ETR-03-31-2014-10Q
Table of Contents

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

FORM 10-Q

(Mark One)
 
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the Quarterly Period Ended March 31, 2014
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from ____________ to ____________

Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
 

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


Table of Contents

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes R No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.
 
Large
accelerated
filer
 
Accelerated
filer
 
Non-
accelerated
filer
 
Smaller
reporting
company
Entergy Corporation
ü
 
 
 
 
 
 
Entergy Arkansas, Inc.
 
 
 
 
ü
 
 
Entergy Gulf States Louisiana, L.L.C.
 
 
 
 
ü
 
 
Entergy Louisiana, LLC
 
 
 
 
ü
 
 
Entergy Mississippi, Inc.
 
 
 
 
ü
 
 
Entergy New Orleans, Inc.
 
 
 
 
ü
 
 
Entergy Texas, Inc.
 
 
 
 
ü
 
 
System Energy Resources, Inc.
 
 
 
 
ü
 
 

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No R
Common Stock Outstanding
 
Outstanding at April 30, 2014
Entergy Corporation
($0.01 par value)
179,381,728

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company reports herein only as to itself and makes no other representations whatsoever as to any other company.  This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2013, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2014

 
Page Number
 
 
Entergy Corporation and Subsidiaries
 
Entergy Arkansas, Inc. and Subsidiaries
 
Entergy Gulf States Louisiana, L.L.C.
 
Entergy Louisiana, LLC and Subsidiaries
 
Entergy Mississippi, Inc.
 

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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2014

 
Page Number
 
 
Entergy New Orleans, Inc.
 
Entergy Texas, Inc. and Subsidiaries
 
System Energy Resources, Inc.
 
 


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FORWARD-LOOKING INFORMATION

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

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

resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
the termination of Entergy Arkansas’s participation in the System Agreement, which occurred in December 2013, the termination of Entergy Mississippi’s participation in the System Agreement in November 2015, the termination of Entergy Texas’s, Entergy Gulf States Louisiana’s, and Entergy Louisiana’s participation in the System Agreement after expiration of the recently proposed 60-month notice period or such other period as approved by the FERC;
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ move to the MISO RTO, which occurred in December 2013, including the effect of RTO rules and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC;
changes in regulation of nuclear generating facilities and nuclear materials and fuel, including with respect to the planned or potential shutdown of nuclear generating facilities owned or operated by the Entergy Wholesale Commodities business, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;
resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications or other authorizations required of nuclear generating facilities;
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities;
Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants;
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities;
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;

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FORWARD-LOOKING INFORMATION (Concluded)


changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, greenhouse gases, mercury, and other regulated air emissions, and changes in costs of compliance with environmental and other laws and regulations;
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal;
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
effects of climate change;
changes in the quality and availability of water supplies and the related regulation of water use and diversion;
Entergy’s ability to manage its capital projects and operation and maintenance costs;
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeast United States and events that could influence economic conditions in those areas;
the effects of Entergy’s strategies to reduce tax payments;
changes in the financial markets, particularly those affecting the availability of capital and Entergy’s ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions;
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
changes in inflation and interest rates;
the effect of litigation and government investigations or proceedings;
changes in technology, including with respect to new, developing, or alternative sources of generation;
the potential effects of threatened or actual terrorism, cyber attacks or data security breaches, including increased security costs, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
Entergy’s ability to attract and retain talented management and directors;
changes in accounting standards and corporate governance;
declines in the market prices of marketable securities and resulting funding requirements for Entergy’s defined benefit pension and other postretirement benefit plans;
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites;
the implementation of the shutdown of Vermont Yankee by the end of 2014 and the related decommissioning of Vermont Yankee;
the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;
factors that could lead to impairment of long-lived assets; and
the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestiture.


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DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym
Term
AFUDC
Allowance for Funds Used During Construction
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASLB
Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council or Council
Council of the City of New Orleans, Louisiana
D.C. Circuit
U.S. Court of Appeals for the District of Columbia Circuit
DOE
United States Department of Energy
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Texas
Entergy Texas, Inc., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale
Commodities (EWC)
Entergy’s non-utility business segment primarily comprised of the ownership and operation of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by those plants to wholesale customers
EPA
United States Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Form 10-K
Annual Report on Form 10-K for the calendar year ended December 31, 2013 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
FTR
Financial transmission right
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment

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DEFINITIONS (Concluded)

Abbreviation or Acronym
Term
IRS
Internal Revenue Service
ISO
Independent System Operator
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LPSC
Louisiana Public Service Commission
MISO
Midcontinent Independent System Operator, Inc., a regional transmission organization
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatts
MWh
Megawatt-hour(s)
Net debt to net capital ratio
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Palisades
Palisades Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement or power purchase agreement
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.
River Bend
River Bend Station (nuclear), owned by Entergy Gulf States Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
SMEPA
South Mississippi Electric Power Association, which owns a 10% interest in Grand Gulf
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. Entergy Arkansas terminated its participation in the System Agreement effective December 18, 2013.
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather


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ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

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

The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.  
The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers.  In August 2013, Entergy announced plans to close and decommission Vermont Yankee.  The plant is expected to cease power production in the fourth quarter 2014 after its current fuel cycle.  This business also provides services to other nuclear power plant owners.  Entergy Wholesale Commodities also owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Results of Operations

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 2014 to the first quarter 2013 showing how much the line item increased or (decreased) in comparison to the prior period:
 
 

Utility
 
Entergy
Wholesale
Commodities
 

Parent &
Other (a)
 

Entergy
 
 
(In Thousands)
1st Quarter 2013 Consolidated Net Income (Loss)
 

$127,835

 

$82,114

 

($42,967
)
 

$166,982

 
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
 
114,089

 
255,023

 
(2,817
)
 
366,295

Other operation and maintenance expenses
 
(22,518
)
 
3,537

 
2,703

 
(16,278
)
Taxes other than income taxes
 
3,221

 
88

 
64

 
3,373

Depreciation and amortization
 
7,025

 
20,904

 
(81
)
 
27,848

Other income
 
3,977

 
(2,834
)
 
96

 
1,239

Interest expense
 
6,594

 
1,993

 
(1,017
)
 
7,570

Other expenses
 
2,150

 
3,370

 

 
5,520

Income taxes
 
43,989

 
61,941

 
(5,500
)
 
100,430

 
 
 
 
 
 
 
 
 
1st Quarter 2014 Consolidated Net Income (Loss)
 

$205,440



$242,470



($41,857
)


$406,053


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

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


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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the first quarter 2014 to the first quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$1,223

Volume/weather
69

Retail electric price
34

Other
11

2014 net revenue

$1,337


The volume/weather variance is primarily due to an increase of 2,307 GWh, or 9%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales in the first quarter 2014 as compared to the same period in the prior year and an increase in sales to industrial customers. The increase in industrial sales was primarily due to expansions, recovery of a major refining customer from an unplanned outage in 2013, and continued moderate growth in the manufacturing sector.

The retail electric price variance is primarily due to:

a formula rate plan increase at Entergy Mississippi, as approved by the MPSC, effective September 2013;
an increase in the energy efficiency rider at Entergy Arkansas, as approved by the APSC, effective July 2013.  Energy efficiency revenues are largely offset by costs included in other operation and maintenance expenses and have minimal effect on net income;
an increase in purchased power capacity costs at Entergy Gulf States Louisiana and Entergy Louisiana that are recovered through base rates set in the annual formula rate plan mechanisms; and
an increase in the storm damage rider, as approved by the MPSC, effective October 2013. The increase in the storm damage rider is offset by other operation and maintenance expenses and has no effect on net income.

See Note 2 to the financial statements herein and in the Form 10-K for a discussion of rate proceedings.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the first quarter 2014 to the first quarter 2013:
 
Amount
 
(In Millions)
2013 net revenue

$493

Nuclear realized price changes
240

Mark-to-market value changes
30

Nuclear volume
(2
)
Other
(13
)
2014 net revenue

$748


As shown in the table above, net revenue for Entergy Wholesale Commodities increased by $255 million in the first quarter 2014 compared to the first quarter 2013 primarily due to higher realized wholesale energy prices reflecting cold winter weather and northeast pipeline infrastructure limitations. Entergy Wholesale Commodities’ hedging strategies routinely include financial instruments that manage operational and liquidity risk. These positions, in addition to a larger-than-normal unhedged position in 2014 due to Vermont Yankee being in its final year of operation, allowed Entergy Wholesale Commodities to benefit from increases in Northeast market power prices throughout the

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Management's Financial Discussion and Analysis

quarter. Net revenue also reflected mark-to-market activity, which was positive for the quarter. See Note 8 to the financial statements herein for discussion of derivative instruments.

Following are key performance measures for Entergy Wholesale Commodities for the first quarter 2014 and 2013:
 
2014
 
2013
Owned capacity (MW) (a)
6,068
 
6,612
GWh billed
10,014
 
10,387
Average realized revenue per MWh
$90.68
 
$58.66
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
82%
 
83%
GWh billed
9,079
 
9,246
Average realized revenue per MWh
$88.86
 
$57.82
Refueling Outage Days:
 
 
 
Indian Point 2
24

Indian Point 3
 
28
Palisades
56

Vermont Yankee
 
22

(a)     The reduction in owned capacity is due to the retirement of the 544 MW Ritchie Unit 2 in November 2013.

Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants" in the Form 10-K for a discussion of the effects of sustained low natural gas prices and power market structure challenges on market prices for electricity in the New York and New England power regions over the past few years.

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $520 million for the first quarter 2013 to $497 million for the first quarter 2014 primarily due to:

a decrease of $24 million in payroll, compensation, and benefits costs primarily due to fewer employees, an increase in the discount rates used to determine net periodic pension and other postretirement benefit costs, and other postretirement benefit plan design changes.  See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates" in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
a decrease of $13 million in fossil-fueled generation expenses primarily resulting from a lower scope of work done during plant outages in 2014 as compared to the same period in 2013; and
a decrease of $7 million resulting from costs incurred in 2013 related to the now-terminated plan to spin off and merge the Utility’s transmission business.

The decrease was partially offset by:

an increase of $9 million due to administration fees in 2014 related to participation in the MISO RTO;

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Management's Financial Discussion and Analysis

an increase of $7 million in storm damage accruals primarily at Entergy Mississippi effective October 2013, as approved by the MPSC, and at Entergy Arkansas effective January 2014, as approved by the APSC; and
an increase of $6 million in energy efficiency costs.  These costs are recovered through an energy efficiency rider and have a minimal effect on net income.

Interest expense increased primarily due to net debt issuances of first mortgage bonds by Entergy Arkansas and Entergy Louisiana in the second and third quarters of 2013. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details of long-term debt.

Entergy Wholesale Commodities

Depreciation and amortization expenses increased primarily due to a change in the estimated average useful lives of plant in service as a result of a new depreciation study as well as additions to plant in service.

Income Taxes

The effective income tax rate was 34.8% for the first quarter 2014. The difference in the effective income tax rate for the first quarter 2014 versus the statutory rate of 35% was primarily due to a deferred state income tax reduction related to a New York tax law change. See Note 10 to the financial statements herein for a discussion of the New York tax law change.

The effective income tax rate for the first quarter 2013 was 41.1%. The difference in the effective income tax rate for the first quarter 2013 versus the statutory rate of 35% was due to state income taxes, the provision for uncertain tax positions, and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.

Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants

See the Form 10-K for a discussion of the NRC operating licenses for Indian Point 2 and Indian Point 3 and the NRC license renewal applications in process for these plants.  Following is an update to the discussion regarding the NRC proceedings. In April 2014 the ASLB granted Entergy’s motion to dismiss as moot a contention by Riverkeeper alleging that the Final Supplemental Environmental Impact Statement failed to adequately address endangered species issues. At the same time, the ASLB denied a motion filed by Riverkeeper in August 2013 to amend its endangered species contention. Subject to possible appeal by Riverkeeper of one or both orders related to its endangered species contention, there are now three Track 2 contentions. Testimony on the remaining Track 2 contentions has not been completed, and Track 2 hearings have not been scheduled.

See “Impairment of Long-Lived Assets” in Note 11 to the financial statements herein for discussion regarding the planned shutdown of the Vermont Yankee plant by the end of 2014.

ANO Damage and Outage
 
See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage and Outage" in the Form 10-K for a discussion of the ANO stator incident. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was $95 million as of March 31, 2014. In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. Entergy Arkansas is assessing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO. NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO. Entergy

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

has responded that it disagrees with NEIL’s position and is evaluating its options for enforcing its rights under the policy. In July 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a general contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop. During the first quarter 2014, Entergy Arkansas collected $33 million from NEIL and is pursuing additional recoveries due under the policy.

Liquidity and Capital Resources

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

Capital Structure

Entergy’s capitalization is balanced between equity and debt, as shown in the following table.
 
March 31,
2014
 
December 31,
2013
Debt to capital
57.5
%
 
57.9
%
Effect of excluding the securitization bonds
(1.6
%)
 
(1.6
%)
Debt to capital, excluding securitization bonds (a)
55.9
%
 
56.3
%
Effect of subtracting cash
(1.8
%)
 
(1.5
%)
Net debt to net capital, excluding securitization bonds (a)
54.1
%
 
54.8
%

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

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

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in March 2019. Entergy Corporation has the ability to issue letters of credit against 50% of the total borrowing capacity of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31, 2014:
Capacity
 
Borrowings
 
Letters
of Credit
 
Capacity
Available
(In Millions)

$3,500

 

$115

 

$9

 

$3,376


A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above.  Entergy is currently in compliance with the covenant.  If Entergy

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Management's Financial Discussion and Analysis

fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur.  See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.

See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation commercial paper program.  As of March 31, 2014, Entergy Corporation had $1,059 million of commercial paper outstanding.

Capital Expenditure Plans and Other Uses of Capital

See the table and discussion in the Form 10-K under "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," that sets forth the amounts of planned construction and other capital investments by operating segment for 2014 through 2016.

Dividends

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board.  Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities.  At its April 2014 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since the second quarter 2010.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 2014 and 2013 were as follows:
 
2014
 
2013
 
(In Millions)
Cash and cash equivalents at beginning of period

$739

 

$533

Cash flow provided by (used in):
 

 
 

Operating activities
767

 
544

Investing activities
(656
)
 
(661
)
Financing activities
58

 
(153
)
Net increase (decrease) in cash and cash equivalents
169

 
(270
)
Cash and cash equivalents at end of period

$908

 

$263


Operating Activities

Net cash provided by operating activities increased by $223 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily due to higher Entergy Wholesale Commodities and Utility net revenues in 2014 as compared to the same period in 2013, as discussed previously. The increase was partially offset by an increase of $55 million in pension contributions, an increase of $14 million in spending on nuclear refueling outages in 2014 as compared to the same period in prior year, and decreased recovery of fuel costs. 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.


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Investing Activities

Net cash used in investing activities decreased by $5 million for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 primarily due to:

a decrease in construction expenditures, primarily in the Utility business, including a decrease in spending on the Ninemile 6 self-build project, spending in 2013 on the Waterford 3 steam generator project, and a decrease in storm restoration spending;
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statement of Cash Flows, as Entergy received net deposits of $21 million in 2014 and returned net deposits of $44 million in 2013.  Entergy Wholesale Commodities’ forward sales contracts are discussed in the “Market and Credit Risk Sensitive Instruments” section below;
$24 million in insurance proceeds received in the first quarter 2014 for property damages related to the generator stator incident at ANO, as discussed above; and
proceeds from the sale of aircraft in first quarter 2014.

These factors were substantially offset by the withdrawal of a total of $252 million from Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm reserve escrow accounts in 2013 as a result of Hurricane Isaac.  See Note 2 to the financial statements in the Form 10-K for a discussion of Hurricane Isaac.

Financing Activities

Financing activities provided $58 million in net cash for the three months ended March 31, 2014 compared to using $153 million in net cash for the three months ended March 31, 2013 primarily due to:

long-term debt activity providing approximately $17 million of cash in 2014 compared to using $285 million of cash in 2013.  Included in the long-term debt activity is $140 million in 2014 and $225 million in 2013 for the repayment of borrowings on the Entergy Corporation long-term credit facility.  Entergy Corporation issued $14 million of commercial paper in 2014 and $219 million in 2013, in part, to repay borrowings on its long-term credit facility;
a net increase of $165 million in short-term borrowings by the nuclear fuel company variable interest entities;
a net increase of $95 million in 2013 in short-term borrowings through the Utility companies’ credit facilities; and
an increase of $27 million in treasury stock issuances in 2014 compared to the same period in 2013.

For details of long-term debt activity and Entergy’s commercial paper program in 2014, see Note 4 to the financial statements herein.

Rate, Cost-recovery, and Other Regulation

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

State and Local Rate Regulation and Fuel-Cost Recovery

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

Federal Regulation

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

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Entergy’s Integration Into the MISO Regional Transmission Organization

As discussed in the Form 10-K, on December 19, 2013, the Utility operating companies successfully completed their planned integration into the MISO RTO.

In January 2013, Occidental Chemical Corporation filed with the FERC a petition for declaratory judgment and complaint against MISO alleging that MISO’s proposed treatment of Qualifying Facilities (QFs) in the Entergy region is unduly discriminatory in violation of sections 205 and 206 of the Federal Power Act and violates PURPA and the FERC’s implementing regulations. Occidental’s filing asks that the FERC declare that MISO’s QF integration plan is unlawful, find that the plan cannot be implemented because MISO did not file it pursuant to section 205 of the Federal Power Act, and direct that MISO modify certain aspects of the plan. Entergy sought to intervene and filed a protest to the pleadings.

In February 2014, Occidental filed a petition for enforcement against the LPSC. Occidental’s petition for enforcement alleges that the LPSC’s January 2014 order, which approved Entergy Gulf States Louisiana’s and Entergy Louisiana’s application for modification of Entergy’s methodology for calculating avoided cost rates paid to QFs, is inconsistent with the requirements of PURPA and the FERC’s regulations implementing PURPA. In April 2014 the FERC issued a “Notice Of Intent Not To Act At This Time” with respect to Occidental’s petition for enforcement against the LPSC. The FERC concluded that Occidental’s petition for enforcement largely raises the same issues as those raised in the January 2013 complaint and petition for declaratory order that Occidental had filed against MISO, and that the two proceedings should be addressed at the same time. The FERC reserved its ability to issue a further order or to take further action at a future date should it find that doing so is appropriate.

In April 2014, Occidental filed a complaint in federal district court for the Middle District of Louisiana against the LPSC and Entergy Louisiana that challenges the January 2014 order issued by the LPSC on grounds similar to those raised in the 2013 complaint and 2014 petition for enforcement that Occidental previously filed at the FERC.  The district court complaint seeks a declaration that the January 2014 order conflicts with and is preempted by PURPA and the Supremacy Clause of the United States Constitution, and also seeks an injunction prohibiting the LPSC and Entergy Louisiana from enforcing or utilizing the practices approved in the order.  The district court complaint seeks damages from Entergy Louisiana and a declaration from the district court that in pursuing the January 2014 order Entergy Louisiana breached an existing agreement with Occidental and an implied covenant of good faith and fair dealing.  

In February 2013, Entergy Services, on behalf of the Utility operating companies, made a filing with the FERC requesting to adopt the standard Attachment O formula rate template used by transmission owners to establish transmission rates within MISO. The filing proposed four transmission pricing zones for the Utility operating companies, one for Entergy Arkansas, one for Entergy Mississippi, one for Entergy Texas, and one for Entergy Louisiana, Entergy Gulf States Louisiana, and Entergy New Orleans. In June 2013 the FERC issued an order accepting the use of four transmission pricing zones and set for hearing and settlement judge procedures those issues of material fact that FERC decided could not be resolved based on the existing record. Several parties, including the City Council, filed requests for rehearing of the June 2013 order. In February 2014 the FERC issued an order addressing the rehearing requests. Among other things, the FERC denied rehearing and affirmed its prior decision allowing the four transmission pricing zones for the Utility operating companies in MISO. The FERC granted rehearing and set for hearing and settlement judge proceedings certain challenges of MISO’s regional through and out rates. In March 2014 certain parties filed a request for rehearing of the FERC’s February 2014 order on issues related to MISO’s regional through and out rates. In February 2014 and April 2014 various parties appealed the FERC’s June 2013 and February 2014 orders to the U.S. Court of Appeals for the D.C. Circuit where the appeals have been consolidated for further proceedings.


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System Agreement

Utility Operating Company Notices of Termination of System Agreement Participation

As discussed in the Form 10-K, in February 2014, Entergy Louisiana and Entergy Gulf States Louisiana provided notice of their respective decisions to terminate their participation in the System Agreement and made a filing with the FERC seeking acceptance of the notice. In the FERC filing, Entergy Louisiana and Entergy Gulf States Louisiana requested an effective date of February 14, 2019 or such other effective date approved by the FERC for the termination. In March 2014 the City Council submitted comments to the FERC regarding the notices of termination. The City Council requested the FERC either to condition its acceptance of the notices on compliance with the prior 96-month notice termination period, or in the alternative, to consolidate the notice filings with the proceeding related to the Utility operating companies’ proposal to shorten the System Agreement’s termination notice period from 96 months to 60 months, and to set all of the proceedings for hearing. Also in March 2014, Entergy Louisiana and Entergy Gulf States Louisiana filed a response to the City Council’s comments requesting that the FERC accept the notices without hearing and with an effective date subject to and consistent with the notice period established by the FERC in the proceeding related to the Utility operating companies’ proposal to shorten the System Agreement’s termination notice period. Entergy Louisiana, Entergy Gulf States Louisiana, and Entergy New Orleans continue to discuss with the LPSC staff and City Council advisors a proposal for the purpose of reaching a consensual agreement among Entergy Louisiana, Entergy Gulf States Louisiana, and Entergy New Orleans on early termination of the System Agreement.
    
Market and Credit Risk Sensitive Instruments

Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets.  In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.  In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk.  Certain hedge volumes have price downside and upside relative to market price movement.  The contracted minimum, expected value, and sensitivities are provided to show potential variations.  The sensitivities may not reflect the total maximum upside potential from higher market prices.  The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation.  Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of March 31, 2014 (2014 represents the remainder of the year):


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Entergy Wholesale Commodities Nuclear Portfolio
 
 
2014
 
2015
 
2016
 
2017
 
2018
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Unit-contingent (b)
 
25%
 
17%
 
16%
 
14%
 
14%
Unit-contingent with availability guarantees (c)
 
16%
 
15%
 
14%
 
15%
 
3%
Firm LD (d)
 
58%
 
42%
 
10%
 
—%
 
—%
Offsetting positions (e)
 
(24%)
 
—%
 
—%
 
—%
 
—%
Total
 
75%
 
74%
 
40%
 
29%
 
17%
Planned generation (TWh) (f) (g)
 
30
 
35
 
36
 
35
 
35
Average revenue per MWh on contracted volumes:
 
 
 
 
 
 
 
 
 
 
Minimum
 
$44
 
$43
 
$47
 
$51
 
$56
Expected based on market prices as of March 31, 2014
 
$48
 
$53
 
$50
 
$53
 
$56
Sensitivity: -/+ $10 per MWh market price change
 
$45-$51
 
$48-$58
 
$48-$52
 
$52-$54
 
$56
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (h):
 
 
 
 
 
 
 
 
 
 
Bundled capacity and energy contracts (i)
 
15%
 
18%
 
18%
 
18%
 
18%
Capacity contracts (j)
 
40%
 
15%
 
15%
 
16%
 
7%
Total
 
55%
 
33%
 
33%
 
34%
 
25%
Planned net MW in operation (g)
 
5,011
 
4,406
 
4,406
 
4,406
 
4,406
Average revenue under contract per kW per month
(applies to capacity contracts only)
 
$4.5
 
$3.2
 
$3.4
 
$5.6
 
$7.0
 
 
 
 
 
 
 
 
 
 
 
Total Nuclear Energy and Capacity Revenues (m)
 
 
 
 
 
 
 
 
 
 
Expected sold and market total revenue per MWh
 
$54
 
$53
 
$51
 
$52
 
$52
Sensitivity: -/+ $10 per MWh market price change
 
$49-$59
 
$46-$59
 
$44-$58
 
$45-$59
 
$44-$60

Entergy Wholesale Commodities Non-Nuclear Portfolio
 
 
2014
 
2015
 
2016
 
2017
 
2018
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Cost-based contracts (k)
 
43%
 
38%
 
36%
 
33%
 
34%
Firm LD (d)
 
8%
 
7%
 
7%
 
6%
 
7%
Total
 
51%
 
45%
 
43%
 
39%
 
41%
Planned generation (TWh) (f) (l)
 
5
 
5
 
6
 
6
 
6
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (h):
 
 
 
 
 
 
 
 
 
 
Cost-based contracts (k)
 
24%
 
24%
 
24%
 
26%
 
26%
Bundled capacity and energy contracts (i)
 
8%
 
8%
 
8%
 
8%
 
8%
Capacity contracts (j)
 
52%
 
53%
 
53%
 
56%
 
24%
Total
 
84%
 
85%
 
85%
 
90%
 
58%
Planned net MW in operation (l)
 
1,052
 
1,052
 
1,052
 
977
 
977

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(a)
Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights. Positions that are no longer classified as hedges are netted in the planned generation under contract.
(b)
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, seller is generally not liable to buyer for any damages.
(c)
A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(d)
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products.
(e)
Transactions for the purchase of energy, generally to offset a firm LD transaction.
(f)
Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch.
(g)
Assumes NRC license renewals for plants whose current licenses expire within five years.  Assumes shutdown of Vermont Yankee in the fourth quarter 2014 and uninterrupted normal operation at remaining plants.  NRC license renewal applications are in process for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013 and now operating under its period of extended operations) and Indian Point 3 (December 2015).  For a discussion regarding the shutdown of the Vermont Yankee plant, see “Impairment of Long-Lived Assets” in Note 11 to the financial statements herein.  For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” herein and in the Form10-K.
(h)
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(i)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(j)
A contract for the sale of an installed capacity product in a regional market.
(k)
Contracts priced in accordance with cost-based rates, a ratemaking concept used for the design and development of rate schedules to ensure that the filed rate schedules recover only the cost of providing the service; these contracts are on owned non-utility resources located within Entergy’s Utility service area and were executed prior to receiving market-based rate authority under MISO.  The percentage sold assumes completion of the necessary transmission upgrades required for the approved transmission rights.
(l)
Non-nuclear planned generation and net MW in operation include purchases from affiliated and non-affiliated counterparties under long-term contracts and exclude energy and capacity from Entergy Wholesale Commodities’ wind investment. The decrease in planned net MW in operation beginning in 2017 is due to the expiration of a non-affiliated 75 MW contact.
(m)
Includes expectations for the new New York ISO Lower Hudson Valley capacity zone starting in May 2014.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on March 31, 2014 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $148 million for the remainder of 2014. A negative $10 per MWh change in the annual average energy price in the markets based on March 31, 2014 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($142) million for the remainder of 2014.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements.  The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of collateral to

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satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At March 31, 2014, based on power prices at that time, Entergy had liquidity exposure of $264 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $73 million of posted cash collateral.  As of March 31, 2014, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $148 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.  In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of March 31, 2014, Entergy would have been required to provide approximately $114 million of additional cash or letters of credit under some of the agreements.

As of March 31, 2014, substantially all of the counterparties or their guarantors for 100% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2018 have public investment grade credit ratings.

Nuclear Matters

See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters" in the Form 10-K for a discussion of nuclear matters.

Critical Accounting Estimates

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

Nuclear Decommissioning Costs

In the first quarter 2014, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study.  The revised estimates resulted in a $43.6 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.

New Accounting Pronouncements

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

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands, Except Share Data)
OPERATING REVENUES
 
 
 
 
Electric
 

$2,226,463

 
$1,949,280
Natural gas
 
78,220

 
53,321

Competitive businesses
 
904,160

 
606,273

TOTAL
 
3,208,843

 
2,608,874

OPERATING EXPENSES
 
 
 
 
Operating and Maintenance:
 
 
 
 
Fuel, fuel-related expenses, and gas purchased for resale
 
543,829

 
510,333

Purchased power
 
574,627

 
373,129

Nuclear refueling outage expenses
 
59,544

 
60,719

Other operation and maintenance
 
737,980

 
754,258

Decommissioning
 
65,799

 
59,104

Taxes other than income taxes
 
154,468

 
151,095

Depreciation and amortization
 
328,724

 
300,876

Other regulatory charges
 
3,995

 
5,315

TOTAL
 
2,468,966

 
2,214,829

OPERATING INCOME
 
739,877

 
394,045

OTHER INCOME
 
 
 
 
Allowance for equity funds used during construction
 
15,129

 
12,751

Interest and investment income
 
35,248

 
38,306

Miscellaneous - net
 
(11,704
)
 
(13,623
)
TOTAL
 
38,673

 
37,434

INTEREST EXPENSE
 
 
 
 
Interest expense
 
162,551

 
153,149

Allowance for borrowed funds used during construction
 
(7,020
)
 
(5,188
)
TOTAL
 
155,531

 
147,961

INCOME BEFORE INCOME TAXES
 
623,019

 
283,518

Income taxes
 
216,966

 
116,536

CONSOLIDATED NET INCOME
 
406,053

 
166,982

Preferred dividend requirements of subsidiaries
 
4,879

 
5,582

NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
 

$401,174

 

$161,400

Earnings per average common share:
 
 
 
 
Basic
 

$2.24

 

$0.91

Diluted
 

$2.24

 

$0.90

Dividends declared per common share
 

$0.83

 

$0.83

Basic average number of common shares outstanding
 
178,797,829

 
178,027,961

Diluted average number of common shares outstanding
 
179,055,967

 
178,413,287

See Notes to Financial Statements.
 
 
 
 


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
 
2014
 
2013
 
(In Thousands)
Net Income

$406,053

 

$166,982

 
 
 
 
Other comprehensive income (loss)
 
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
(net of tax expense (benefit) of $7,225 and ($41,135))
13,754

 
(75,975
)
Pension and other postretirement liabilities
 
 
 
(net of tax expense of $17,761 and $5,869)
(12,696
)
 
9,795

Net unrealized investment gains
 
 
 
(net of tax expense of $5,748 and $54,311)
22,989

 
56,377

Foreign currency translation
 
 
 
(net of tax expense (benefit) of $40 and ($416))
75

 
(772
)
Other comprehensive income (loss)
24,122

 
(10,575
)
 
 
 
 
Comprehensive Income
430,175

 
156,407

Preferred dividend requirements of subsidiaries
4,879

 
5,582

Comprehensive Income Attributable to Entergy Corporation

$425,296

 

$150,825

 
 
 
 
See Notes to Financial Statements.
 
 
 



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CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
Consolidated net income
 

$406,053

 

$166,982

Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
516,442

 
472,933

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
234,102

 
98,671

Changes in working capital:
 
 
 
 
Receivables
 
49,107

 
(29,845
)
Fuel inventory
 
15,940

 
(5,147
)
Accounts payable
 
32,870

 
(40,861
)
Prepaid taxes and taxes accrued
 
(79,829
)
 
(35,648
)
Interest accrued
 
(24,802
)
 
(30,570
)
Deferred fuel costs
 
(161,189
)
 
(2,149
)
Other working capital accounts
 
(115,060
)
 
(151,958
)
Changes in provisions for estimated losses
 
3,319

 
(245,972
)
Changes in other regulatory assets
 
18,627

 
167,634

Changes in other regulatory liabilities
 
19,634

 
147,492

Changes in pensions and other postretirement liabilities
 
(46,174
)
 
32,696

Other
 
(101,883
)
 
(269
)
Net cash flow provided by operating activities
 
767,157

 
543,989

 
 
 
 
 
INVESTING ACTIVITIES
 
 
 
 
Construction/capital expenditures
 
(483,350
)
 
(631,857
)
Allowance for equity funds used during construction
 
15,883

 
13,672

Nuclear fuel purchases
 
(142,672
)
 
(145,168
)
Proceeds from sale of assets
 
10,100

 

Insurance proceeds received for property damages
 
28,226

 

Changes in securitization account
 
(2,219
)
 
1,601

NYPA value sharing payment
 
(72,000
)
 
(71,736
)
Payments to storm reserve escrow account
 
(1,897
)
 
(2,219
)
Receipts from storm reserve escrow account
 

 
252,482

Decrease (increase) in other investments
 
18,093

 
(44,298
)
Proceeds from nuclear decommissioning trust fund sales
 
536,515

 
398,010

Investment in nuclear decommissioning trust funds
 
(562,278
)
 
(432,247
)
Net cash flow used in investing activities
 
(655,599
)
 
(661,760
)
 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 

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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
FINANCING ACTIVITIES
 
 
 
 
Proceeds from the issuance of:
 
 
 
 
Long-term debt
 
753,244

 
564,717

Treasury stock
 
35,538

 
8,102

Retirement of long-term debt
 
(735,794
)
 
(849,860
)
Changes in credit borrowings and commercial paper - net
 
157,959

 
277,886

Dividends paid:
 
 
 
 
Common stock
 
(148,275
)
 
(147,902
)
Preferred stock
 
(4,873
)
 
(5,582
)
Net cash flow provided by (used in) financing activities
 
57,799

 
(152,639
)
 
 
 
 
 
Effect of exchange rates on cash and cash equivalents
 

 
772

 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
169,357

 
(269,638
)
 
 
 
 
 
Cash and cash equivalents at beginning of period
 
739,126

 
532,569

 
 
 
 
 
Cash and cash equivalents at end of period
 

$908,483

 

$262,931

 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest - net of amount capitalized
 

$181,112

 

$179,119

Income taxes
 

$4,196

 

$12,341

 
 
 
 
 
See Notes to Financial Statements.
 
 
 
 


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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$108,053

 

$129,979

Temporary cash investments
 
800,430

 
609,147

Total cash and cash equivalents
 
908,483

 
739,126

Accounts receivable:
 
 
 
 
Customer
 
701,534

 
670,641

Allowance for doubtful accounts
 
(34,064
)
 
(34,311
)
Other
 
184,623

 
195,028

Accrued unbilled revenues
 
276,099

 
340,828

Total accounts receivable
 
1,128,192

 
1,172,186

Deferred fuel costs
 
241,372

 
116,379

Accumulated deferred income taxes
 
64,889

 
175,073

Fuel inventory - at average cost
 
193,018

 
208,958

Materials and supplies - at average cost
 
926,256

 
915,006

Deferred nuclear refueling outage costs
 
306,355

 
192,474

Prepayments and other
 
424,751

 
410,489

TOTAL
 
4,193,316

 
3,929,691

OTHER PROPERTY AND INVESTMENTS
 
 
 
 
Investment in affiliates - at equity
 
39,370

 
40,350

Decommissioning trust funds
 
4,991,062

 
4,903,144

Non-utility property - at cost (less accumulated depreciation)
 
199,251

 
199,375

Other
 
167,569

 
210,616

TOTAL
 
5,397,252

 
5,353,485

PROPERTY, PLANT AND EQUIPMENT
 
 
 
 
Electric
 
43,180,962

 
42,935,712

Property under capital lease
 
940,996

 
941,299

Natural gas
 
368,094

 
366,365

Construction work in progress
 
1,645,580

 
1,514,857

Nuclear fuel
 
1,563,851

 
1,566,904

TOTAL PROPERTY, PLANT AND EQUIPMENT
 
47,699,483

 
47,325,137

Less - accumulated depreciation and amortization
 
19,690,826

 
19,443,493

PROPERTY, PLANT AND EQUIPMENT - NET
 
28,008,657

 
27,881,644

DEFERRED DEBITS AND OTHER ASSETS
 
 
 
 
Regulatory assets:
 
 
 
 
Regulatory asset for income taxes - net
 
847,868

 
849,718

Other regulatory assets (includes securitization property of $796,806 as of March 31, 2014 and $822,218 as of December 31, 2013)
 
3,876,586

 
3,893,363

Deferred fuel costs
 
172,202

 
172,202

Goodwill
 
377,172

 
377,172

Accumulated deferred income taxes
 
42,500

 
62,011

Other
 
961,216

 
887,160

TOTAL
 
6,277,544

 
6,241,626

TOTAL ASSETS
 

$43,876,769

 

$43,406,446

See Notes to Financial Statements.
 
 
 
 

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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
March 31, 2014 and December 31, 2013
(Unaudited)
 
 
2014
 
2013
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$422,666

 

$457,095

Notes payable and commercial paper
 
1,204,846

 
1,046,887

Accounts payable
 
1,145,591

 
1,173,313

Customer deposits
 
372,723

 
370,997

Taxes accrued
 
111,264

 
191,093

Accumulated deferred income taxes
 
28,382

 
28,307

Interest accrued
 
156,195

 
180,997

Deferred fuel costs
 
21,435

 
57,631

Obligations under capital leases
 
2,368

 
2,323

Pension and other postretirement liabilities
 
57,109

 
67,419

Other
 
394,882

 
484,510

TOTAL
 
3,917,461

 
4,060,572

NON-CURRENT LIABILITIES
 
 
 
 
Accumulated deferred income taxes and taxes accrued
 
8,876,125

 
8,724,635

Accumulated deferred investment tax credits
 
260,714

 
263,765

Obligations under capital leases
 
31,608

 
32,218

Other regulatory liabilities
 
1,315,589

 
1,295,955

Decommissioning and asset retirement cost liabilities
 
4,040,099

 
3,933,416

Accumulated provisions
 
118,741

 
115,139

Pension and other postretirement liabilities
 
2,284,840

 
2,320,704

Long-term debt (includes securitization bonds of $860,501 as of March 31, 2014 and $883,013 as of December 31, 2013)
 
12,198,641

 
12,139,149

Other
 
579,763

 
583,667

TOTAL
 
29,706,120

 
29,408,648

Commitments and Contingencies
 
 
 
 
Subsidiaries’ preferred stock without sinking fund
 
210,760

 
210,760

EQUITY
 
 
 
 
Common Shareholders’ Equity:
 
 
 
 
Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2014 and in 2013
 
2,548

 
2,548

Paid-in capital
 
5,350,632

 
5,368,131

Retained earnings
 
10,077,952

 
9,825,053

Accumulated other comprehensive loss
 
(5,202
)
 
(29,324
)
Less - treasury stock, at cost (75,608,733 shares in 2014 and 76,381,936 shares in 2013)
 
5,477,502

 
5,533,942

Total common shareholders’ equity
 
9,948,428

 
9,632,466

’Subsidiaries’ preferred stock without sinking fund
 
94,000

 
94,000

TOTAL
 
10,042,428

 
9,726,466

TOTAL LIABILITIES AND EQUITY
 

$43,876,769

 

$43,406,446

See Notes to Financial Statements.
 
 
 
 


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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
 
 
 
Common Shareholders’ Equity
 
 
 
Subsidiaries’ Preferred Stock
 
Common
Stock
 
Treasury
Stock
 
Paid-in
Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
(In Thousands)
Balance at December 31, 2012

$94,000

 

$2,548

 

($5,574,819
)
 

$5,357,852

 

$9,704,591

 

($293,083
)
 

$9,291,089

Consolidated net income (a)
5,582

 

 

 

 
161,400

 

 
166,982

Other comprehensive loss

 

 

 

 

 
(10,575
)
 
(10,575
)
Common stock issuances related to stock-based compensation plans

 

 
20,949

 
(7,967
)
 

 

 
12,982

Common stock dividends declared

 

 

 

 
(147,820
)
 

 
(147,820
)
Preferred dividend requirements of subsidiaries (a)
(5,582
)
 

 

 

 

 

 
(5,582
)
Balance at March 31, 2013

$94,000

 

$2,548

 

($5,553,870
)
 

$5,349,885

 

$9,718,171

 

($303,658
)
 

$9,307,076

Balance at December 31, 2013

$94,000

 

$2,548

 

($5,533,942
)
 

$5,368,131

 

$9,825,053

 

($29,324
)
 

$9,726,466

Consolidated net income (a)
4,879

 

 

 

 
401,174

 

 
406,053

Other comprehensive income

 

 

 

 

 
24,122

 
24,122

Common stock issuances related to stock-based compensation plans

 

 
56,440

 
(17,499
)
 

 

 
38,941

Common stock dividends declared

 

 

 

 
(148,275
)
 

 
(148,275
)
Preferred dividend requirements of subsidiaries (a)
(4,879
)
 

 

 

 

 

 
(4,879
)
Balance at March 31, 2014

$94,000

 

$2,548

 

($5,477,502
)
 

$5,350,632

 

$10,077,952

 

($5,202
)
 

$10,042,428

See Notes to Financial Statements.
 
 
 
 
 
 
 
 
 
 
 
 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2014 and 2013 include $3.2 million and $3.9 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity.


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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
 
 
Three Months Ended
 
Increase/
 
 
Description
 
2014
 
2013
 
(Decrease)
 
%
 
 
(Dollars in Millions)
 
 
Utility Electric Operating Revenues:
 
 
 
 
 
 
 
 
Residential
 

$904

 

$751

 

$153

 
20

Commercial
 
577

 
523

 
54

 
10

Industrial
 
555

 
544

 
11

 
2

Governmental
 
53

 
52

 
1

 
2

Total retail
 
2,089

 
1,870

 
219

 
12

Sales for resale
 
119

 
52

 
67

 
129

Other
 
18

 
27

 
(9
)
 
(33
)
Total
 

$2,226

 

$1,949

 

$277

 
14

Utility Billed Electric Energy Sales (GWh):
 
 
 
 
 
 
 
 
Residential
 
10,027

 
8,344

 
1,683

 
20

Commercial
 
6,800

 
6,421

 
379

 
6

Industrial
 
10,113

 
9,868

 
245

 
2

Governmental
 
584

 
584

 

 

Total retail
 
27,524

 
25,217

 
2,307

 
9

Sales for resale
 
2,234

 
630

 
1,604

 
255

Total
 
29,758

 
25,847

 
3,911

 
15

Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
Operating Revenues
 

$912

 

$614

 

$298

 
49

Billed Electric Energy Sales (GWh)
 
10,014

 
10,387

 
(373
)
 
(4
)


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Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.  COMMITMENTS AND CONTINGENCIES  (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, 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 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.

ANO Damage and Outage

See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident. The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was $95 million as of March 31, 2014.  In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage. In February 2014, the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available. Entergy Arkansas is assessing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action.  Entergy is a member of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants, including ANO.  NEIL has notified Entergy that it believes that a $50 million course of construction sublimit applies to any loss associated with the lifting apparatus failure and stator drop at ANO.  Entergy has responded that it disagrees with NEIL’s position and is evaluating its options for enforcing its rights under the policy.  On July 12, 2013, Entergy Arkansas filed a complaint in the Circuit Court in Pope County, Arkansas against the owner of the heavy-lifting apparatus that collapsed, an engineering firm, a general contractor, and certain individuals asserting claims of breach of contract, negligence, and gross negligence in connection with their responsibility for the stator drop. During the first quarter of 2014, Entergy Arkansas collected $33 million from NEIL and is pursuing additional recoveries due under the policy.

Baxter Wilson Plant Event

On September 11, 2013, Entergy Mississippi’s Baxter Wilson (Unit 1) power plant experienced a significant unplanned outage event.  Entergy Mississippi completed the process of assessing the nature and extent of the damage to the unit and repairs are in progress. The current estimate of costs to return the unit to service is in the range of $45 million to $60 million.  This estimate may change as restorative activities occur.  The costs necessary to return the plant to service are expected to be incurred into late 2014.  Entergy Mississippi believes that the damage is covered by its property insurance policy, subject to a $20 million deductible. In December 2013, Entergy Mississippi made a filing with the MPSC requesting approval for Entergy Mississippi to defer and accumulate the costs incurred in connection with Baxter Wilson repair activities, net of applicable insurance proceeds, with such costs to be recoverable in a manner to be determined by the MPSC. The MPSC has not acted on Entergy Mississippi’s request.


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Entergy Corporation and Subsidiaries
Notes to Financial Statements

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.

Conventional Property Insurance

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

Employment Litigation

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 Gulf States Louisiana, 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 at Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas.


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

Regulatory Assets

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

Retail Rate Proceedings

See Note 2 to the financial statements in the Form 10-K for detailed information regarding retail rate proceedings involving the Utility operating companies.  The following are updates to that information.

Filings with the LPSC

Retail Rates - Gas (Entergy Gulf States Louisiana)

In January 2014, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2013.  The filing showed an earned return on common equity of 5.47%, which results in a $1.5 million rate increase. In April 2014 the LPSC Staff issued a report indicating "that Entergy Gulf States Louisiana has properly determined its earnings for the test year ended September 30, 2013." The $1.5 million rate increase was implemented effective with the first billing cycle of April 2014.

Filings with the City Council (Entergy Louisiana)

In March 2013, Entergy Louisiana filed a rate case for the Algiers area, which is in New Orleans and is regulated
by the City Council. Entergy Louisiana is requesting a rate increase of $13 million over three years, including a 10.4%
return on common equity and a formula rate plan mechanism identical to its LPSC request made in February 2013. In January 2014, the City Council Advisors filed direct testimony recommending a rate increase of $5.56 million over

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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

three years, including an 8.13% return on common equity. New rates are currently expected to become effective in second quarter 2014. The procedural schedule calls for the hearing on the merits to commence on May 20, 2014.

Filings with the PUCT (Entergy Texas)

2013 Rate Case

In September 2013, Entergy Texas filed a rate case requesting a $38.6 million base rate increase reflecting a 10.4% return on common equity based on an adjusted test year ending March 31, 2013.  The rate case also proposed (1) a rough production cost equalization adjustment rider recovering Entergy Texas’s payment to Entergy New Orleans to achieve rough production cost equalization based on calendar year 2012 production costs and (2) a rate case expense rider recovering the cost of the 2013 rate case and certain costs associated with previous rate cases. The rate case filing also included a request to reconcile $0.9 billion of fuel and purchased power costs and fuel revenues covering the period July 2011 through March 2013.  The fuel reconciliation also reflects special circumstances fuel cost recovery of approximately $22 million of purchased power capacity costs. In January 2014 the PUCT staff filed direct testimony recommending a retail rate reduction of $0.3 million and a 9.2% return on common equity. In March 2014, Entergy Texas filed an Agreed Motion for Interim Rates. The motion explained that the parties to this proceeding have agreed that Entergy Texas should be allowed to implement new rates reflecting an $18.5 million base rate increase, effective for usage on and after April 1, 2014, as well as recovery of charges for rough production cost equalization and rate case expenses. In March 2014, the State Office of Administrative Hearings, the body assigned to hear the case, approved the motion. In April 2014, Entergy Texas filed a unanimous stipulation in this case. Among other things, the stipulation provides for an $18.5 million base rate increase, recovery over three years of rough production cost equalization charges and rate case expenses (the same as the interim rates currently in effect), and states a 9.8% return on common equity. In addition, the stipulation finalizes the fuel and purchased power reconciliation covering the period July 2011 through March 2013, with the parties stipulating an immaterial fuel disallowance. No special circumstances recovery of purchased power costs was allowed. In April 2014, the State Office of Administrative Hearings remanded the case back to the PUCT for final processing. A memorandum filed in this matter by the PUCT’s ALJ indicates that the PUCT will consider this matter at its open meeting currently scheduled for May 16, 2014.

System Agreement Cost Equalization Proceedings

See Note 2 to the financial statements in the Form 10-K for a discussion of the proceedings regarding the System Agreement, including the FERC’s October 2011 order and Entergy’s December 2011 compliance filing in response to that order.  In February 2014 the FERC issued a rehearing order addressing its October 2011 order. The FERC denied the LPSC’s request for rehearing on the issues of whether the bandwidth remedy should be made effective earlier than June 1, 2005, and whether refunds should be ordered for the 20-month refund effective period. The FERC granted the LPSC’s rehearing request on the issue of interest on the bandwidth payments/receipts for the June - December 2005 period, requiring that interest be accrued from June 1, 2006 until the date those bandwidth payments/receipts are made. Also in February 2014 the FERC issued an order rejecting the December 2011 compliance filing that calculated the bandwidth payments/receipts for the June - December 2005 period. The FERC order requires a new compliance filing that calculates the bandwidth payments/receipts for the June - December 2005 period based on monthly data for the seven individual months and that includes interest pursuant to the February 2014 rehearing order. Entergy has sought rehearing of the February 2014 orders with respect to the FERC’s determinations regarding interest.

In April 2014, Entergy filed with the FERC a compliance filing that provides the payments and receipts among the Utility operating companies pursuant to the FERC’s February 2014 orders.  The filing shows the following net payments and receipts, including interest, among the Utility operating companies:

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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

 
Payments
(Receipts)
 
(In Millions)
Entergy Arkansas
$67
 
Entergy Gulf States Louisiana
($33)
 
Entergy Louisiana
$—
 
Entergy Mississippi
($11)
 
Entergy New Orleans
$2
 
Entergy Texas
($25)
 

Storm Cost Recovery Filings with Retail Regulators

Entergy New Orleans

As discussed in the Form 10-K, total restoration costs for the repair and replacement of Entergy New Orleans’s electric facilities damaged by Hurricane Isaac were $47.3 million. Entergy New Orleans withdrew $17.4 million from the storm reserve escrow account to partially offset these costs. In February 2014, Entergy New Orleans made a filing with the City Council seeking certification of the Hurricane Isaac costs.


NOTE 3.  EQUITY  (Entergy Corporation, Entergy Gulf States Louisiana, and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
 
For the Three Months Ended March 31,
 
2014
 
2013
 
(In Millions, Except Per Share Data)
Basic earnings per share
Income
 
Shares
 
$/share
 
Income
 
Shares
 
$/share
Net income attributable to Entergy Corporation

$401.2

 
178.8

 

$2.24

 

$161.4

 
178.0

 

$0.91

Average dilutive effect of:
 
 
 
 
 
 
 
 
 
 
 
Stock options
 
 

 

 
 
 
0.1

 

Other equity plans
 
 
0.3

 

 
 
 
0.3

 
(0.01
)
Diluted earnings per share

$401.2

 
179.1

 

$2.24

 

$161.4

 
178.4

 

$0.90


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 9.0 million and 8.9 million for the three months ended March 31, 2014 and 2013, respectively.

Entergy’s stock options and other equity compensation plans are discussed in Note 5 herein and in Note 12 to the financial statements in the Form 10-K.


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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

Treasury Stock

During the three months ended March 31, 2014, Entergy Corporation issued 773,203 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, 2014.

Retained Earnings

On April 17, 2014, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.83 per share, payable on June 2, 2014 to holders of record as of May 15, 2014.

Comprehensive Income

Accumulated other comprehensive loss is included in the equity section of the balance sheets of Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana.  The following table presents changes in accumulated other comprehensive loss for Entergy for the three months ended March 31, 2014 by component:
 
Cash flow
hedges
net
unrealized
loss
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gains
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Loss
 
(In Thousands)
Beginning balance, December 31, 2013

($81,777
)
 

($288,223
)
 

$337,256

 

$3,420

 

($29,324
)
Other comprehensive income before reclassifications
140,052

 

 
24,723

 
75

 
164,850

Amounts reclassified from accumulated other comprehensive loss
(126,298
)
 
(12,696
)
 
(1,734
)
 

 
(140,728
)
Net other comprehensive income (loss) for the period
13,754

 
(12,696
)
 
22,989

 
75

 
24,122

Ending balance, March 31, 2014

($68,023
)
 

($300,919
)
 

$360,245

 

$3,495

 

($5,202
)


26

Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

The following table presents changes in accumulated other comprehensive loss for Entergy for the three months ended March 31, 2013 by component:
 
Cash flow
hedges
net
unrealized
gain
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gains
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Loss
 
(In Thousands)
Beginning balance, December 31, 2012

$79,905

 

($590,712
)
 

$214,547

 

$3,177

 

($293,083
)
Other comprehensive income (loss) before reclassifications
(77,561
)
 

 
57,372

 
(772
)
 
(20,961
)
Amounts reclassified from accumulated other comprehensive loss
1,586

 
9,795

 
(995
)
 

 
10,386

Net other comprehensive income (loss) for the period
(75,975
)
 
</