetermined rate became effective with the first billing cycle in April 2021 through the normal operation of the tariff.
Opportunity Sales Proceeding
As discussed in the Form 10-K, in May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting approval of a special rider tariff to recover from its retail customers the costs of the opportunity sales payments made to the other Utility operating companies, and in July 2020 the APSC issued a decision finding that Entergy Arkansas’s application is not in the public interest. In September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of these payments. The court held a hearing in February 2021 regarding issues addressed in the pre-trial conference report, and the parties await further instructions from the court.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Net Metering Legislation
See the Form 10-K for discussion of Arkansas net metering legislation and subsequent APSC net metering proceedings. In January 2021, Entergy Arkansas, pursuant to an APSC order, filed an updated net metering tariff, which was approved in February 2021.
COVID-19 Orders
See the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. In March 2021 the APSC issued an order confirming the lifting of the moratorium on service disconnects effective in May 2021. As of March 31, 2021, Entergy Arkansas recorded a regulatory asset of $11.4 million for costs associated with the COVID-19 pandemic.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED INCOME STATEMENTS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(In Thousands)
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
Electric
|
|
|
|
|
|
$583,386
|
|
|
$481,912
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance:
|
|
|
|
|
|
|
|
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
|
|
|
|
126,181
|
|
|
87,411
|
|
|
Purchased power
|
|
|
|
|
|
70,221
|
|
|
46,041
|
|
|
Nuclear refueling outage expenses
|
|
|
|
|
|
12,647
|
|
|
16,247
|
|
|
Other operation and maintenance
|
|
|
|
|
|
154,908
|
|
|
151,857
|
|
|
Decommissioning
|
|
|
|
|
|
19,000
|
|
|
17,941
|
|
|
Taxes other than income taxes
|
|
|
|
|
|
29,743
|
|
|
31,060
|
|
|
Depreciation and amortization
|
|
|
|
|
|
88,279
|
|
|
83,521
|
|
|
Other regulatory charges (credits) - net
|
|
|
|
|
|
(37,467)
|
|
|
(20,001)
|
|
|
TOTAL
|
|
|
|
|
|
463,512
|
|
|
414,077
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
|
|
|
119,874
|
|
|
67,835
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
|
Allowance for equity funds used during construction
|
|
|
|
|
|
2,993
|
|
|
2,917
|
|
|
Interest and investment income
|
|
|
|
|
|
27,887
|
|
|
7,938
|
|
|
Miscellaneous - net
|
|
|
|
|
|
(5,791)
|
|
|
(6,436)
|
|
|
TOTAL
|
|
|
|
|
|
25,089
|
|
|
4,419
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
33,786
|
|
|
35,623
|
|
|
Allowance for borrowed funds used during construction
|
|
|
|
|
|
(1,290)
|
|
|
(1,281)
|
|
|
TOTAL
|
|
|
|
|
|
32,496
|
|
|
34,342
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
|
|
112,467
|
|
|
37,912
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
|
|
|
19,430
|
|
|
(6,683)
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
|
|
|
$93,037
|
|
|
$44,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
(Page left blank intentionally)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$93,037
|
|
|
$44,595
|
|
|
Adjustments to reconcile net income to net cash flow provided by operating activities:
|
|
|
|
|
|
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
|
|
126,630
|
|
|
123,160
|
|
|
Deferred income taxes, investment tax credits, and non-current taxes accrued
|
|
42,885
|
|
|
8,251
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Receivables
|
|
(56,256)
|
|
|
32,820
|
|
|
Fuel inventory
|
|
17,930
|
|
|
(9,419)
|
|
|
Accounts payable
|
|
(21,622)
|
|
|
(42,694)
|
|
|
Taxes accrued
|
|
8,365
|
|
|
9,302
|
|
|
Interest accrued
|
|
18,837
|
|
|
16,839
|
|
|
Deferred fuel costs
|
|
(55,704)
|
|
|
23,594
|
|
|
Other working capital accounts
|
|
(8,025)
|
|
|
(2,691)
|
|
|
Provisions for estimated losses
|
|
(12,383)
|
|
|
4,695
|
|
|
Other regulatory assets
|
|
42,388
|
|
|
(13,187)
|
|
|
Other regulatory liabilities
|
|
(38,604)
|
|
|
(161,989)
|
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities
|
|
(25,116)
|
|
|
11,704
|
|
|
Other assets and liabilities
|
|
(40,789)
|
|
|
164,694
|
|
|
Net cash flow provided by operating activities
|
|
91,573
|
|
|
209,674
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction expenditures
|
|
(146,334)
|
|
|
(179,117)
|
|
|
Allowance for equity funds used during construction
|
|
2,993
|
|
|
2,917
|
|
|
|
|
|
|
|
|
Nuclear fuel purchases
|
|
(17,621)
|
|
|
(52,211)
|
|
|
Proceeds from sale of nuclear fuel
|
|
16,059
|
|
|
17,210
|
|
|
Proceeds from nuclear decommissioning trust fund sales
|
|
143,575
|
|
|
115,030
|
|
|
Investment in nuclear decommissioning trust funds
|
|
(148,783)
|
|
|
(121,003)
|
|
|
Change in money pool receivable - net
|
|
(12,500)
|
|
|
(24,935)
|
|
|
Changes in securitization account
|
|
—
|
|
|
(3,443)
|
|
|
|
|
|
|
|
|
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
|
|
—
|
|
|
55,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow used in investing activities
|
|
(162,611)
|
|
|
(190,551)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
604,760
|
|
|
264,505
|
|
|
|
|
|
|
|
|
Retirement of long-term debt
|
|
(613,706)
|
|
|
(127,203)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in money pool payable - net
|
|
—
|
|
|
(21,634)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
11,636
|
|
|
(818)
|
|
|
Net cash flow provided by financing activities
|
|
2,690
|
|
|
114,850
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(68,348)
|
|
|
133,973
|
|
|
Cash and cash equivalents at beginning of period
|
|
192,128
|
|
|
3,519
|
|
|
Cash and cash equivalents at end of period
|
|
$123,780
|
|
|
$137,492
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
Interest - net of amount capitalized
|
|
$14,359
|
|
|
$17,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
ASSETS
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash
|
|
$122
|
|
|
$24,108
|
|
|
Temporary cash investments
|
|
123,658
|
|
|
168,020
|
|
|
Total cash and cash equivalents
|
|
123,780
|
|
|
192,128
|
|
|
|
|
|
|
|
|
Accounts receivable:
|
|
|
|
|
|
Customer
|
|
215,233
|
|
|
183,719
|
|
|
Allowance for doubtful accounts
|
|
(21,176)
|
|
|
(18,334)
|
|
|
Associated companies
|
|
56,711
|
|
|
34,216
|
|
|
Other
|
|
69,110
|
|
|
35,845
|
|
|
Accrued unbilled revenues
|
|
93,324
|
|
|
109,000
|
|
|
Total accounts receivable
|
|
413,202
|
|
|
344,446
|
|
|
|
|
|
|
|
|
Deferred fuel costs
|
|
2,506
|
|
|
—
|
|
|
Fuel inventory - at average cost
|
|
25,881
|
|
|
43,811
|
|
|
Materials and supplies - at average cost
|
|
243,721
|
|
|
237,640
|
|
|
Deferred nuclear refueling outage costs
|
|
26,613
|
|
|
32,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments and other
|
|
15,134
|
|
|
13,296
|
|
|
TOTAL
|
|
850,837
|
|
|
864,013
|
|
|
|
|
|
|
|
|
OTHER PROPERTY AND INVESTMENTS
|
|
|
|
|
|
Decommissioning trust funds
|
|
1,311,053
|
|
|
1,273,921
|
|
|
|
|
|
|
|
|
Other
|
|
340
|
|
|
341
|
|
|
TOTAL
|
|
1,311,393
|
|
|
1,274,262
|
|
|
|
|
|
|
|
|
UTILITY PLANT
|
|
|
|
|
|
Electric
|
|
12,963,731
|
|
|
12,905,322
|
|
|
|
|
|
|
|
|
Construction work in progress
|
|
288,269
|
|
|
234,213
|
|
|
Nuclear fuel
|
|
143,835
|
|
|
163,044
|
|
|
TOTAL UTILITY PLANT
|
|
13,395,835
|
|
|
13,302,579
|
|
|
Less - accumulated depreciation and amortization
|
|
5,323,933
|
|
|
5,255,355
|
|
|
UTILITY PLANT - NET
|
|
8,071,902
|
|
|
8,047,224
|
|
|
|
|
|
|
|
|
DEFERRED DEBITS AND OTHER ASSETS
|
|
|
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
|
|
|
Other regulatory assets
|
|
1,789,996
|
|
|
1,832,384
|
|
|
Deferred fuel costs
|
|
68,353
|
|
|
68,220
|
|
|
Other
|
|
20,675
|
|
|
14,028
|
|
|
TOTAL
|
|
1,879,024
|
|
|
1,914,632
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$12,113,156
|
|
|
$12,100,131
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
LIABILITIES AND EQUITY
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Currently maturing long-term debt
|
|
$90,000
|
|
|
$485,000
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
Associated companies
|
|
39,361
|
|
|
59,448
|
|
|
Other
|
|
190,966
|
|
|
208,591
|
|
|
Customer deposits
|
|
92,626
|
|
|
98,506
|
|
|
Taxes accrued
|
|
90,202
|
|
|
81,837
|
|
|
|
|
|
|
|
|
Interest accrued
|
|
41,582
|
|
|
22,745
|
|
|
Deferred fuel costs
|
|
—
|
|
|
53,065
|
|
|
|
|
|
|
|
|
Other
|
|
40,776
|
|
|
40,628
|
|
|
TOTAL
|
|
585,513
|
|
|
1,049,820
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
Accumulated deferred income taxes and taxes accrued
|
|
1,326,518
|
|
|
1,286,123
|
|
|
Accumulated deferred investment tax credits
|
|
30,200
|
|
|
30,500
|
|
|
Regulatory liability for income taxes - net
|
|
452,987
|
|
|
467,031
|
|
|
Other regulatory liabilities
|
|
662,312
|
|
|
686,872
|
|
|
Decommissioning
|
|
1,333,159
|
|
|
1,314,160
|
|
|
Accumulated provisions
|
|
57,786
|
|
|
70,169
|
|
|
Pension and other postretirement liabilities
|
|
336,515
|
|
|
361,682
|
|
|
Long-term debt
|
|
3,868,751
|
|
|
3,482,507
|
|
|
Other
|
|
90,209
|
|
|
75,098
|
|
|
TOTAL
|
|
8,158,437
|
|
|
7,774,142
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Member's equity
|
|
3,369,206
|
|
|
3,276,169
|
|
|
TOTAL
|
|
3,369,206
|
|
|
3,276,169
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$12,113,156
|
|
|
$12,100,131
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Member's Equity
|
|
|
|
(In Thousands)
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$3,125,937
|
|
|
|
|
|
|
Net income
|
|
44,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
|
$3,170,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$3,276,169
|
|
|
|
|
|
|
Net income
|
|
93,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2021
|
|
$3,369,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
The COVID-19 Pandemic
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.
Hurricane Laura, Hurricane Delta, and Hurricane Zeta
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Laura, Hurricane Delta, and Hurricane Zeta” in the Form 10-K for a discussion of Hurricane Laura, Hurricane Delta, and Hurricane Zeta, which caused significant damage to portions of Entergy Louisiana’s service area. See Note 2 to the financial statements herein for discussion of storm cost recovery filings made by Entergy Louisiana in April 2021.
Winter Storm Uri
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy Louisiana’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Louisiana were approximately $285 million in February 2021 compared to approximately $95 million in February 2020. See Note 2 to the financial statements herein for discussion of the storm cost recovery filing made by Entergy Louisiana in April 2021. See Note 2 to the financial statements herein and in the Form 10-K for discussion of fuel cost recovery at Entergy Louisiana.
Results of Operations
Net Income
Net income decreased $22.8 million primarily due to the $58 million reduction in income tax expense resulting from an IRS settlement in the first quarter 2020 related to the uncertain tax position regarding the Hurricane Isaac Louisiana Act 55 financing, which also resulted in a $29 million ($21 million net-of-tax) regulatory charge to reflect Entergy Louisiana’s agreement to share the savings with customers. Also contributing to the decrease was higher other operation and maintenance expenses, higher interest expense, and a higher effective income tax rate. The decrease was partially offset by higher retail electric price and higher volume/weather. See Note 3 to the financial statements in the Form 10-K for further discussion of the tax settlement.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 2021 to the first quarter 2020:
|
|
|
|
|
|
|
|
|
Amount
|
|
|
(In Millions)
|
|
2020 operating revenues
|
$930.6
|
|
|
Fuel, rider, and other revenues that do not significantly affect net income
|
88.1
|
|
|
Retail electric price
|
52.4
|
|
|
Volume/weather
|
36.5
|
|
|
|
|
|
2021 operating revenues
|
$1,107.6
|
|
Entergy Louisiana’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The retail electric price variance is primarily due to:
•an interim increase in formula rate plan revenues effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station;
•an increase in formula rate plan revenues and an increase in the transmission recovery mechanism effective September 2020; and
•an interim increase in formula rate plan revenues effective December 2020 due to the inclusion of the first-year revenue requirement for the Washington Parish Energy Center.
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales and an increase in usage during the unbilled sales period. The increase is partially offset by a decrease in industrial usage and decreased demand from mid to small customers. The decrease in industrial usage is primarily due to decreased demand from existing customers in the chemicals and petroleum refining industries as a result of the COVID-19 pandemic and plant shutdowns and operational issues. The decrease in industrial usage is partially offset by an increase in demand from expansion projects, primarily in the transportation and chemicals industries. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Billed electric energy sales for Entergy Louisiana for the three months ended March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
|
(GWh)
|
|
|
|
Residential
|
3,500
|
|
|
2,975
|
|
|
18
|
|
|
Commercial
|
2,409
|
|
|
2,459
|
|
|
(2)
|
|
|
Industrial
|
7,010
|
|
|
7,450
|
|
|
(6)
|
|
|
Governmental
|
197
|
|
|
199
|
|
|
(1)
|
|
|
Total retail
|
13,116
|
|
|
13,083
|
|
|
—
|
|
|
Sales for resale:
|
|
|
|
|
|
|
Associated companies
|
959
|
|
|
1,341
|
|
|
(28)
|
|
|
Non-associated companies
|
386
|
|
|
457
|
|
|
(16)
|
|
|
Total
|
14,461
|
|
|
14,881
|
|
|
(3)
|
|
See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
•an increase of $8.9 million in nuclear generation expenses primarily due to spending on sanitation and social distancing protocols, as a result of the COVID-19 pandemic;
•a decrease of $4.2 million in nuclear insurance refunds; and
•an increase of $1.5 million in non-nuclear generation expenses due to higher expenses associated with the Lake Charles Power Station, which began commercial operation in March 2020, partially offset by a lower scope of work performed during plant outages in 2021 as compared to the prior year.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Lake Charles Power Station, which was placed in service in March 2020.
Other regulatory charges (credits) - net include regulatory charges of $29 million recorded in first quarter 2020 due to a settlement with the IRS related to the uncertain tax position regarding Hurricane Isaac Louisiana Act 55 financing because the savings will be shared with customers. See Note 3 in the Form 10-K for further discussion of the settlement and savings obligation.
Other income decreased primarily due to a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the Lake Charles Power Station project. The decrease was substantially offset by changes in decommissioning trust fund activity.
Interest expense increased primarily due to:
•the issuance of $350 million of 2.90% Series mortgage bonds in March 2020;
•the issuance of $1.1 billion of 0.62% Series mortgage bonds, $300 million of 2.90% Series mortgage bonds, and $300 million of 1.60% Series mortgage bonds, each in November 2020;
•the issuance of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021; and
•a decrease in the allowance for borrowed funds used during construction due to higher construction work in progress in 2020, including the Lake Charles Power Station project.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The increase was partially offset by the repayment of $200 million of 5.25% Series mortgage bonds and $100 million of 4.70% Series mortgage bonds, each in December 2020.
Income Taxes
The effective income tax rate was 18.5% for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, and the amortization of excess accumulated deferred income taxes, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
The effective income tax rate was (36.0%) for the first quarter 2020. The difference in the effective income tax rate for the first quarter 2020 versus the federal statutory rate of 21% was primarily due to the settlement with the IRS on the treatment of funds received in conjunction with the Louisiana Act 55 financing of Hurricane Isaac storm costs, permanent differences related to income tax deductions for stock-based compensation, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, book and tax differences related to the allowance for equity funds used during construction, and the amortization of excess accumulated deferred income taxes, partially offset by state income taxes. See Note 3 in the Form 10-K for discussion of the IRS settlement and the income tax deductions for stock-based compensation. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Cash and cash equivalents at beginning of period
|
$728,020
|
|
|
$2,006
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
Operating activities
|
(54,598)
|
|
|
313,799
|
|
|
Investing activities
|
(1,098,466)
|
|
|
(373,239)
|
|
|
Financing activities
|
1,026,860
|
|
|
522,828
|
|
|
Net increase (decrease) in cash and cash equivalents
|
(126,204)
|
|
|
463,388
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$601,816
|
|
|
$465,394
|
|
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Entergy Louisiana’s operating activities used $54.6 million of cash for the three months ended March 31, 2021 compared to providing $313.8 million of cash for the three months ended March 31, 2020 primarily due to:
•an increase of approximately $170 million in storm spending in 2021, primarily due to Hurricane Laura, Hurricane Delta, and Hurricane Zeta restoration efforts. See “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” above for discussion of storm restoration efforts;
•increased fuel costs as a result of Winter Storm Uri. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•an increase of $24 million in spending on nuclear refueling outages;
•income tax refunds of $20.7 million in 2020. Entergy Louisiana had income tax refunds in 2020 as a result of a refund of an overpayment on a prior year state income tax return; and
•an increase of $20.5 million in pension contributions in 2021. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
Investing Activities
Net cash flow used in investing activities increased $725.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:
•an increase of 437.9 million in distribution construction expenditures primarily due to storm spending in 2021. See “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” above for discussion of storm restoration efforts;
•an increase of $162.6 million in transmission construction expenditures primarily due to storm spending in 2021. See “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” above for discussion of storm restoration efforts;
•an increase of $68.3 million as a result of fluctuations in nuclear fuel activity, primarily due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
•$39.5 million in net receipts from storm reserve escrow accounts in the first quarter 2020; and
•an increase of $19.7 million in nuclear construction expenditures primarily due to increased spending on various projects in 2021.
The increase was partially offset by:
•a decrease of $19.7 million in non-nuclear generation construction expenditures due to a lower scope of work performed in 2021 as compared to 2020; and
•money pool activity.
Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana’s receivable from the money pool increased by $62.3 million for the three months ended March 31, 2021 compared to increasing by $84.5 million for the three months ended March 31, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Net cash flow provided by financing activities increased $504 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:
•the issuance of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021, as compared to the issuances of $350 million of 2.90% Series mortgage bonds and $300 million of 4.20% Series mortgage bonds, each in March 2020;
•net long-term borrowings of $85.5 million in 2021 compared to net repayments of long-term borrowings of $28.5 million in 2020 on the nuclear fuel company variable interest entities’ credit facilities;
•money pool activity; and
•the payment of $11.5 million in common equity distributions in March 2020 primarily to maintain Entergy Louisiana’s capital structure.
The decrease was partially offset by the repayment of Entergy Louisiana Waterford VIE’s $40 million of 3.92% Series H secured notes in February 2021.
Decreases in Entergy Louisiana’s payable to the money pool are a use of cash flow, and Entergy Louisiana’s payable to the money pool decreased by $82.8 million for the three months ended March 31, 2020.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Louisiana’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Louisiana is primarily due to the issuance of $1 billion of mortgage bonds in March 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Debt to capital
|
56.9
|
%
|
|
54.8
|
%
|
|
Effect of excluding securitization bonds
|
0.0
|
%
|
|
0.0
|
%
|
|
Debt to capital, excluding securitization bonds (a)
|
56.9
|
%
|
|
54.8
|
%
|
|
Effect of subtracting cash
|
(1.5
|
%)
|
|
(2.1
|
%)
|
|
Net debt to net capital, excluding securitization bonds (a)
|
55.4
|
%
|
|
52.7
|
%
|
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.
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 common equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana 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 Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Louisiana 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 Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Louisiana’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In Thousands)
|
|
$75,772
|
|
$13,426
|
|
$84,466
|
|
($82,826)
|
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in September 2024. The credit facility includes fronting commitments for the issuance of letters of credit against $15 million of the borrowing capacity of the facility. As of March 31, 2021, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2021, $12.8 million in letters of credit were outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, each in the amount of $105 million and scheduled to expire in September 2022. As of March 31, 2021, $70.5 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of March 31, 2021, $73.2 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel cost recovery. The following are updates to that discussion.
Retail Rates - Electric
2017 Formula Rate Plan Filing
As discussed in the Form 10-K, in May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station (formerly St. Charles Power Station). In February 2021, LPSC staff filed testimony that substantially all the costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for recovery from customers. LPSC staff further recommended that the LPSC consider monitoring the remaining $3.1 million that was estimated to be incurred for completion of the project in the event the final costs exceed the estimated amounts. Settlement discussions are in progress.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Request for Extension and Modification of Formula Rate Plan
As discussed in the Form 10-K, in May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate plan. The parties reached a settlement in April 2021 regarding Entergy Louisiana’s proposed FRP extension. Entergy Louisiana and the LPSC staff filed a joint motion asking the LPSC to consider and approve the uncontested settlement at the May 2021 LPSC meeting. Key terms of the settlement include: a three year term (test years 2020, 2021, and 2022) covering a rate-effective period of September 2021 through August 2024; a 9.50% return on equity, with a smaller, 50 basis point deadband above and below (9.0%-10.0%); elimination of sharing if earnings are outside the deadband; a $63 million rate increase for test year 2020 (exclusive of riders); continuation of existing riders (transmission, additional capacity, etc.); addition of a distribution recovery mechanism permitting $225 million per year of distribution investment above a baseline level to be recovered dollar for dollar; modification of the tax mechanism to allow timely rate changes in the event the federal corporate income tax rate is changed from 21%; a cumulative rate increase limit of $70 million (exclusive of riders) for test years 2021 and 2022; and deferral of up to $7 million per year in 2021 and 2022 of expenditures on vegetation management for outside of right of way hazard trees.
Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri
In August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild.
In October 2020, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking adjustments to facilitate issuance of shorter-term bonds to provide interim financing for restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy Louisiana’s capital structure and cost rate of debt for ratemaking purposes, including the allowance for funds used during construction, shorter-term debt up to $1.1 billion issued by Entergy Louisiana to fund costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta costs on an interim basis. In November 2020 the LPSC issued an order approving the joint motion, and Entergy Louisiana issued $1.1 billion of 0.62% Series mortgage bonds due November 2023. Also in November 2020, Entergy Louisiana drew $257 million from its funded storm reserves.
In February 2021, two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing incremental outages. As discussed above in “Fuel and purchased power recovery,” Entergy Louisiana is recovering the incremental fuel costs associated with Winter Storm Uri over a five-month period from April 2021 through August 2021.
In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by the storms are currently estimated to be approximately $2.05 billion, including approximately $1.74 billion in capital costs and approximately $310 million in non-capital costs. Including carrying costs through January 2022, Entergy Louisiana is seeking an LPSC determination that $2.10 billion was prudently incurred and, therefore, is eligible for recovery from customers. Additionally, Entergy Louisiana is requesting that the LPSC determine that re-establishment of a storm escrow account to the previously authorized amount of $290 million is appropriate. Entergy Louisiana intends to supplement this application with a request regarding the financing and recovery of the recoverable storm restoration costs.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Fuel and purchased power recovery
In February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021 winter storms. To mitigate the effect of these costs on customer bills, in March 2021 Entergy Louisiana requested and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over five months beginning in April 2021. The incremental fuel costs remain subject to review for reasonableness and eligibility for recovery through the fuel adjustment clause mechanism. At its April 2021 meeting, the LPSC authorized its staff to review the prudence of February 2021 fuel costs incurred by all LPSC jurisdictional utilities.
In March 2021 the LPSC staff provided notice of an audit of Entergy Louisiana’s purchased gas adjustment clause filings covering the period January 2018 through December 2020. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period. No audit report has been filed.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees and disconnects for non-payment was extended until the first billing cycle after July 16, 2020. In January 2021, Entergy Louisiana resumed disconnections for customers in all customer classes with past-due balances that have not made payment arrangements. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of March 31, 2021, Entergy Louisiana recorded a regulatory asset of $47.8 million for costs associated with the COVID-19 pandemic.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
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.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED INCOME STATEMENTS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
Electric
|
|
$1,079,663
|
|
|
$912,541
|
|
|
|
|
|
|
Natural gas
|
|
27,981
|
|
|
18,106
|
|
|
|
|
|
|
TOTAL
|
|
1,107,644
|
|
|
930,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance:
|
|
|
|
|
|
|
|
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
145,234
|
|
|
144,492
|
|
|
|
|
|
|
Purchased power
|
|
209,961
|
|
|
160,743
|
|
|
|
|
|
|
Nuclear refueling outage expenses
|
|
13,282
|
|
|
13,630
|
|
|
|
|
|
|
Other operation and maintenance
|
|
237,483
|
|
|
222,658
|
|
|
|
|
|
|
Decommissioning
|
|
16,823
|
|
|
16,001
|
|
|
|
|
|
|
Taxes other than income taxes
|
|
52,484
|
|
|
50,077
|
|
|
|
|
|
|
Depreciation and amortization
|
|
160,813
|
|
|
145,135
|
|
|
|
|
|
|
Other regulatory charges (credits) - net
|
|
31,097
|
|
|
11,132
|
|
|
|
|
|
|
TOTAL
|
|
867,177
|
|
|
763,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
240,467
|
|
|
166,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
|
Allowance for equity funds used during construction
|
|
6,101
|
|
|
14,887
|
|
|
|
|
|
|
Interest and investment income
|
|
72,515
|
|
|
(19,669)
|
|
|
|
|
|
|
Miscellaneous - net
|
|
(34,638)
|
|
|
49,601
|
|
|
|
|
|
|
TOTAL
|
|
43,978
|
|
|
44,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
82,806
|
|
|
79,517
|
|
|
|
|
|
|
Allowance for borrowed funds used during construction
|
|
(2,759)
|
|
|
(7,132)
|
|
|
|
|
|
|
TOTAL
|
|
80,047
|
|
|
72,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
204,398
|
|
|
139,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
37,772
|
|
|
(50,183)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$166,626
|
|
|
$189,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
$166,626
|
|
|
$189,396
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities (net of tax expense (benefit) of ($144) and $3,340)
|
(407)
|
|
|
9,467
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
(407)
|
|
|
9,467
|
|
|
|
|
|
|
Comprehensive Income
|
$166,219
|
|
|
$198,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$166,626
|
|
|
$189,396
|
|
|
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
|
|
198,868
|
|
|
191,447
|
|
|
Deferred income taxes, investment tax credits, and non-current taxes accrued
|
|
67,823
|
|
|
(39,681)
|
|
|
Changes in working capital:
|
|
|
|
|
|
Receivables
|
|
(13,080)
|
|
|
23,004
|
|
|
Fuel inventory
|
|
1,194
|
|
|
(456)
|
|
|
Accounts payable
|
|
(126,070)
|
|
|
(86,317)
|
|
|
Prepaid taxes and taxes accrued
|
|
20,619
|
|
|
48,840
|
|
|
Interest accrued
|
|
(9,163)
|
|
|
(2,384)
|
|
|
Deferred fuel costs
|
|
(203,815)
|
|
|
(18,280)
|
|
|
Other working capital accounts
|
|
(25,628)
|
|
|
(3,156)
|
|
|
Changes in provisions for estimated losses
|
|
(258)
|
|
|
(41,113)
|
|
|
Changes in other regulatory assets
|
|
(70,784)
|
|
|
55,539
|
|
|
Changes in other regulatory liabilities
|
|
22,503
|
|
|
(129,370)
|
|
|
Changes in pension and other postretirement liabilities
|
|
(30,745)
|
|
|
(22,806)
|
|
|
Other
|
|
(52,688)
|
|
|
149,136
|
|
|
Net cash flow provided by (used in) operating activities
|
|
(54,598)
|
|
|
313,799
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction expenditures
|
|
(945,831)
|
|
|
(344,522)
|
|
|
Allowance for equity funds used during construction
|
|
6,101
|
|
|
14,887
|
|
|
|
|
|
|
|
|
Nuclear fuel purchases
|
|
(52,435)
|
|
|
(18,052)
|
|
|
Proceeds from the sale of nuclear fuel
|
|
—
|
|
|
33,889
|
|
|
Receipts from storm reserve escrow account
|
|
—
|
|
|
40,589
|
|
|
|
|
|
|
|
|
Payments to storm reserve escrow account
|
|
—
|
|
|
(1,113)
|
|
|
|
|
|
|
|
|
Changes to securitization account
|
|
(6,050)
|
|
|
(5,348)
|
|
|
Proceeds from nuclear decommissioning trust fund sales
|
|
291,275
|
|
|
144,962
|
|
|
Investment in nuclear decommissioning trust funds
|
|
(329,180)
|
|
|
(154,065)
|
|
|
Changes in money pool receivable - net
|
|
(62,346)
|
|
|
(84,466)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow used in investing activities
|
|
(1,098,466)
|
|
|
(373,239)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
1,399,245
|
|
|
1,221,900
|
|
|
Retirement of long-term debt
|
|
(368,707)
|
|
|
(603,607)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in money pool payable - net
|
|
—
|
|
|
(82,826)
|
|
|
|
|
|
|
|
|
Common equity distributions paid
|
|
—
|
|
|
(11,500)
|
|
|
|
|
|
|
|
|
Other
|
|
(3,678)
|
|
|
(1,139)
|
|
|
Net cash flow provided by financing activities
|
|
1,026,860
|
|
|
522,828
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(126,204)
|
|
|
463,388
|
|
|
Cash and cash equivalents at beginning of period
|
|
728,020
|
|
|
2,006
|
|
|
Cash and cash equivalents at end of period
|
|
$601,816
|
|
|
$465,394
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash paid (received) during the period for:
|
|
|
|
|
|
Interest - net of amount capitalized
|
|
$89,432
|
|
|
$79,794
|
|
|
Income taxes
|
|
$—
|
|
|
($20,684)
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
ASSETS
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash
|
|
$233
|
|
|
$1,303
|
|
|
Temporary cash investments
|
|
601,583
|
|
|
726,717
|
|
|
Total cash and cash equivalents
|
|
601,816
|
|
|
728,020
|
|
|
|
|
|
|
|
|
Accounts receivable:
|
|
|
|
|
|
Customer
|
|
326,475
|
|
|
317,905
|
|
|
Allowance for doubtful accounts
|
|
(46,655)
|
|
|
(45,693)
|
|
|
Associated companies
|
|
144,640
|
|
|
81,624
|
|
|
Other
|
|
39,401
|
|
|
41,760
|
|
|
Accrued unbilled revenues
|
|
186,001
|
|
|
178,840
|
|
|
Total accounts receivable
|
|
649,862
|
|
|
574,436
|
|
|
|
|
|
|
|
|
Deferred fuel costs
|
|
206,065
|
|
|
2,250
|
|
|
Fuel inventory
|
|
49,486
|
|
|
50,680
|
|
|
Materials and supplies - at average cost
|
|
433,841
|
|
|
437,933
|
|
|
Deferred nuclear refueling outage costs
|
|
75,916
|
|
|
48,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments and other
|
|
41,100
|
|
|
36,813
|
|
|
TOTAL
|
|
2,058,086
|
|
|
1,878,539
|
|
|
|
|
|
|
|
|
OTHER PROPERTY AND INVESTMENTS
|
|
|
|
|
|
Investment in affiliate preferred membership interests
|
|
1,390,587
|
|
|
1,390,587
|
|
|
Decommissioning trust funds
|
|
1,879,332
|
|
|
1,794,042
|
|
|
|
|
|
|
|
|
Non-utility property - at cost (less accumulated depreciation)
|
|
335,730
|
|
|
323,110
|
|
|
|
|
|
|
|
|
Other
|
|
13,521
|
|
|
13,399
|
|
|
TOTAL
|
|
3,619,170
|
|
|
3,521,138
|
|
|
|
|
|
|
|
|
UTILITY PLANT
|
|
|
|
|
|
Electric
|
|
25,960,969
|
|
|
25,619,789
|
|
|
|
|
|
|
|
|
Natural gas
|
|
268,865
|
|
|
262,744
|
|
|
|
|
|
|
|
|
Construction work in progress
|
|
526,575
|
|
|
667,281
|
|
|
Nuclear fuel
|
|
252,555
|
|
|
210,128
|
|
|
TOTAL UTILITY PLANT
|
|
27,008,964
|
|
|
26,759,942
|
|
|
Less - accumulated depreciation and amortization
|
|
9,502,347
|
|
|
9,372,224
|
|
|
UTILITY PLANT - NET
|
|
17,506,617
|
|
|
17,387,718
|
|
|
|
|
|
|
|
|
DEFERRED DEBITS AND OTHER ASSETS
|
|
|
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
|
|
|
Other regulatory assets (includes securitization property of $— as of March 31, 2021 and $5,088 as of December 31, 2020)
|
|
1,796,850
|
|
|
1,726,066
|
|
|
Deferred fuel costs
|
|
168,122
|
|
|
168,122
|
|
|
Other
|
|
32,212
|
|
|
23,924
|
|
|
TOTAL
|
|
1,997,184
|
|
|
1,918,112
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$25,181,057
|
|
|
$24,705,507
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
LIABILITIES AND EQUITY
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Currently maturing long-term debt
|
|
$200,000
|
|
|
$240,000
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
Associated companies
|
|
75,431
|
|
|
103,148
|
|
|
Other
|
|
685,493
|
|
|
1,450,008
|
|
|
Customer deposits
|
|
151,307
|
|
|
152,612
|
|
|
Taxes accrued
|
|
63,236
|
|
|
42,617
|
|
|
|
|
|
|
|
|
Interest accrued
|
|
83,086
|
|
|
92,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of unprotected excess accumulated deferred income taxes
|
|
31,138
|
|
|
31,138
|
|
|
Other
|
|
60,652
|
|
|
62,968
|
|
|
TOTAL
|
|
1,350,343
|
|
|
2,174,740
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
Accumulated deferred income taxes and taxes accrued
|
|
2,193,429
|
|
|
2,138,522
|
|
|
Accumulated deferred investment tax credits
|
|
106,135
|
|
|
107,317
|
|
|
Regulatory liability for income taxes - net
|
|
436,577
|
|
|
447,628
|
|
|
|
|
|
|
|
|
Other regulatory liabilities
|
|
951,847
|
|
|
918,293
|
|
|
Decommissioning
|
|
1,592,903
|
|
|
1,573,307
|
|
|
Accumulated provisions
|
|
24,681
|
|
|
24,939
|
|
|
Pension and other postretirement liabilities
|
|
661,999
|
|
|
692,728
|
|
|
Long-term debt (includes securitization bonds of $10,344 as of March 31, 2021 and $10,278 as of December 31, 2020)
|
|
9,859,885
|
|
|
8,787,451
|
|
|
|
|
|
|
|
|
Other
|
|
379,367
|
|
|
382,894
|
|
|
TOTAL
|
|
16,206,823
|
|
|
15,073,079
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Member's equity
|
|
7,619,971
|
|
|
7,453,361
|
|
|
Accumulated other comprehensive income
|
|
3,920
|
|
|
4,327
|
|
|
TOTAL
|
|
7,623,891
|
|
|
7,457,688
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$25,181,057
|
|
|
$24,705,507
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Common Equity
|
|
|
|
|
Member’s
Equity
|
|
Accumulated
Other
Comprehensive
Income
|
|
Total
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$6,392,556
|
|
|
$4,562
|
|
|
$6,397,118
|
|
|
|
|
|
|
|
|
|
Net income
|
189,396
|
|
|
—
|
|
|
189,396
|
|
|
Other comprehensive income
|
—
|
|
|
9,467
|
|
|
9,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions declared on common equity
|
(11,500)
|
|
|
—
|
|
|
(11,500)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
(10)
|
|
|
—
|
|
|
(10)
|
|
|
Balance at March 31, 2020
|
$6,570,442
|
|
|
$14,029
|
|
|
$6,584,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$7,453,361
|
|
|
$4,327
|
|
|
$7,457,688
|
|
|
|
|
|
|
|
|
|
Net income
|
166,626
|
|
|
—
|
|
|
166,626
|
|
|
Other comprehensive loss
|
—
|
|
|
(407)
|
|
|
(407)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
(16)
|
|
|
—
|
|
|
(16)
|
|
|
Balance at March 31, 2021
|
$7,619,971
|
|
|
$3,920
|
|
|
$7,623,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
ENTERGY MISSISSIPPI, LLC
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
The COVID-19 Pandemic
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.
Winter Storm Uri
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in Entergy Mississippi’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Mississippi were approximately $65 million in February 2021 compared to approximately $35 million in February 2020. See Note 2 to the financial statements in the Form 10-K for discussion of storm cost recovery and fuel cost recovery at Entergy Mississippi.
In February 2021 the MPSC announced that it would launch a comprehensive review of the condition and resiliency of the state’s public utility infrastructure in response to the impacts of the February 2021 winter storms. Although the MPSC did not open a formal docket, the MPSC submitted data requests to Entergy Mississippi regarding the actions taken to ensure reliable operations of the electric network during the winter storm events and in anticipation of other future extreme weather events. In April 2021 the MPSC opened a docket to investigate Entergy Mississippi’s membership in MISO. In the order, the MPSC noted the impact of the February 2021 winter storms, stating that it observed “excessive prices of natural gas and electricity” during the winter event. The MPSC has requested comments due 75 days after publication of the order.
Results of Operations
Net Income
Net income increased $3.4 million primarily due to higher retail electric price and higher volume/weather, partially offset by higher other operation and maintenance expenses, a higher effective income tax rate, and higher depreciation and amortization expenses.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 2021 to the first quarter 2020:
|
|
|
|
|
|
|
|
|
Amount
|
|
|
(In Millions)
|
|
2020 operating revenues
|
$293.9
|
|
|
Fuel, rider, and other revenues that do not significantly affect net income
|
22.9
|
|
|
Retail electric price
|
12.3
|
|
|
Volume/weather
|
7.5
|
|
|
2021 operating revenues
|
$336.6
|
|
Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.
The retail electric price variance is primarily due to increases in formula rate plan rates effective with the first billing cycle of April 2020 and the implementation of a vegetation management rider effective with the April 2020 billing cycle. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filings and the vegetation management rider.
The volume/weather variance is primarily due to an increase of 213 GWh, or 7%, in billed electricity usage, including the effect of more favorable weather on residential sales, partially offset by a decrease in industrial usage.
Billed electric energy sales for Entergy Mississippi for the three months ended March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
|
(GWh)
|
|
|
|
Residential
|
1,495
|
|
|
1,250
|
|
|
20
|
|
|
Commercial
|
1,009
|
|
|
1,006
|
|
|
—
|
|
|
Industrial
|
520
|
|
|
556
|
|
|
(6)
|
|
|
Governmental
|
95
|
|
|
94
|
|
|
1
|
|
|
Total retail
|
3,119
|
|
|
2,906
|
|
|
7
|
|
|
Sales for resale:
|
|
|
|
|
|
|
Non-associated companies
|
1,452
|
|
|
827
|
|
|
76
|
|
|
Total
|
4,571
|
|
|
3,733
|
|
|
22
|
|
See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
•an increase of $4.1 million in vegetation maintenance costs;
•an increase of $1.4 million due to bad debt expense as a result of the COVID-19 pandemic; and
•an increase of $1.4 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements for further information on the recovery of these costs.
The increase was partially offset by a decrease of $1.1 million in energy efficiency costs.
Depreciation and amortization expenses increased primarily as a result of additions to plant in service.
Income Taxes
The effective income tax rate was 22.2% for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items, partially offset by state income taxes.
The effective income tax rate was 7.7% for the first quarter 2020. The difference in the effective income tax rate for the first quarter 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and permanent differences related to income tax deductions for stock-based
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
compensation, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for a discussion of the income tax deductions for stock-based compensation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Cash and cash equivalents at beginning of period
|
$18
|
|
|
$51,601
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
Operating activities
|
54,311
|
|
|
33,261
|
|
|
Investing activities
|
(162,802)
|
|
|
(103,615)
|
|
|
Financing activities
|
185,189
|
|
|
18,772
|
|
|
Net increase (decrease) in cash and cash equivalents
|
76,698
|
|
|
(51,582)
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$76,716
|
|
|
$19
|
|
Operating Activities
Net cash flow provided by operating activities increased $21.1 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to the timing of payments to vendors. The increase was partially offset by increased fuel costs as a result of Winter Storm Uri and the timing of collections of receivables from customers, in part due to the COVID-19 pandemic. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery.
Investing Activities
Net cash flow used in investing activities increased $59.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to money pool activity and an increase of $43.5 million in distribution construction expenditures primarily due to increased spending on the reliability and infrastructure of Entergy Mississippi’s distribution system in 2021 as compared to 2020. The increase was partially offset by $24.6 million in plant upgrades for Choctaw Generating Station in March 2020.
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 by $9.7 million for the three months ended March 31, 2021 compared to decreasing $44.7 million for the three months ended March 31, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility’s subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $166.4 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to the issuance of $200 million of 3.5% Series mortgage bonds in March 2021, partially offset by money pool activity. 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.
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
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 by $16.5 million for the three months ended March 31, 2021 compared to increasing by $19 million for the three months ended March 31, 2020.
Capital Structure
Entergy Mississippi’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Mississippi is primarily due to the issuance of $200 million of mortgage bonds in March 2021.
|
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|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Debt to capital
|
54.0
|
%
|
|
51.7
|
%
|
|
Effect of subtracting cash
|
(1.0
|
%)
|
|
—
|
%
|
|
Net debt to net capital
|
53.0
|
%
|
|
51.7
|
%
|
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In Thousands)
|
|
$9,683
|
|
($16,516)
|
|
($19,006)
|
|
$44,693
|
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has three separate credit facilities in the aggregate amount of $82.5 million scheduled to expire in April 2022. No borrowings were outstanding under the credit facilities as of March 31, 2021. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility primarily as a means to post collateral to support its obligations to MISO. As of March 31, 2021, $1 million of MISO letters of credit and $1 million of non-MISO letters of credit were outstanding under this facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Entergy Mississippi has $33 million in its storm reserve escrow account at March 31, 2021.
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
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 the formula rate plan and fuel and purchased power cost recovery. The following are updates to that discussion.
2021 Formula Rate Plan Filing
In March 2021, Entergy Mississippi submitted its formula rate plan 2021 test year filing and 2020 look-back filing showing Entergy Mississippi’s earned return for the historical 2020 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2021 calendar year to be below the formula rate plan bandwidth. The 2020 test year filing shows a $95.4 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.69% return on rate base, within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $44.3 million. The 2021 evaluation report also includes $3.9 million in demand side management costs for which the MPSC approved realignment of recovery from the energy efficiency rider to the formula rate plan. These costs are not subject to the 4% cap and result in a total change in formula rate plan revenues of $48.2 million. The 2020 look-back filing compares actual 2020 results to the approved benchmark return on rate base and reflects the need for a $16.8 million interim increase in formula rate plan revenues. In addition, the 2020 look-back filing includes an interim capacity adjustment true-up for the Choctaw Generating Station, which increases the look-back interim rate adjustment by $1.7 million. These interim rate adjustments total $18.5 million. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $22.1 million interim rate increase, reflecting a cap equal to 2% of 2020 retail revenues, effective with the April 2021 billing cycle, subject to refund, pending a final MPSC order. The $3.9 million of demand side management costs and the Choctaw Generating Station true-up of $1.7 million, which are not subject to the 2% cap of 2020 retail revenues, were included in the April 2021 rate adjustments. A final order is expected in the second quarter 2021, with the resulting final rates, including amounts above the 2% cap of 2020 retail revenues, effective July 2021.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. In December 2020, Entergy Mississippi resumed disconnections for commercial, industrial, and governmental customers with past-due balances that have not made payment arrangements. In January 2021, Entergy Mississippi resumed disconnecting service for residential customers with past-due balances that have not made payment arrangements. As of March 31, 2021, Entergy Mississippi recorded a regulatory asset of $16.3 million for costs associated with the COVID-19 pandemic.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY MISSISSIPPI, LLC
|
|
INCOME STATEMENTS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(In Thousands)
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
Electric
|
|
|
|
|
|
$336,619
|
|
|
$293,922
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance:
|
|
|
|
|
|
|
|
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
|
|
|
|
60,197
|
|
|
63,297
|
|
|
Purchased power
|
|
|
|
|
|
68,591
|
|
|
52,643
|
|
|
Other operation and maintenance
|
|
|
|
|
|
67,831
|
|
|
62,337
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes other than income taxes
|
|
|
|
|
|
25,899
|
|
|
27,190
|
|
|
Depreciation and amortization
|
|
|
|
|
|
55,036
|
|
|
51,155
|
|
|
Other regulatory charges (credits) - net
|
|
|
|
|
|
8,129
|
|
|
(3,881)
|
|
|
TOTAL
|
|
|
|
|
|
285,683
|
|
|
252,741
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
|
|
|
50,936
|
|
|
41,181
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DEDUCTIONS
|
|
|
|
|
|
|
|
|
|
Allowance for equity funds used during construction
|
|
|
|
|
|
1,668
|
|
|
1,439
|
|
|
Interest and investment income
|
|
|
|
|
|
42
|
|
|
120
|
|
|
Miscellaneous - net
|
|
|
|
|
|
(2,313)
|
|
|
(2,296)
|
|
|
TOTAL
|
|
|
|
|
|
(603)
|
|
|
(737)
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
17,613
|
|
|
16,583
|
|
|
Allowance for borrowed funds used during construction
|
|
|
|
|
|
(677)
|
|
|
(551)
|
|
|
TOTAL
|
|
|
|
|
|
16,936
|
|
|
16,032
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
|
|
33,397
|
|
|
24,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
|
|
|
7,425
|
|
|
1,886
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
|
|
|
$25,972
|
|
|
$22,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
(Page left blank intentionally)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY MISSISSIPPI, LLC
|
|
STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$25,972
|
|
|
$22,526
|
|
|
Adjustments to reconcile net income to net cash flow provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
55,036
|
|
|
51,155
|
|
|
Deferred income taxes, investment tax credits, and non-current taxes accrued
|
|
22,593
|
|
|
2,762
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Receivables
|
|
4,557
|
|
|
17,971
|
|
|
Fuel inventory
|
|
1,736
|
|
|
(3,266)
|
|
|
Accounts payable
|
|
26,391
|
|
|
(8,125)
|
|
|
Taxes accrued
|
|
(75,886)
|
|
|
(58,651)
|
|
|
Interest accrued
|
|
4,238
|
|
|
6,201
|
|
|
Deferred fuel costs
|
|
(25,722)
|
|
|
13,406
|
|
|
Other working capital accounts
|
|
(3,425)
|
|
|
7,849
|
|
|
Provisions for estimated losses
|
|
(7,689)
|
|
|
(47)
|
|
|
Other regulatory assets
|
|
11,015
|
|
|
(8,484)
|
|
|
Other regulatory liabilities
|
|
19,147
|
|
|
(5,532)
|
|
|
Pension and other postretirement liabilities
|
|
(5,668)
|
|
|
(2,482)
|
|
|
Other assets and liabilities
|
|
2,016
|
|
|
(2,022)
|
|
|
Net cash flow provided by operating activities
|
|
54,311
|
|
|
33,261
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction expenditures
|
|
(154,788)
|
|
|
(124,986)
|
|
|
Allowance for equity funds used during construction
|
|
1,668
|
|
|
1,439
|
|
|
|
|
|
|
|
|
Changes in money pool receivable - net
|
|
(9,683)
|
|
|
44,693
|
|
|
Payment for the purchase of plant or assets
|
|
—
|
|
|
(24,633)
|
|
|
|
|
|
|
|
|
Other
|
|
1
|
|
|
(128)
|
|
|
Net cash flow used in investing activities
|
|
(162,802)
|
|
|
(103,615)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
200,573
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in money pool payable - net
|
|
(16,516)
|
|
|
19,006
|
|
|
|
|
|
|
|
|
Common equity distributions paid
|
|
—
|
|
|
(2,500)
|
|
|
|
|
|
|
|
|
Other
|
|
1,132
|
|
|
2,266
|
|
|
Net cash flow provided by financing activities
|
|
185,189
|
|
|
18,772
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
76,698
|
|
|
(51,582)
|
|
|
Cash and cash equivalents at beginning of period
|
|
18
|
|
|
51,601
|
|
|
Cash and cash equivalents at end of period
|
|
$76,716
|
|
|
$19
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash paid (received) during the period for:
|
|
|
|
|
|
Interest - net of amount capitalized
|
|
$12,757
|
|
|
$9,800
|
|
|
Income taxes
|
|
($8,045)
|
|
|
$—
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY MISSISSIPPI, LLC
|
|
BALANCE SHEETS
|
|
ASSETS
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash
|
|
$11
|
|
|
$11
|
|
|
Temporary cash investments
|
|
76,705
|
|
|
7
|
|
|
Total cash and cash equivalents
|
|
76,716
|
|
|
18
|
|
|
Accounts receivable:
|
|
|
|
|
|
Customer
|
|
104,649
|
|
|
105,732
|
|
|
Allowance for doubtful accounts
|
|
(16,771)
|
|
|
(19,527)
|
|
|
Associated companies
|
|
13,857
|
|
|
2,740
|
|
|
Other
|
|
13,596
|
|
|
11,821
|
|
|
Accrued unbilled revenues
|
|
50,075
|
|
|
59,514
|
|
|
Total accounts receivable
|
|
165,406
|
|
|
160,280
|
|
|
Deferred fuel costs
|
|
11,031
|
|
|
—
|
|
|
|
|
|
|
|
|
Fuel inventory - at average cost
|
|
15,381
|
|
|
17,117
|
|
|
Materials and supplies - at average cost
|
|
61,336
|
|
|
59,542
|
|
|
|
|
|
|
|
|
Prepayments and other
|
|
3,792
|
|
|
4,876
|
|
|
TOTAL
|
|
333,662
|
|
|
241,833
|
|
|
|
|
|
|
|
|
OTHER PROPERTY AND INVESTMENTS
|
|
|
|
|
|
Non-utility property - at cost (less accumulated depreciation)
|
|
4,539
|
|
|
4,543
|
|
|
Escrow accounts
|
|
64,637
|
|
|
64,635
|
|
|
TOTAL
|
|
69,176
|
|
|
69,178
|
|
|
|
|
|
|
|
|
UTILITY PLANT
|
|
|
|
|
|
Electric
|
|
6,151,971
|
|
|
6,084,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction work in progress
|
|
192,649
|
|
|
134,854
|
|
|
TOTAL UTILITY PLANT
|
|
6,344,620
|
|
|
6,219,584
|
|
|
Less - accumulated depreciation and amortization
|
|
2,046,216
|
|
|
2,005,087
|
|
|
UTILITY PLANT - NET
|
|
4,298,404
|
|
|
4,214,497
|
|
|
|
|
|
|
|
|
DEFERRED DEBITS AND OTHER ASSETS
|
|
|
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
|
|
|
Other regulatory assets
|
|
456,326
|
|
|
467,341
|
|
|
Other
|
|
19,886
|
|
|
14,413
|
|
|
TOTAL
|
|
476,212
|
|
|
481,754
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$5,177,454
|
|
|
$5,007,262
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY MISSISSIPPI, LLC
|
|
BALANCE SHEETS
|
|
LIABILITIES AND EQUITY
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
Associated companies
|
|
$37,053
|
|
|
$61,727
|
|
|
Other
|
|
144,652
|
|
|
117,629
|
|
|
Customer deposits
|
|
85,953
|
|
|
86,200
|
|
|
Taxes accrued
|
|
32,198
|
|
|
108,084
|
|
|
|
|
|
|
|
|
Interest accrued
|
|
25,127
|
|
|
20,889
|
|
|
Deferred fuel costs
|
|
—
|
|
|
14,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
32,239
|
|
|
34,270
|
|
|
TOTAL
|
|
357,222
|
|
|
443,490
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
Accumulated deferred income taxes and taxes accrued
|
|
664,704
|
|
|
646,674
|
|
|
Accumulated deferred investment tax credits
|
|
11,080
|
|
|
9,062
|
|
|
|
|
|
|
|
|
Regulatory liability for income taxes - net
|
|
222,078
|
|
|
224,000
|
|
|
|
|
|
|
|
|
Other regulatory liabilities
|
|
36,897
|
|
|
15,828
|
|
|
Asset retirement cost liabilities
|
|
9,898
|
|
|
9,762
|
|
|
Accumulated provisions
|
|
38,815
|
|
|
46,504
|
|
|
Pension and other postretirement liabilities
|
|
105,176
|
|
|
110,901
|
|
|
Long-term debt
|
|
1,981,429
|
|
|
1,780,577
|
|
|
Other
|
|
51,449
|
|
|
47,730
|
|
|
TOTAL
|
|
3,121,526
|
|
|
2,891,038
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Member's equity
|
|
1,698,706
|
|
|
1,672,734
|
|
|
TOTAL
|
|
1,698,706
|
|
|
1,672,734
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$5,177,454
|
|
|
$5,007,262
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY MISSISSIPPI, LLC
|
|
STATEMENTS OF CHANGES IN MEMBER'S EQUITY
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Member's Equity
|
|
|
|
(In Thousands)
|
|
|
|
|
|
Balance at December 31, 2019
|
|
$1,542,151
|
|
|
|
|
|
|
Net income
|
|
22,526
|
|
|
Common equity distributions
|
|
(2,500)
|
|
|
Balance at March 31, 2020
|
|
$1,562,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
$1,672,734
|
|
|
|
|
|
|
Net income
|
|
25,972
|
|
|
|
|
|
|
Balance at March 31, 2021
|
|
$1,698,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
The COVID-19 Pandemic
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.
Hurricane Zeta
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Zeta” in the Form 10-K for a discussion of Hurricane Zeta, which caused significant damage to Entergy New Orleans’s service area. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. Entergy New Orleans expects to initiate its storm cost recovery proceeding in May 2021.
Winter Storm Uri
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy New Orleans’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy New Orleans were approximately $35 million in February 2021 compared to approximately $25 million in February 2020. See Note 2 to the financial statements in the Form 10-K for discussion of fuel cost recovery at Entergy New Orleans. See “Load Shed Investigation” below for discussion of the investigation initiated by the City Council in February 2021 .
Results of Operations
Net Income
Net income decreased $9.4 million primarily due to higher other operation and maintenance expenses, partially offset by higher retail electric price.
Operating Revenues
Following is an analysis of the change in operating revenues comparing first quarter 2021 to first quarter 2020:
|
|
|
|
|
|
|
|
|
Amount
|
|
|
(In Millions)
|
|
2020 operating revenues
|
$149.3
|
|
|
Fuel, rider, and other revenues that do not significantly affect net income
|
5.3
|
|
|
Retail electric price
|
15.2
|
|
|
Volume/weather
|
(0.5)
|
|
|
2021 operating revenues
|
$169.3
|
|
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.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The retail electric price variance is primarily due to an increase in formula rate plan revenues resulting from the recovery of New Orleans Power Station costs, effective November 2020. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate case resolution.
The volume/weather variance is primarily due to decreased commercial and residential usage and the effect of decreased usage during the unbilled sales period, significantly offset by more favorable weather on residential sales.
Billed electric energy sales for Entergy New Orleans for the three months ended March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
|
(GWh)
|
|
|
Residential
|
595
|
|
|
501
|
|
|
19
|
|
|
Commercial
|
450
|
|
|
496
|
|
|
(9)
|
|
|
Industrial
|
92
|
|
|
102
|
|
|
(10)
|
|
|
Governmental
|
171
|
|
|
184
|
|
|
(7)
|
|
|
Total retail
|
1,308
|
|
|
1,283
|
|
|
2
|
|
|
Sales for resale:
|
|
|
|
|
|
|
Non-associated companies
|
89
|
|
|
601
|
|
|
(85)
|
|
|
Total
|
1,397
|
|
|
1,884
|
|
|
(26)
|
|
See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to an increase of $3.6 million in energy efficiency costs and an increase of $3.5 million in non-nuclear generation expenses primarily due to the timing of the scope of work performed during plant outages as compared to the same period in 2020 and the New Orleans Power Station, which was placed in service in May 2020.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the New Orleans Power Station, which was placed in service in May 2020.
Other regulatory charges (credits) - net include regulatory credits recorded in first quarter 2020 to reflect compliance with terms of the 2018 combined rate case resolution approved by the City Council in February 2020. See Note 2 to the financial statements in the Form 10-K for discussion of the rate case resolution.
Income Taxes
The effective income tax rate was 33.9% for first quarter 2021. The difference in the effective income tax rate for first quarter 2021 versus the federal statutory rate of 21% was primarily due to the provision for uncertain tax positions and state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was (32.4%) for first quarter 2020. The difference in the effective income tax rate for first quarter 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, permanent differences related to income tax deductions for stock-based compensation, certain book and tax differences related to utility plant items, and book and tax differences related to
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
the allowance for equity funds used during construction, partially offset by the provision for uncertain tax positions. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Cash and cash equivalents at beginning of period
|
$26
|
|
|
$6,017
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
Operating activities
|
(14,114)
|
|
|
17,318
|
|
|
Investing activities
|
14,875
|
|
|
(68,691)
|
|
|
Financing activities
|
14,825
|
|
|
118,671
|
|
|
Net increase in cash and cash equivalents
|
15,586
|
|
|
67,298
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$15,612
|
|
|
$73,315
|
|
Operating Activities
Entergy New Orleans’s operating activities used $14.1 million of cash for the three months ended March 31, 2021 compared to providing $17.3 million of cash for the three months ended March 31, 2020 primarily due to the following activity:
•the timing of payments to vendors;
•increased fuel costs as a result of Winter Storm Uri. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•the timing of collection of receivables from customers, in part due to the COVID-19 pandemic; and
•an increase of approximately $5 million in storm spending in 2021, primarily due to Hurricane Zeta restoration efforts. See “Hurricane Zeta” above for discussion of hurricane restoration efforts.
Investing Activities
Entergy New Orleans’s investing activities provided $14.9 million of cash for the three months ended March 31, 2021 compared to using $68.7 million of cash for the three months ended March 31, 2020 primarily due to the following activity:
•$44.2 million in receipts from storm reserve escrow accounts in 2021; and
•a decrease of $33.8 million in construction expenditures primarily due to lower spending in 2021 on the New Orleans Power Station and the New Orleans Solar Station projects and lower spending in 2021 on advanced metering infrastructure, partially offset by storm spending in 2021. See “Hurricane Zeta” above for discussion of hurricane restoration efforts.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Net cash flow provided by financing activities decreased $103.8 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to the issuance of $78 million of 3.00% Series mortgage bonds and the issuance of $62 million of 3.75% Series mortgage bonds, each in March 2020. The decrease was partially offset by $20 million in repayments on long-term credit borrowings in 2020 and money pool activity.
Increases in Entergy New Orleans’s payable to the money pool are a source of cash flow, and Entergy New Orleans’s payable to the money pool increased $15 million for the three months ended March 31, 2021. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy New Orleans’s debt to capital ratio is shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Debt to capital
|
51.5
|
%
|
|
51.5
|
%
|
|
Effect of excluding securitization bonds
|
(1.7
|
%)
|
|
(1.6
|
%)
|
|
Debt to capital, excluding securitization bonds (a)
|
49.8
|
%
|
|
49.9
|
%
|
|
Effect of subtracting cash
|
(0.6
|
%)
|
|
—
|
%
|
|
Net debt to net capital, excluding securitization bonds (a)
|
49.2
|
%
|
|
49.9
|
%
|
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, long-term debt, including the currently maturing portion, and the long-term payable due to an associated company. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In Thousands)
|
|
($25,229)
|
|
($10,190)
|
|
$13,170
|
|
$5,191
|
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 November 2021. 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 March 31, 2021, there were no cash borrowings and no letters of credit outstanding under the 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 March 31, 2021, a $2 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.
Entergy New Orleans has $38.8 million in its storm reserve escrow account at March 31, 2021.
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
COVID-19 Orders
As discussed in the Form 10-K, in June 2020 the City Council established the City Council Cares Program and directed Entergy New Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC proceeding, currently being held in escrow, and approximately $15 million of non-securitized storm reserves to fund this program, which was intended to provide temporary bill relief to customers who became unemployed during the COVID-19 pandemic. The program became effective July 1, 2020 and offered qualifying residential customers bill credits of $100 per month for up to four months, for a maximum of $400 in residential customer bill credits. As of March 31, 2021 the program expired and credits of $4.3 million have been applied to customer bills under the City Council Cares Program.
Additionally, as discussed in the Form 10-K, in February 2021 the City Council adopted a resolution suspending residential customer disconnections for non-payment of utility bills and suspending the assessment and accumulation of late fees on residential customers with past-due balances through May 15, 2021. As of March 31, 2021, Entergy New Orleans recorded a regulatory asset of $14.8 million for costs associated with the COVID-19 pandemic.
Hurricane Zeta
In October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Zeta are currently estimated to be approximately $36 million, including approximately $28 million in capital costs and approximately $8 million in non-capital costs. In March
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. Entergy New Orleans expects to initiate its storm cost recovery proceeding in May 2021.
Load Shed Investigation
On February 16, 2021, due to high customer demand and limited generation, MISO issued an order requiring load-serving entities throughout its southern region to shed load to protect the integrity of the bulk electric system. Entergy New Orleans was required to shed load of at least 26 MW, but due to certain complications with its automated load shed program and certain load measurement issues, it inadvertently shed approximately 105 MW of load in its service area. The maximum time any customer was without power due to the load shed event was one hour and forty minutes. In late February 2021 the City Council ordered its advisors to conduct an investigation into the load shed event and to issue a report, which was completed and filed in April 2021. The report recommended that the City Council open an additional docket to determine whether any of Entergy New Orleans’s actions were imprudent, and the City Council Utility Committee Chairperson has made statements in the media that the City Council may seek to impose a fine on Entergy New Orleans. Entergy New Orleans would oppose any attempt to levy a fine under the circumstances presented.
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 further discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED INCOME STATEMENTS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(In Thousands)
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
Electric
|
|
|
|
|
|
$139,148
|
|
|
$123,431
|
|
|
Natural gas
|
|
|
|
|
|
30,187
|
|
|
25,871
|
|
|
TOTAL
|
|
|
|
|
|
169,335
|
|
|
149,302
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance:
|
|
|
|
|
|
|
|
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
|
|
|
|
19,012
|
|
|
27,495
|
|
|
Purchased power
|
|
|
|
|
|
68,670
|
|
|
56,467
|
|
|
Other operation and maintenance
|
|
|
|
|
|
38,178
|
|
|
30,704
|
|
|
Taxes other than income taxes
|
|
|
|
|
|
12,556
|
|
|
13,206
|
|
|
Depreciation and amortization
|
|
|
|
|
|
18,161
|
|
|
15,075
|
|
|
Other regulatory charges (credits) - net
|
|
|
|
|
|
3,130
|
|
|
(5,736)
|
|
|
TOTAL
|
|
|
|
|
|
159,707
|
|
|
137,211
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
|
|
|
9,628
|
|
|
12,091
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (DEDUCTIONS)
|
|
|
|
|
|
|
|
|
|
Allowance for equity funds used during construction
|
|
|
|
|
|
258
|
|
|
2,485
|
|
|
Interest and investment income
|
|
|
|
|
|
9
|
|
|
53
|
|
|
Miscellaneous - net
|
|
|
|
|
|
(302)
|
|
|
(738)
|
|
|
TOTAL
|
|
|
|
|
|
(35)
|
|
|
1,800
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
7,029
|
|
|
6,640
|
|
|
Allowance for borrowed funds used during construction
|
|
|
|
|
|
(116)
|
|
|
(1,195)
|
|
|
TOTAL
|
|
|
|
|
|
6,913
|
|
|
5,445
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
|
|
2,680
|
|
|
8,446
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
|
|
|
909
|
|
|
(2,740)
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
|
|
|
$1,771
|
|
|
$11,186
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
(Page left blank intentionally)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$1,771
|
|
|
$11,186
|
|
|
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
18,161
|
|
|
15,075
|
|
|
Deferred income taxes, investment tax credits, and non-current taxes accrued
|
|
4,572
|
|
|
1,339
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Receivables
|
|
(1,975)
|
|
|
4,039
|
|
|
Fuel inventory
|
|
2,234
|
|
|
(25)
|
|
|
Accounts payable
|
|
(27,777)
|
|
|
(5,291)
|
|
|
Taxes accrued
|
|
13
|
|
|
122
|
|
|
Interest accrued
|
|
(3,203)
|
|
|
(929)
|
|
|
Deferred fuel costs
|
|
(4,886)
|
|
|
3,702
|
|
|
Other working capital accounts
|
|
(11,103)
|
|
|
(10,795)
|
|
|
Provisions for estimated losses
|
|
(40,680)
|
|
|
923
|
|
|
Other regulatory assets
|
|
28,879
|
|
|
1,867
|
|
|
Other regulatory liabilities
|
|
8,728
|
|
|
(9,599)
|
|
|
Pension and other postretirement liabilities
|
|
(4,397)
|
|
|
(4,878)
|
|
|
Other assets and liabilities
|
|
15,549
|
|
|
10,582
|
|
|
Net cash flow provided by (used in) operating activities
|
|
(14,114)
|
|
|
17,318
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction expenditures
|
|
(26,165)
|
|
|
(60,001)
|
|
|
Allowance for equity funds used during construction
|
|
258
|
|
|
2,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in money pool receivable - net
|
|
—
|
|
|
(7,979)
|
|
|
Receipts from storm reserve escrow account
|
|
44,200
|
|
|
—
|
|
|
Payments to storm reserve escrow account
|
|
(3)
|
|
|
(314)
|
|
|
Changes in securitization account
|
|
(3,415)
|
|
|
(2,882)
|
|
|
|
|
|
|
|
|
Net cash flow provided by (used in) investing activities
|
|
14,875
|
|
|
(68,691)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
—
|
|
|
139,116
|
|
|
Retirement of long-term debt
|
|
—
|
|
|
(20,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in money pool payable - net
|
|
15,039
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
(214)
|
|
|
(445)
|
|
|
Net cash flow provided by financing activities
|
|
14,825
|
|
|
118,671
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
15,586
|
|
|
67,298
|
|
|
Cash and cash equivalents at beginning of period
|
|
26
|
|
|
6,017
|
|
|
Cash and cash equivalents at end of period
|
|
$15,612
|
|
|
$73,315
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
Interest - net of amount capitalized
|
|
$9,921
|
|
|
$7,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
ASSETS
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash
|
|
$15,612
|
|
|
$26
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
15,612
|
|
|
26
|
|
|
Securitization recovery trust account
|
|
6,779
|
|
|
3,364
|
|
|
Accounts receivable:
|
|
|
|
|
|
Customer
|
|
82,902
|
|
|
70,694
|
|
|
Allowance for doubtful accounts
|
|
(19,365)
|
|
|
(17,430)
|
|
|
Associated companies
|
|
1,331
|
|
|
2,381
|
|
|
Other
|
|
5,060
|
|
|
4,248
|
|
|
Accrued unbilled revenues
|
|
23,009
|
|
|
31,069
|
|
|
Total accounts receivable
|
|
92,937
|
|
|
90,962
|
|
|
Deferred fuel costs
|
|
7,016
|
|
|
2,130
|
|
|
Fuel inventory - at average cost
|
|
—
|
|
|
1,978
|
|
|
Materials and supplies - at average cost
|
|
16,434
|
|
|
16,550
|
|
|
Prepayments and other
|
|
14,733
|
|
|
3,715
|
|
|
TOTAL
|
|
153,511
|
|
|
118,725
|
|
|
|
|
|
|
|
|
OTHER PROPERTY AND INVESTMENTS
|
|
|
|
|
|
Non-utility property at cost (less accumulated depreciation)
|
|
1,016
|
|
|
1,016
|
|
|
Storm reserve escrow account
|
|
38,841
|
|
|
83,038
|
|
|
|
|
|
|
|
|
TOTAL
|
|
39,857
|
|
|
84,054
|
|
|
|
|
|
|
|
|
UTILITY PLANT
|
|
|
|
|
|
Electric
|
|
1,806,961
|
|
|
1,821,638
|
|
|
Natural gas
|
|
352,817
|
|
|
348,024
|
|
|
Construction work in progress
|
|
26,927
|
|
|
12,460
|
|
|
TOTAL UTILITY PLANT
|
|
2,186,705
|
|
|
2,182,122
|
|
|
Less - accumulated depreciation and amortization
|
|
751,117
|
|
|
740,796
|
|
|
UTILITY PLANT - NET
|
|
1,435,588
|
|
|
1,441,326
|
|
|
|
|
|
|
|
|
DEFERRED DEBITS AND OTHER ASSETS
|
|
|
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
|
|
|
Deferred fuel costs
|
|
4,080
|
|
|
4,080
|
|
|
Other regulatory assets (includes securitization property of $32,859 as of March 31, 2021 and $35,559 as of December 31, 2020)
|
|
237,911
|
|
|
266,790
|
|
|
Other
|
|
29,864
|
|
|
23,931
|
|
|
TOTAL
|
|
271,855
|
|
|
294,801
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$1,900,811
|
|
|
$1,938,906
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
LIABILITIES AND EQUITY
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
Payable due to associated company
|
|
$1,618
|
|
|
$1,618
|
|
|
Accounts payable:
|
|
|
|
|
|
Associated companies
|
|
66,122
|
|
|
54,234
|
|
|
Other
|
|
40,944
|
|
|
60,766
|
|
|
Customer deposits
|
|
27,315
|
|
|
27,912
|
|
|
Taxes accrued
|
|
4,713
|
|
|
4,700
|
|
|
Interest accrued
|
|
4,892
|
|
|
8,095
|
|
|
|
|
|
|
|
|
Current portion of unprotected excess accumulated deferred income taxes
|
|
3,327
|
|
|
3,296
|
|
|
Other
|
|
6,160
|
|
|
5,462
|
|
|
TOTAL
|
|
155,091
|
|
|
166,083
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
Accumulated deferred income taxes and taxes accrued
|
|
341,217
|
|
|
338,714
|
|
|
Accumulated deferred investment tax credits
|
|
16,081
|
|
|
16,095
|
|
|
Regulatory liability for income taxes - net
|
|
55,180
|
|
|
55,675
|
|
|
Asset retirement cost liabilities
|
|
3,833
|
|
|
3,768
|
|
|
Accumulated provisions
|
|
49,218
|
|
|
89,898
|
|
|
|
|
|
|
|
|
Long-term debt (includes securitization bonds of $41,352 as of March 31, 2021 and $41,291 as of December 31, 2020)
|
|
629,883
|
|
|
629,704
|
|
|
Long-term payable due to associated company
|
|
10,911
|
|
|
10,911
|
|
|
Other
|
|
30,709
|
|
|
21,141
|
|
|
TOTAL
|
|
1,137,032
|
|
|
1,165,906
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Member's equity
|
|
608,688
|
|
|
606,917
|
|
|
TOTAL
|
|
608,688
|
|
|
606,917
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$1,900,811
|
|
|
$1,938,906
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Member's Equity
|
|
|
(In Thousands)
|
|
|
|
|
Balance at December 31, 2019
|
$497,579
|
|
|
|
|
|
Net income
|
11,186
|
|
|
|
|
|
Balance at March 31, 2020
|
$508,765
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$606,917
|
|
|
|
|
|
Net income
|
1,771
|
|
|
|
|
|
Balance at March 31, 2021
|
$608,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
The COVID-19 Pandemic
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.
Hurricane Laura and Hurricane Delta
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Laura and Hurricane Delta” in the Form 10-K for a discussion of Hurricane Laura and Hurricane Delta, which caused significant damage to portions of Entergy Texas’s service territory. See Note 2 to the financial statements herein for discussion of storm cost recovery filings made by Entergy Texas in April 2021.
Winter Storm Uri
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy Texas’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Texas were approximately $185 million in February 2021 compared to approximately $50 million in February 2020. See Note 2 to the financial statements herein for discussion of the storm cost recovery filing made by Entergy Texas in April 2021. See Note 2 to the financial statements herein and in the Form 10-K for discussion of fuel cost recovery at Entergy Texas.
Results of Operations
Net Income
Net income increased $17.4 million primarily due to higher retail electric price and higher volume/weather. The increase was partially offset by a higher effective tax rate, lower other income, and higher depreciation and amortization expenses.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 2021 to the first quarter 2020:
|
|
|
|
|
|
|
|
|
Amount
|
|
|
(In Millions)
|
|
2020 operating revenues
|
$339.3
|
|
|
Fuel, rider, and other revenues that do not significantly affect net income
|
105.9
|
|
|
Retail electric price
|
19.1
|
|
|
Volume/weather
|
17.3
|
|
|
Return of unprotected excess accumulated deferred income taxes to customers
|
(1.4)
|
|
|
2021 operating revenues
|
$480.2
|
|
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 retail electric price variance is primarily due to the implementation of the generation cost recovery rider effective January 2021, an increase in the transmission cost recovery factor rider effective March 2021, and an increase in the distribution cost recovery factor rider effective March 2021. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the generation cost recovery rider and transmission and distribution cost recovery factor rider filings.
The volume/weather variance is primarily due to the effect of more favorable weather on residential sales.
The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018. In first quarter 2021, $7.1 million was returned to customers as compared to $5.7 million in first quarter 2020. There is no effect on net income as the reduction in operating revenues is offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.
Billed electric energy sales for Entergy Texas for the three months ended March 31, 2021 and 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
% Change
|
|
|
(GWh)
|
|
|
|
Residential
|
1,539
|
|
|
1,326
|
|
|
16
|
|
|
Commercial
|
1,000
|
|
|
1,000
|
|
|
—
|
|
|
Industrial
|
1,928
|
|
|
1,897
|
|
|
2
|
|
|
Governmental
|
62
|
|
|
64
|
|
|
(3)
|
|
|
Total retail
|
4,529
|
|
|
4,287
|
|
|
6
|
|
|
Sales for resale:
|
|
|
|
|
|
|
Associated companies
|
296
|
|
|
244
|
|
|
21
|
|
|
Non-associated companies
|
341
|
|
|
85
|
|
|
301
|
|
|
Total
|
5,166
|
|
|
4,616
|
|
|
12
|
|
See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
•an increase of $1.3 million due to bad debt expense as a result of the COVID-19 pandemic;
•an increase of $1.3 million in non-nuclear generation expenses primarily due to higher expenses associated with the Montgomery County Power Station, which was placed in service in January 2021, and a higher scope of work performed in 2021 as compared to the same period in 2020; and
•several individually insignificant items.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes as a result of higher estimated ad valorem taxes associated with the Montgomery County Power Station.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Montgomery County Power Station, which was placed in service in January 2021.
Other income decreased primarily due to a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the Montgomery County Power Station project, as compared to the same period in 2021.
Interest expense increased primarily due to a decrease in the allowance for borrowed funds used during construction due to higher construction work in progress in 2020, including the Montgomery County Power Station project, as compared to the same period in 2021.
Income Taxes
The effective income tax rate was 9.1% for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
The effective income tax rate was (14.8%) for the first quarter 2020. The difference in the effective income tax rate for the first quarter 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, permanent differences related to income tax deductions for stock-based compensation, 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. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Cash and cash equivalents at beginning of period
|
$248,596
|
|
|
$12,929
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
Operating activities
|
(28,864)
|
|
|
37,114
|
|
|
Investing activities
|
(223,696)
|
|
|
(232,650)
|
|
|
Financing activities
|
3,989
|
|
|
342,320
|
|
|
Net increase (decrease) in cash and cash equivalents
|
(248,571)
|
|
|
146,784
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$25
|
|
|
$159,713
|
|
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Entergy Texas’s operating activities used $28.9 million of cash for the three months ended March 31, 2021 compared to providing $37.1 million of cash for the three months ended March 31, 2020 primarily due to increased fuel costs as a result of Winter Storm Uri and an increase of approximately $25 million in storm spending in 2021, primarily due to Hurricane Laura and Hurricane Delta restoration efforts. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery. See “Hurricane Laura and Hurricane Delta” above for discussion of hurricane restoration efforts.
Investing Activities
Net cash flow used in investing activities decreased $9.0 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to a decrease of $42.9 million in non-nuclear generation construction expenditures, primarily due to higher spending in 2020 on the Montgomery County Power Station project, and money pool activity. The decrease was partially offset by an increase of $50.7 million in distribution construction expenditures primarily due to storm spending in 2021. See “Hurricane Laura and Hurricane Delta” above for discussion of hurricane restoration efforts.
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 $4.6 million for the three months ended March 31, 2021 compared to increasing $17.9 million for the three months ended March 31, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities decreased $338.3 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to a capital contribution of $175 million received from Entergy Corporation in March 2020 in anticipation of upcoming expenditures, including Montgomery County Power Station, and the issuance of $175 million of 3.55% Series mortgage bonds in March 2020. The decrease was partially offset by money pool activity.
Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $30.9 million for the three months ended March 31, 2021.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Texas’s debt to capital ratio is shown in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Debt to capital
|
52.8
|
%
|
|
53.7
|
%
|
|
Effect of excluding the securitization bonds
|
(0.9
|
%)
|
|
(1.3
|
%)
|
|
Debt to capital, excluding securitization bonds (a)
|
51.9
|
%
|
|
52.4
|
%
|
|
Effect of subtracting cash
|
—
|
%
|
|
(2.7
|
%)
|
|
Net debt to net capital, excluding securitization bonds (a)
|
51.9
|
%
|
|
49.7
|
%
|
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Net debt consists of debt less cash and cash equivalents. Debt consists of finance lease obligations and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. Following are updates to information provided in the Form 10-K.
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In Thousands)
|
|
($30,858)
|
|
$4,601
|
|
$29,092
|
|
$11,181
|
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in September 2024. 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 March 31, 2021, there were no cash borrowings and $1.3 million of letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2021, $30.2 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.
Liberty County Solar Facility
In September 2020, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to acquire the 100 MW Liberty County Solar Facility and a determination that Entergy Texas’s acquisition of the facility through a tax equity partnership is in the public interest. In its preliminary order, the PUCT determined that, in considering Entergy Texas’s application, it would not specifically address whether Entergy Texas’s use of a tax equity partnership is in the public interest. In March 2021 intervenors and PUCT staff filed testimony, and Entergy Texas filed rebuttal testimony in April 2021. A hearing on the merits was held in April 2021. Post-hearing briefs and reply briefs are due in May 2021. Closing is expected to occur in 2023.
Hardin County Peaking Facility
In April 2020, Entergy Texas and East Texas Electric Cooperative, Inc. filed a joint report and application seeking PUCT approvals related to two transactions: (1) Entergy Texas’s acquisition of the Hardin County Peaking Facility from East Texas Electric Cooperative, Inc.; and (2) Entergy Texas’s sale of a 7.56% partial interest in the Montgomery County Power Station to East Texas Electric Cooperative, Inc. The two transactions, currently
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
expected to close in June 2021, are interdependent. In October 2020, Entergy Texas filed an unopposed settlement agreement supporting approval of the transactions. Key provisions of the settlement include: Entergy Texas will propose to depreciate its investment in Hardin County Peaking Facility through the end of 2041; Entergy Texas’s recovery of its investment in Hardin County Peaking Facility will be capped at approximately $36 million; and Entergy Texas will not seek recovery of an acquisition adjustment, if any, or transaction costs for either transaction. The settlement was approved by the PUCT in April 2021.
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.
Distribution Cost Recovery Factor (DCRF) Rider
As discussed in the Form 10-K, in October 2020, 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 $26.3 million annually, or $6.8 million in incremental annual revenues beyond Entergy Texas’s currently effective DCRF rider based on its capital invested in distribution between January 1, 2020 and August 31, 2020. In February 2021 the administrative law judge with the State Office of Administrative Hearings approved Entergy Texas’s agreed motion for interim rates, which went into effect in March 2021. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding. This case has been remanded to the PUCT for consideration of a final order at a future open meeting.
Transmission Cost Recovery Factor (TCRF) Rider
As discussed in the Form 10-K, in October 2020, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $51 million annually, or $31.6 million in incremental annual revenues beyond Entergy Texas’s currently effective TCRF rider based on its capital invested in transmission between July 1, 2019 and August 31, 2020. A procedural schedule was established with a hearing scheduled in March 2021. In February 2021, Entergy Texas filed an agreed motion to abate the procedural schedule, noting that the parties had reached a settlement in principle, and the administrative law judge granted the motion to abate. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement with interim rates effective March 2021 and resolving all issues in the proceeding. In March 2021 the administrative law judge granted the motion for interim rates, admitted evidence, and remanded this case to the PUCT for consideration of a final order at a future open meeting.
Fuel and purchased power recovery
In February 2021, Entergy Texas filed an application to implement a fuel refund for a cumulative over-recovery of approximately $75 million that is primarily attributable to settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas planned to issue the refund over the period of March through August 2021. On February 22, 2021, Entergy Texas filed a motion to abate its fuel refund proceeding to assess how the February 2021 winter storm impacted Entergy Texas’s fuel over-recovery position. In March 2021, Entergy Texas withdrew its application to implement the fuel refund. Entergy Texas is continuing to evaluate its fuel balance and will file a subsequent refund or surcharge application consistent with the requirements of the PUCT’s rules.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
COVID-19 Orders
As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. In January 2021, Entergy Texas resumed disconnections for customers with past-due balances that have not made payment arrangements. As of March 31, 2021, Entergy Texas recorded a regulatory asset of $10.7 million for costs associated with the COVID-19 pandemic.
Generation Cost Recovery Rider
As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider with an initial annual revenue requirement of approximately $91 million to begin recovering a return of and on its capital investment in the Montgomery County Power Station through August 31, 2020. In December 2020, Entergy Texas filed an unopposed settlement supporting a generation cost recovery rider with an annual revenue requirement of approximately $86 million. On January 14, 2021, the PUCT approved the generation cost recovery rider settlement rates on an interim basis and abated the proceeding. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include investment in Montgomery County Power Station after August 31, 2020. In April 2021 the ALJ issued an order unabating the proceeding to consider Entergy Texas’s updated application and establishing a procedural schedule that will result in administrative approval of Entergy Texas’s application in June 2021 if it is unopposed by parties to the proceeding.
In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which is expected to close in June 2021. The initial generation cost recovery rider rates proposed in the application represent no change from the generation cost recovery rider rates to be established in Entergy Texas’s previous generation cost recovery rider proceeding. Once Entergy Texas has acquired the Hardin County Peaking Facility, its investment in the facility will be reflected in an updated filing to Entergy Texas’s application, which will be made within 60 days of the acquisition’s closing.
Hurricane Laura, Hurricane Delta, and Winter Storm Uri
In August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In April 2021, Entergy Texas filed an application with the PUCT requesting a determination that its system restoration costs associated with Hurricane Laura, Hurricane Delta, and Winter Storm Uri of approximately $250 million, including approximately $200 million in capital costs and approximately $50 million in non-capital costs were reasonable and necessary to enable Entergy Texas to restore electric service to its customers and Entergy Texas’s electric utility infrastructure. The filing currently includes only a portion of the Winter Storm Uri costs. Entergy Texas expects to initiate a proceeding later in 2021 to securitize the costs approved by the PUCT.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for discussion of nuclear matters.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY TEXAS, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED INCOME STATEMENTS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
(In Thousands)
|
|
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
Electric
|
|
$480,220
|
|
|
$339,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance:
|
|
|
|
|
|
|
|
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
112,396
|
|
|
41,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchased power
|
|
141,362
|
|
|
119,791
|
|
|
|
|
|
|
Other operation and maintenance
|
|
62,955
|
|
|
58,933
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes other than income taxes
|
|
21,875
|
|
|
19,272
|
|
|
|
|
|
|
Depreciation and amortization
|
|
50,936
|
|
|
42,566
|
|
|
|
|
|
|
Other regulatory charges (credits) - net
|
|
15,840
|
|
|
21,368
|
|
|
|
|
|
|
TOTAL
|
|
405,364
|
|
|
303,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
74,856
|
|
|
36,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
|
Allowance for equity funds used during construction
|
|
2,445
|
|
|
10,641
|
|
|
|
|
|
|
Interest and investment income
|
|
224
|
|
|
429
|
|
|
|
|
|
|
Miscellaneous - net
|
|
(423)
|
|
|
(346)
|
|
|
|
|
|
|
TOTAL
|
|
2,246
|
|
|
10,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
23,038
|
|
|
22,858
|
|
|
|
|
|
|
Allowance for borrowed funds used during construction
|
|
(984)
|
|
|
(4,573)
|
|
|
|
|
|
|
TOTAL
|
|
22,054
|
|
|
18,285
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
55,048
|
|
|
28,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
4,990
|
|
|
(4,208)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
50,058
|
|
|
32,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividend requirements
|
|
470
|
|
|
470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS APPLICABLE TO COMMON STOCK
|
|
$49,588
|
|
|
$32,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
(Page left blank intentionally)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY TEXAS, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$50,058
|
|
|
$32,707
|
|
|
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
50,936
|
|
|
42,566
|
|
|
Deferred income taxes, investment tax credits, and non-current taxes accrued
|
|
(1,522)
|
|
|
3,921
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Receivables
|
|
(16,424)
|
|
|
1,221
|
|
|
Fuel inventory
|
|
3,509
|
|
|
(1,127)
|
|
|
Accounts payable
|
|
(42,511)
|
|
|
(35,288)
|
|
|
Taxes accrued
|
|
(5,123)
|
|
|
(20,597)
|
|
|
Interest accrued
|
|
(10,989)
|
|
|
(7,380)
|
|
|
Deferred fuel costs
|
|
(62,970)
|
|
|
8,138
|
|
|
Other working capital accounts
|
|
1,118
|
|
|
5,004
|
|
|
Provisions for estimated losses
|
|
(31)
|
|
|
5
|
|
|
Other regulatory assets
|
|
40,484
|
|
|
34,309
|
|
|
Other regulatory liabilities
|
|
(13,649)
|
|
|
(8,854)
|
|
|
Pension and other postretirement liabilities
|
|
(5,434)
|
|
|
(9,086)
|
|
|
Other assets and liabilities
|
|
(16,316)
|
|
|
(8,425)
|
|
|
Net cash flow provided by (used in) operating activities
|
|
(28,864)
|
|
|
37,114
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction expenditures
|
|
(238,903)
|
|
|
(236,984)
|
|
|
Allowance for equity funds used during construction
|
|
2,445
|
|
|
10,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in money pool receivable - net
|
|
4,601
|
|
|
(17,911)
|
|
|
Changes in securitization account
|
|
8,161
|
|
|
11,604
|
|
|
|
|
|
|
|
|
Net cash flow used in investing activities
|
|
(223,696)
|
|
|
(232,650)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
—
|
|
|
194,631
|
|
|
Retirement of long-term debt
|
|
(27,951)
|
|
|
(26,864)
|
|
|
Capital contribution from parent
|
|
—
|
|
|
175,000
|
|
|
|
|
|
|
|
|
Change in money pool payable - net
|
|
30,858
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends paid
|
|
(470)
|
|
|
(653)
|
|
|
Other
|
|
1,552
|
|
|
206
|
|
|
Net cash flow provided by financing activities
|
|
3,989
|
|
|
342,320
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(248,571)
|
|
|
146,784
|
|
|
Cash and cash equivalents at beginning of period
|
|
248,596
|
|
|
12,929
|
|
|
Cash and cash equivalents at end of period
|
|
$25
|
|
|
$159,713
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash paid (received) during the period for:
|
|
|
|
|
|
Interest - net of amount capitalized
|
|
$33,394
|
|
|
$29,699
|
|
|
Income taxes
|
|
($836)
|
|
|
($2,358)
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY TEXAS, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
ASSETS
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash
|
|
$25
|
|
|
$26
|
|
|
Temporary cash investments
|
|
—
|
|
|
248,570
|
|
|
Total cash and cash equivalents
|
|
25
|
|
|
248,596
|
|
|
Securitization recovery trust account
|
|
28,072
|
|
|
36,233
|
|
|
Accounts receivable:
|
|
|
|
|
|
Customer
|
|
108,152
|
|
|
103,221
|
|
|
Allowance for doubtful accounts
|
|
(15,058)
|
|
|
(16,810)
|
|
|
Associated companies
|
|
14,385
|
|
|
18,892
|
|
|
Other
|
|
14,995
|
|
|
11,780
|
|
|
Accrued unbilled revenues
|
|
62,845
|
|
|
56,411
|
|
|
Total accounts receivable
|
|
185,319
|
|
|
173,494
|
|
|
|
|
|
|
|
|
Fuel inventory - at average cost
|
|
50,022
|
|
|
53,531
|
|
|
Materials and supplies - at average cost
|
|
60,011
|
|
|
56,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayments and other
|
|
12,493
|
|
|
20,165
|
|
|
TOTAL
|
|
335,942
|
|
|
588,246
|
|
|
|
|
|
|
|
|
OTHER PROPERTY AND INVESTMENTS
|
|
|
|
|
|
Investments in affiliates - at equity
|
|
336
|
|
|
349
|
|
|
Non-utility property - at cost (less accumulated depreciation)
|
|
376
|
|
|
376
|
|
|
Other
|
|
17,552
|
|
|
19,889
|
|
|
TOTAL
|
|
18,264
|
|
|
20,614
|
|
|
|
|
|
|
|
|
UTILITY PLANT
|
|
|
|
|
|
Electric
|
|
6,771,662
|
|
|
6,007,687
|
|
|
Construction work in progress
|
|
178,917
|
|
|
879,908
|
|
|
TOTAL UTILITY PLANT
|
|
6,950,579
|
|
|
6,887,595
|
|
|
Less - accumulated depreciation and amortization
|
|
1,898,407
|
|
|
1,864,494
|
|
|
UTILITY PLANT - NET
|
|
5,052,172
|
|
|
5,023,101
|
|
|
|
|
|
|
|
|
DEFERRED DEBITS AND OTHER ASSETS
|
|
|
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
|
|
|
Other regulatory assets (includes securitization property of $60,618 as of March 31, 2021 and $78,590 as of December 31, 2020)
|
|
484,229
|
|
|
524,713
|
|
|
|
|
|
|
|
|
Other
|
|
78,654
|
|
|
70,397
|
|
|
TOTAL
|
|
562,883
|
|
|
595,110
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$5,969,261
|
|
|
$6,227,071
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY TEXAS, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
LIABILITIES AND EQUITY
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Currently maturing long-term debt
|
|
$200,000
|
|
|
$200,000
|
|
|
Accounts payable:
|
|
|
|
|
|
Associated companies
|
|
81,613
|
|
|
55,944
|
|
|
Other
|
|
139,190
|
|
|
350,947
|
|
|
Customer deposits
|
|
33,831
|
|
|
36,282
|
|
|
Taxes accrued
|
|
47,315
|
|
|
52,438
|
|
|
Interest accrued
|
|
9,867
|
|
|
20,856
|
|
|
Current portion of unprotected excess accumulated deferred income taxes
|
|
30,591
|
|
|
29,249
|
|
|
Deferred fuel costs
|
|
22,386
|
|
|
85,356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
12,377
|
|
|
12,370
|
|
|
TOTAL
|
|
577,170
|
|
|
843,442
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
Accumulated deferred income taxes and taxes accrued
|
|
635,212
|
|
|
639,422
|
|
|
Accumulated deferred investment tax credits
|
|
9,788
|
|
|
9,942
|
|
|
Regulatory liability for income taxes - net
|
|
164,680
|
|
|
175,594
|
|
|
Other regulatory liabilities
|
|
28,220
|
|
|
32,297
|
|
|
Asset retirement cost liabilities
|
|
8,175
|
|
|
8,063
|
|
|
Accumulated provisions
|
|
8,351
|
|
|
8,382
|
|
|
|
|
|
|
|
|
Long-term debt (includes securitization bonds of $95,185 as of March 31, 2021 and $123,066 as of December 31, 2020)
|
|
2,265,827
|
|
|
2,293,708
|
|
|
Other
|
|
64,672
|
|
|
58,643
|
|
|
TOTAL
|
|
3,184,925
|
|
|
3,226,051
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2021 and 2020
|
|
49,452
|
|
|
49,452
|
|
|
Paid-in capital
|
|
955,162
|
|
|
955,162
|
|
|
Retained earnings
|
|
1,167,552
|
|
|
1,117,964
|
|
|
Total common shareholder's equity
|
|
2,172,166
|
|
|
2,122,578
|
|
|
Preferred stock without sinking fund
|
|
35,000
|
|
|
35,000
|
|
|
TOTAL
|
|
2,207,166
|
|
|
2,157,578
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$5,969,261
|
|
|
$6,227,071
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERGY TEXAS, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity
|
|
|
|
|
Preferred Stock
|
|
Common
Stock
|
|
Paid-in
Capital
|
|
Retained
Earnings
|
|
Total
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$35,000
|
|
|
$49,452
|
|
|
$780,182
|
|
|
$934,773
|
|
|
$1,799,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
32,707
|
|
|
32,707
|
|
|
Capital contribution from parent
|
—
|
|
|
—
|
|
|
175,000
|
|
|
—
|
|
|
175,000
|
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(470)
|
|
|
(470)
|
|
|
Balance at March 31, 2020
|
$35,000
|
|
|
$49,452
|
|
|
$955,182
|
|
|
$967,010
|
|
|
$2,006,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$35,000
|
|
|
$49,452
|
|
|
$955,162
|
|
|
$1,117,964
|
|
|
$2,157,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
50,058
|
|
|
50,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(470)
|
|
|
(470)
|
|
|
Balance at March 31, 2021
|
$
|
35,000
|
|
|
$
|
49,452
|
|
|
$
|
955,162
|
|
|
$
|
1,167,552
|
|
|
$
|
2,207,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.
Results of Operations
Net Income
Net income decreased $4.6 million primarily due to a decrease in the allowance for equity funds used during construction resulting from higher spending in 2020 including the scheduled 2020 Grand Gulf refueling outage.
Income Taxes
The effective income tax rate was (79.5%) for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, the amortization of investment tax credits, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Notes 2 and 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.
The effective income tax rate was 16% for the first quarter 2020. The difference in the effective income tax rate for the first quarter 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items, permanent differences related to income tax deductions for stock-based compensation, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
(In Thousands)
|
|
Cash and cash equivalents at beginning of period
|
$242,469
|
|
|
$68,534
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
Operating activities
|
(29,242)
|
|
|
60,442
|
|
|
Investing activities
|
(23,437)
|
|
|
(79,532)
|
|
|
Financing activities
|
(57,563)
|
|
|
43,002
|
|
|
Net increase (decrease) in cash and cash equivalents
|
(110,242)
|
|
|
23,912
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
$132,227
|
|
|
$92,446
|
|
Operating Activities
System Energy’s operating activities used $29.2 million of cash for the three months ended March 31, 2021 compared to providing $60.4 million of cash for the three months ended March 31, 2020 primarily due to income tax payments of $39.1 million in 2021 and timing of payments to vendors, partially offset by a decrease in spending of $18 million on nuclear refueling outages in 2021 as compared to the same period in 2020. System Energy had income tax payments in 2021 as a result of the amended Mississippi tax returns filed based on federal adjustments related to the resolution of the 2014-2015 IRS audit, as well as a portion of the payments made in accordance with an intercompany income tax allocation agreement. See Note 3 to the financial statements in the Form 10-K for discussion of the 2014-2015 IRS audit.
Investing Activities
Net cash flow used in investing activities decreased $56.1 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to:
•an increase of $67.4 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•a decrease of $46.4 million in nuclear construction expenditures as a result of spending in 2020 on Grand Gulf outage projects and upgrades.
The decrease was partially offset by money pool activity.
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 by $12.7 million for the three months ended March 31, 2021 compared to decreasing by $42.5 million for the three months ended March 31, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Financing Activities
System Energy’s financing activities used $57.6 million of cash for the three months ended March 31, 2021 compared to providing $43 million of cash for the three months ended March 31, 2020 primarily due to the repayment in February 2021 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity.
Capital Structure
System Energy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to the net repayment of long-term debt in 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Debt to capital
|
41.5
|
%
|
|
42.7
|
%
|
|
Effect of subtracting cash
|
(4.5
|
%)
|
|
(8.5
|
%)
|
|
Net debt to net capital
|
37.0
|
%
|
|
34.2
|
%
|
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
System Energy’s receivables from the money pool were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
March 31, 2020
|
|
December 31, 2019
|
|
(In Thousands)
|
|
$16,682
|
|
$4,004
|
|
$16,819
|
|
$59,298
|
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 September 2022. As of March 31, 2021, $63.4 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.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule in the System Energy proceeding was further revised in order to allow parties to address the Opinion No. 569-A methodology. The parties and FERC trial staff filed final rounds of testimony in August 2020. The hearing before a FERC ALJ occurred in late-September through early-October 2020, post-hearing briefing took place in November and December 2020. System Energy recorded a provision against revenue for the potential outcome of this proceeding.
In March 2021 the FERC ALJ issued an initial decision. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $59 million, which includes interest through March 31, 2021, and the estimated resulting annual rate reduction would be approximately $46 million. The estimated refund will continue to accrue interest until a final FERC decision is issued. Based on the course of the proceeding to date, System Energy has recorded a provision of $36 million, including interest, as of March 31, 2021.
The ALJ initial decision is an interim step in the FERC litigation process. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021, the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions are due in May 2021.
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue
As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a value for the refund expected as a result of this
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities are accumulated deferred income taxes and that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue through March 31, 2021, is approximately $422 million, plus interest, which is approximately $115 million through March 31, 2021. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through March 31, 2021.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before the FERC, which will review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
Also as discussed in the Form 10-K, in November 2020 the IRS issued a Revenue Agent’s Report (RAR) for the 2014/2015 tax year and in December 2020 Entergy executed it. The RAR contained an adjustment to System Energy’s uncertain nuclear decommissioning tax position. As a result of the RAR, in December 2020, System Energy filed amendments to its new Federal Power Act section 205 filings to establish an ongoing rate base credit for the accumulated deferred income taxes resulting from the decommissioning uncertain tax position and to credit excess accumulated deferred income taxes arising from the successful portion of the decommissioning uncertain tax position. The amendments both propose the inclusion of the RAR as support for the filings. In December 2020 the LPSC, APSC, and City Council filed a protest in response to the amendments, reiterating their prior objections to the filings. In February 2021 the FERC issued an order accepting System Energy’s Federal Power Act section 205 filings subject to refund, setting them for hearing, and holding the hearing in abeyance.
In December 2020, System Energy filed a new Federal Power Act section 205 filing to provide a one-time, historical credit to customers of $25.2 million for the accumulated deferred income taxes that would have been created by the decommissioning uncertain tax position if the IRS’s decision had been known in 2016. In January 2021 the LPSC, APSC, MPSC, and City Council filed a protest to the filing. In February 2021, the FERC issued an order accepting System Energy’s Federal Power Act section 205 filing subject to refund, setting it for hearing, and holding the hearing in abeyance. The one-time credit was made during the first quarter 2021.
LPSC Authorization of Additional Complaints
As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at 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, and the first of the additional complaints was filed by the LPSC, the APSC, the MPSC and the City Council in September 2020. The second of the additional complaints was filed at the FERC in March 2021 by the LPSC, the APSC, and the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. The second complaint contains two primary allegations. First, it alleges that, based on the plant’s capacity factor and alleged safety performance, System Energy and the other respondents imprudently operated Grand Gulf during the period 2016-2020, and it seeks refunds of at least $360 million in alleged replacement energy costs, in addition to other costs, including those that can only be identified upon further investigation. Second, it alleges that the performance and/or management of the 2012 extended power uprate of Grand Gulf was imprudent, and it seeks refunds of all costs of the 2012 uprate that are determined to result from imprudent planning or management of the project. In addition to the requested refunds, the complaint asks that the FERC modify the Unit Power Sales Agreement to provide for full cost recovery only if certain performance
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
indicators are met and to require pre-authorization of capital improvement projects in excess of $125 million before related costs may be passed through to customers in rates. In April 2021, System Energy and the other respondents filed their motion to dismiss and answer to the complaint. System Energy requested that the FERC dismiss the claims within the complaint. With respect to the claim concerning operations, System Energy argues that the complaint does not meet its legal burden because, among other reasons, it fails to allege any specific imprudent conduct. With respect to the claim concerning the uprate, System Energy argues that the complaint fails because, among other reasons, the complainants’ own conduct prevents them from raising a serious doubt as to the prudence of the uprate. System Energy also requests that the FERC dismiss other elements of the complaint, including the proposed modifications to the Unit Power Sales Agreement, because they are not warranted.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. Following is an update to that discussion
NRC Reactor Oversight Process
As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and “multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs.
In March 2021 the NRC placed Grand Gulf in Column 3 based on the incidence of five unplanned plant scrams during calendar year 2020, some of which were related to upgrades made to the plant’s turbine control system during the spring 2020 refueling outage. The NRC plans to conduct a supplemental inspection of Grand Gulf in accordance with its inspection procedures for nuclear plants in Column 3.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.
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|
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|
|
|
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|
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SYSTEM ENERGY RESOURCES, INC.
|
|
INCOME STATEMENTS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
|
|
|
(In Thousands)
|
|
OPERATING REVENUES
|
|
|
|
|
|
|
|
|
|
Electric
|
|
|
|
|
|
$117,746
|
|
|
$130,664
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
Operation and Maintenance:
|
|
|
|
|
|
|
|
|
|
Fuel, fuel-related expenses, and gas purchased for resale
|
|
|
|
|
|
16,859
|
|
|
13,143
|
|
|
Nuclear refueling outage expenses
|
|
|
|
|
|
6,718
|
|
|
8,272
|
|
|
Other operation and maintenance
|
|
|
|
|
|
41,960
|
|
|
40,471
|
|
|
Decommissioning
|
|
|
|
|
|
9,529
|
|
|
9,157
|
|
|
Taxes other than income taxes
|
|
|
|
|
|
6,825
|
|
|
7,973
|
|
|
Depreciation and amortization
|
|
|
|
|
|
28,194
|
|
|
26,899
|
|
|
Other regulatory charges (credits) - net
|
|
|
|
|
|
11,550
|
|
|
(10,560)
|
|
|
TOTAL
|
|
|
|
|
|
121,635
|
|
|
95,355
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME (LOSS)
|
|
|
|
|
|
(3,889)
|
|
|
35,309
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
|
Allowance for equity funds used during construction
|
|
|
|
|
|
1,111
|
|
|
3,584
|
|
|
Interest and investment income
|
|
|
|
|
|
27,442
|
|
|
5,338
|
|
|
Miscellaneous - net
|
|
|
|
|
|
(2,024)
|
|
|
(2,460)
|
|
|
TOTAL
|
|
|
|
|
|
26,529
|
|
|
6,462
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
|
9,535
|
|
|
8,540
|
|
|
Allowance for borrowed funds used during construction
|
|
|
|
|
|
(188)
|
|
|
(711)
|
|
|
TOTAL
|
|
|
|
|
|
9,347
|
|
|
7,829
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
|
|
|
13,293
|
|
|
33,942
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
|
|
|
(10,571)
|
|
|
5,429
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
|
|
|
|
$23,864
|
|
|
$28,513
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
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|
|
(Page left blank intentionally)
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|
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|
|
|
|
|
|
|
|
|
|
SYSTEM ENERGY RESOURCES, INC.
|
|
STATEMENTS OF CASH FLOWS
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$23,864
|
|
|
$28,513
|
|
|
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:
|
|
|
|
|
|
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
|
|
53,433
|
|
|
47,041
|
|
|
Deferred income taxes, investment tax credits, and non-current taxes accrued
|
|
(10,197)
|
|
|
(5,764)
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
Receivables
|
|
9,255
|
|
|
22,292
|
|
|
Accounts payable
|
|
(21,296)
|
|
|
15,049
|
|
|
Taxes accrued
|
|
(33,364)
|
|
|
(3,590)
|
|
|
Interest accrued
|
|
(1,088)
|
|
|
(201)
|
|
|
Other working capital accounts
|
|
2,347
|
|
|
(30,385)
|
|
|
Other regulatory assets
|
|
20,923
|
|
|
(3,893)
|
|
|
Other regulatory liabilities
|
|
(12,591)
|
|
|
(135,561)
|
|
|
Pension and other postretirement liabilities
|
|
(7,424)
|
|
|
(2,587)
|
|
|
Other assets and liabilities
|
|
(53,104)
|
|
|
129,528
|
|
|
Net cash flow provided by (used in) operating activities
|
|
(29,242)
|
|
|
60,442
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
Construction expenditures
|
|
(14,890)
|
|
|
(60,551)
|
|
|
Allowance for equity funds used during construction
|
|
1,111
|
|
|
3,584
|
|
|
Nuclear fuel purchases
|
|
(4,745)
|
|
|
(69,022)
|
|
|
Proceeds from the sale of nuclear fuel
|
|
12,626
|
|
|
9,503
|
|
|
|
|
|
|
|
|
Proceeds from nuclear decommissioning trust fund sales
|
|
211,481
|
|
|
132,661
|
|
|
Investment in nuclear decommissioning trust funds
|
|
(216,342)
|
|
|
(138,186)
|
|
|
Changes in money pool receivable - net
|
|
(12,678)
|
|
|
42,479
|
|
|
|
|
|
|
|
|
Net cash flow used in investing activities
|
|
(23,437)
|
|
|
(79,532)
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
|
189,244
|
|
|
243,559
|
|
|
Retirement of long-term debt
|
|
(225,807)
|
|
|
(186,904)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock dividends and distributions paid
|
|
(21,000)
|
|
|
(13,653)
|
|
|
|
|
|
|
|
|
Net cash flow provided by (used in) financing activities
|
|
(57,563)
|
|
|
43,002
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(110,242)
|
|
|
23,912
|
|
|
Cash and cash equivalents at beginning of period
|
|
242,469
|
|
|
68,534
|
|
|
Cash and cash equivalents at end of period
|
|
$132,227
|
|
|
$92,446
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
Interest - net of amount capitalized
|
|
$10,720
|
|
|
$8,598
|
|
|
Income taxes
|
|
$39,085
|
|
|
$—
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SYSTEM ENERGY RESOURCES, INC.
|
|
BALANCE SHEETS
|
|
ASSETS
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
Cash
|
|
$78
|
|
|
$26,086
|
|
|
Temporary cash investments
|
|
132,149
|
|
|
216,383
|
|
|
Total cash and cash equivalents
|
|
132,227
|
|
|
242,469
|
|
|
Accounts receivable:
|
|
|
|
|
|
Associated companies
|
|
59,422
|
|
|
57,743
|
|
|
Other
|
|
4,294
|
|
|
2,550
|
|
|
Total accounts receivable
|
|
63,716
|
|
|
60,293
|
|
|
|
|
|
|
|
|
Materials and supplies - at average cost
|
|
126,444
|
|
|
123,006
|
|
|
Deferred nuclear refueling outage costs
|
|
27,932
|
|
|
34,459
|
|
|
|
|
|
|
|
|
Prepayments and other
|
|
7,605
|
|
|
6,864
|
|
|
TOTAL
|
|
357,924
|
|
|
467,091
|
|
|
|
|
|
|
|
|
OTHER PROPERTY AND INVESTMENTS
|
|
|
|
|
|
Decommissioning trust funds
|
|
1,249,846
|
|
|
1,215,868
|
|
|
TOTAL
|
|
1,249,846
|
|
|
1,215,868
|
|
|
|
|
|
|
|
|
UTILITY PLANT
|
|
|
|
|
|
Electric
|
|
5,310,445
|
|
|
5,309,458
|
|
|
|
|
|
|
|
|
Construction work in progress
|
|
73,360
|
|
|
59,831
|
|
|
Nuclear fuel
|
|
150,948
|
|
|
175,005
|
|
|
TOTAL UTILITY PLANT
|
|
5,534,753
|
|
|
5,544,294
|
|
|
Less - accumulated depreciation and amortization
|
|
3,381,583
|
|
|
3,355,367
|
|
|
UTILITY PLANT - NET
|
|
2,153,170
|
|
|
2,188,927
|
|
|
|
|
|
|
|
|
DEFERRED DEBITS AND OTHER ASSETS
|
|
|
|
|
|
Regulatory assets:
|
|
|
|
|
|
|
|
|
|
|
|
Other regulatory assets
|
|
518,040
|
|
|
538,963
|
|
|
|
|
|
|
|
|
Other
|
|
2,441
|
|
|
3,119
|
|
|
TOTAL
|
|
520,481
|
|
|
542,082
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$4,281,421
|
|
|
$4,413,968
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SYSTEM ENERGY RESOURCES, INC.
|
|
BALANCE SHEETS
|
|
LIABILITIES AND EQUITY
|
|
March 31, 2021 and December 31, 2020
|
|
(Unaudited)
|
|
|
|
2021
|
|
2020
|
|
|
|
(In Thousands)
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Currently maturing long-term debt
|
|
$19
|
|
|
$100,015
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
Associated companies
|
|
4,644
|
|
|
15,309
|
|
|
Other
|
|
36,849
|
|
|
41,313
|
|
|
Taxes accrued
|
|
49,613
|
|
|
82,977
|
|
|
|
|
|
|
|
|
Interest accrued
|
|
11,634
|
|
|
12,722
|
|
|
|
|
|
|
|
|
Other
|
|
4,247
|
|
|
4,248
|
|
|
TOTAL
|
|
107,006
|
|
|
256,584
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
Accumulated deferred income taxes and taxes accrued
|
|
340,689
|
|
|
359,835
|
|
|
Accumulated deferred investment tax credits
|
|
43,963
|
|
|
38,902
|
|
|
Regulatory liability for income taxes - net
|
|
134,350
|
|
|
151,829
|
|
|
Other regulatory liabilities
|
|
670,284
|
|
|
665,396
|
|
|
Decommissioning
|
|
978,439
|
|
|
968,910
|
|
|
Pension and other postretirement liabilities
|
|
117,988
|
|
|
125,412
|
|
|
Long-term debt
|
|
768,950
|
|
|
705,259
|
|
|
Other
|
|
36,342
|
|
|
61,295
|
|
|
TOTAL
|
|
3,091,005
|
|
|
3,076,838
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
COMMON EQUITY
|
|
|
|
|
|
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2021 and 2020
|
|
951,850
|
|
|
951,850
|
|
|
Retained earnings
|
|
131,560
|
|
|
128,696
|
|
|
TOTAL
|
|
1,083,410
|
|
|
1,080,546
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$4,281,421
|
|
|
$4,413,968
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SYSTEM ENERGY RESOURCES, INC.
|
|
STATEMENTS OF CHANGES IN COMMON EQUITY
|
|
For the Three Months Ended March 31, 2021 and 2020
|
|
(Unaudited)
|
|
|
|
|
|
|
|
Common Equity
|
|
|
|
|
Common
Stock
|
|
Retained
Earnings
|
|
Total
|
|
|
(In Thousands)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
$601,850
|
|
|
$110,218
|
|
|
$712,068
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
28,513
|
|
|
28,513
|
|
|
Common stock dividends and distributions
|
—
|
|
|
(13,653)
|
|
|
(13,653)
|
|
|
Balance at March 31, 2020
|
$601,850
|
|
|
$125,078
|
|
|
$726,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
$951,850
|
|
|
$128,696
|
|
|
$1,080,546
|
|
|
|
|
|
|
|
|
|
Net income
|
—
|
|
|
23,864
|
|
|
23,864
|
|
|
Common stock dividends and distributions
|
—
|
|
|
(21,000)
|
|
|
(21,000)
|
|
|
Balance at March 31, 2021
|
$951,850
|
|
|
$131,560
|
|
|
$1,083,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Financial Statements.
|
|
|
|
|
|
ENTERGY CORPORATION AND SUBSIDIARIES