ENTERGY CORPORATION Entergy operates primarily through two business segments: Utility and
•The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions ofArkansas ,Mississippi ,Texas , andLouisiana , including theCity of New Orleans ; and operation of a small natural gas distribution business. •The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northernUnited States and the sale of the electric power produced by its operating plants to wholesale customers.Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See "Entergy Wholesale Commodities Exit from theMerchant Power Business" below and in the Form 10-K for discussion of the shutdown and sale of each of theEntergy Wholesale Commodities nuclear power plants. With the sale of Palisades inJune 2022 , Entergy completed its multi-year strategy to exit the merchant nuclear power business.
See Note 7 to the financial statements herein for financial information regarding Entergy's business segments.
1
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Results of Operations
Third Quarter 2022 Compared to Third Quarter 2021
Following are income statement variances for Utility,Entergy Wholesale Commodities , Parent & Other, and Entergy comparing the third quarter 2022 to the third quarter 2021 showing how much the line item increased or (decreased) in comparison to the prior period: Entergy Wholesale Parent & Utility Commodities Other (a) Entergy (In Thousands) 2021 Net Income (Loss) Attributable to Entergy Corporation$570,366 $25,517 ($64,880 )$531,003 Operating revenues 965,376 (100,266) (27) 865,083 Fuel, fuel-related expenses, and gas purchased for resale 623,649 5,380 (3) 629,026 Purchased power 101,408 2,323 3 103,734 Other regulatory charges (credits) - net (111,607) - - (111,607) Other operation and maintenance 132,029 (40,994) 1,515 92,550 Asset write-offs, impairments, and related charges (credits) - (4) - (4) Taxes other than income taxes 8,938 (1,257) 28 7,709 Depreciation and amortization 39,246 (7,298) (405) 31,543 Other income (deductions) (35,648) (2,819) (24,279) (62,746) Interest expense 14,589 (1,042) 4,413 17,960 Other expenses 10,097 (24,800) - (14,703) Income taxes 18,616 9,416 (2,202) 25,830 Preferred dividend requirements of subsidiaries and noncontrolling interest (9,239) - (48) (9,287) 2022 Net Income (Loss) Attributable to Entergy Corporation$672,368 ($19,292 ) ($92,487 )$560,589
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
2
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing the third quarter 2022 to the third quarter 2021:
Amount
(In Millions)
2021 operating revenues $3,191
Fuel, rider, and other revenues that do not significantly affect net
income 811
Retail electric price 100
Volume/weather 92
Retail one-time bill credit (37)
2022 operating revenues $4,157
The Utility operating companies' 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 increase inEntergy Arkansas's formula rate plan rates effectiveJanuary 2022 ; •increases in Entergy Louisiana's formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effectiveSeptember 2021 andSeptember 2022 ; •increases inEntergy Mississippi's formula rate plan rates effectiveApril 2022 andAugust 2022 ; •increases inEntergy New Orleans's formula rate plan rates effectiveNovember 2021 andSeptember 2022 ; and •an increase in the distribution cost recovery factor rider effectiveJanuary 2022 and an increase in the transmission cost recovery factor rider effectiveMarch 2022 , each atEntergy Texas .
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the regulatory proceedings discussed above.
The volume/weather variance is primarily due to an increase of 2,260 GWh, or 7%, in electricity usage across all customer classes, including the effect of more favorable weather on residential and commercial sales and the effects of Hurricane Ida in third quarter 2021. The increase in industrial usage was due to an increase in demand from expansion projects, primarily in the chemicals industry, an increase in demand from small industrial customers, and an increase in demand from cogeneration customers. The increase in weather-adjusted commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in third quarter 2021. The retail one-time bill credit represents the disbursement of settlement proceeds in the form of a one-time bill credit provided toEntergy Mississippi's retail customers, effective during theSeptember 2022 billing cycle, as a result of the System Energy partial settlement agreement with the MPSC. There is no effect on net income as the reduction in operating revenues was offset by regulatory credits recorded in third quarter 2022. See Note 2 to the financial statements herein for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds. 3 -------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Total electric energy sales for Utility for the three months ended
2022 2021 % Change
(GWh)
Residential 11,272 10,545 7
Commercial 8,223 7,649 8
Industrial 13,926 13,021 7
Governmental 702 648 8
Total retail 34,123 31,863 7
Sales for resale 4,809 4,350 11
Total 38,932 36,213 8
See Note 13 to the financial statements herein for additional discussion of operating revenues.
Operating revenues forEntergy Wholesale Commodities decreased from$162 million for the third quarter 2021 to$62 million for the third quarter 2022 primarily due to the shutdown of Palisades inMay 2022 .
Following are key performance measures for
2022 2021
Owned capacity (MW) (a) 394 1,205
GWh billed 577 2,166
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor -% 97%
GWh billed - 1,702
Average energy price ($/MWh) $- $69.35
Average capacity price ($/kW-month) $- $0.15 (a)The reduction in owned capacity is due to the shutdown of the 811 MW
Palisades plant in
Other Income Statement Items Utility
Other operation and maintenance expenses increased from
•an increase of$36 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems; 4 --------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•an increase of $30 million in nuclear generation expenses primarily due to a
higher scope of work performed and higher outage costs in 2022 as compared to
prior year and higher nuclear labor costs;
•an increase of $20 million in compensation and benefits costs primarily due to
the timing of incentive-based compensation accruals as compared to prior year;
•a gain of $15 million , recorded in the third quarter 2021, on the sale of a
pipeline; and
•an increase of $13 million in bad debt expense, including the deferral in 2021
of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the
financial statements herein and in the Form 10-K for discussion of regulatory
activity associated with the COVID-19 pandemic.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includes:
•a regulatory credit of$37 million , recorded in the third quarter 2022 atEntergy Mississippi , to reflect a one-time bill credit to customers as a result of the partial settlement agreement and offer of settlement with System Energy. This regulatory credit offsets a reduction in gross revenue from the bill credits provided to customers in the September bill cycle. See Note 2 to the financial statements herein for further discussion of the partial settlement agreement and the MPSC directive related to the disbursement of settlement proceeds; and •regulatory credits of$23 million , recorded in the third quarter 2022 atEntergy Mississippi , to reflect the effects of the joint stipulation reached in the 2022 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2022 formula rate plan filing. In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue. Other income decreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in 2021. The decrease was partially offset by an increase of$24 million in intercompany dividend income. The increase in intercompany dividend income results from the Entergy Louisiana storm trust's investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana's investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The intercompany dividend income on the affiliate preferred membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary. See Note 2 to the financial statements herein for discussion of the securitization.
Interest expense increased primarily due to:
•the issuance byEntergy Arkansas of$200 million of 4.20% Series mortgage bonds inMarch 2022 ; •the issuance by Entergy Louisiana of$1 billion of 0.95% Series mortgage bonds inOctober 2021 ; •the issuance by Entergy Louisiana of$500 million of 4.75% Series mortgage bonds inAugust 2022 ; •the issuance byEntergy Mississippi of$200 million of 2.55% Series mortgage bonds inNovember 2021 ; •the$150 million unsecured term loan proceeds received byEntergy Mississippi inJune 2022 ; •borrowings of$100 million in 2022 onEntergy Mississippi's credit facility; •the issuances byEntergy New Orleans of$90 million of 4.19% Series mortgage bonds and$70 million of 4.51% Series mortgage bonds, each inNovember 2021 ; and •the issuance byEntergy Texas of$325 million of 5.00% Series mortgage bonds inAugust 2022 . 5
-------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Other operation and maintenance expenses decreased from$51 million for the third quarter 2021 to$10 million for the third quarter 2022 primarily due to a decrease of$39 million resulting from the absence of expenses from Palisades, after it was shut down inMay 2022 , and a decrease of$3 million in severance and retention expenses. See "Entergy Wholesale Commodities Exit from the Merchant Power Business" below and in the Form 10-K for a discussion of management's strategy to shut down and sell all plants inEntergy Wholesale Commodities' merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses.
Depreciation and amortization expenses decreased primarily due to the absence of
depreciation expense from Palisades, after it was shut down in
Other expenses decreased primarily due to the absence of decommissioning expense and nuclear refueling outage expense from Palisades, after it was shut down inMay 2022 and sold inJune 2022 . See Note 14 to the financial statements herein for discussion of the sale of Palisades.
Parent and Other
Other income decreased primarily due to the elimination for consolidation purposes of intercompany dividend income, as discussed above.
Income Taxes
The effective income tax rate was 24.9% for the third quarter 2022. The
difference in the effective income tax rate for the third quarter 2022 versus
the federal statutory rate of 21% was primarily due to state income taxes and a
provision recorded for uncertain tax positions, partially offset by 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 of and regulatory activity regarding the Tax
Cuts and Jobs Act.
The effective income tax rate was 22.8% for the third quarter 2021. The
difference in the effective income tax rate for the third quarter 2021 versus
the federal statutory rate of 21% was primarily due to state income taxes,
partially offset by 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 of and regulatory activity
regarding the Tax Cuts and Jobs Act.
6
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended
Following are income statement variances for Utility,
Entergy
Wholesale Parent &
Utility Commodities Other (a) Entergy
(In Thousands)
2021 Net Income (Loss) Attributable to
Entergy Corporation $1,252,835 ($212,101 ) ($181,140 ) $859,594
Operating revenues 1,729,800 (258,430) (73) 1,471,297
Fuel, fuel-related expenses, and gas
purchased for resale 803,142 17,533 3 820,678
Purchased power 305,790 6,093 (3) 311,880
Other regulatory charges (credits) - net 643,891 - - 643,891
Other operation and maintenance 192,684 (139,562) 8,054 61,176
Asset write-offs, impairments, and related
charges (credits) - (508,690) - (508,690)
Taxes other than income taxes 48,849 (1,427) 66 47,488
Depreciation and amortization 103,258 (22,689) (1,359) 79,210
Other income (deductions) (87,226) (109,424) (36,762) (233,412)
Interest expense 40,651 (6,357) 18,803 53,097
Other expenses 11,199 (93,355) - (82,156)
Income taxes (408,823) 93,639 342 (314,842)
Preferred dividend requirements of
subsidiaries and noncontrolling interest (10,801) - (144) (10,945)
2022 Net Income (Loss) Attributable to
Entergy Corporation $1,165,569 $74,860 ($243,737 ) $996,692 (a)Parent & Other includes eliminations, which are primarily intersegment activity.
Results of operations for the nine months endedSeptember 30, 2022 include: 1) a regulatory charge of$551 million ($413 million net-of-tax), recorded at Utility, as a result of System Energy's partial settlement agreement and offer of settlement related to pending proceedings before theFERC ; 2) a$283 million reduction in income tax expense as a result of the Hurricane Laura,Hurricane Delta , Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization financing, which also resulted in a$224 million ($165 million net-of-tax) regulatory charge, recorded at Utility, to reflect Entergy Louisiana's obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding; and 3) a gain of$166 million ($130 million net-of-tax) as a result of the sale of the Palisades plant inJune 2022 . See Note 2 to the financial statements herein for further discussion of the System Energy partial settlement agreement and offer of settlement. See Notes 2 and 10 to the financial statements herein for further discussion of the securitization. See Note 14 to the financial statements herein for discussion of the sale of the Palisades plant. Results of operations for the nine months endedSeptember 30, 2021 include a charge of$340 million ($268 million net-of-tax) as a result of the sale of the Indian Point Energy Center inMay 2021 . See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. 7 -------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and Analysis Operating Revenues Utility Following is an analysis of the change in operating revenues comparing the nine months endedSeptember 30, 2022 to the nine months endedSeptember 30, 2021 : Amount (In Millions) 2021 operating revenues$8,461 Fuel, rider, and other revenues that do not significantly affect net income 1,220 Retail electric price 249 Volume/weather 218 Storm restoration carrying costs 59 Return of unprotected excess accumulated deferred income taxes to customers 21 Retail one-time bill credit (37) 2022 operating revenues$10,191 The Utility operating companies' 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:
•increases inEntergy Arkansas's formula rate plan rates effectiveMay 2021 andJanuary 2022 ; •increases in Entergy Louisiana's formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effectiveSeptember 2021 andSeptember 2022 ; •increases inEntergy Mississippi's formula rate plan rates effectiveApril 2021 ,July 2021 ,April 2022 , andAugust 2022 ; •an increase inEntergy New Orleans's formula rate plan rates effectiveNovember 2021 ; and •increases in the transmission cost recovery factor rider effectiveMarch 2021 andMarch 2022 , an increase in the distribution cost recovery factor rider effectiveJanuary 2022 , and the implementation of the generation cost recovery rider, which includes the first-year revenue requirement for theMontgomery County Power Station , effective in lateJanuary 2021 , each atEntergy Texas .
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the regulatory proceedings discussed above.
The volume/weather variance is primarily due to an increase of 5,317 GWh, or 6%,
in electricity usage across all customer classes, including the effect of more
favorable weather on residential and commercial sales. The increase in
industrial usage was due to an increase in demand from expansion projects,
primarily in the chemicals, transportation, and petroleum refining industries,
an increase in demand from cogeneration customers, an increase in demand from
existing customers, primarily in the chemicals, pulp and paper, and
transportation industries as a result of prior year temporary plant shutdowns,
partially offset by decreased demand in the petroleum refining industry as a
result of a permanent plant shutdown due to Hurricane Ida, and an increase in
demand from small industrial customers. The increase in weather-adjusted
commercial usage was primarily due to an increase in customers and the effect of
the COVID-19 pandemic on businesses in 2021. The increased usage from these
8
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
industrial and commercial customers has a relatively smaller effect on operating
revenues because a larger portion of the revenues from those customers comes
from fixed charges.
Storm restoration carrying costs, representing the equity component of storm
restoration carrying costs, includes $37 million at Entergy Louisiana and $22
million at Entergy Texas , recorded in second quarter 2022, recognized as part of
the Entergy Louisiana storm cost securitization in May 2022 and the Entergy
Texas storm cost securitization in April 2022 . See Note 2 to the financial
statements herein for discussion of storm cost securitizations.
The return of unprotected excess accumulated deferred income taxes to customers
resulted from activity at the Utility operating companies in response to the
enactment of the Tax Cuts and Jobs Act. The return of unprotected excess
accumulated deferred income taxes began in second quarter 2018. In the nine
months ended September 30, 2022 , $50 million was returned to customers through
reductions in operating revenues as compared to $71 million in the nine months
ended September 30, 2021 . There is no effect on net income as the reductions in
operating revenues were offset by reductions in income tax expense. See Note 2
to the financial statements in the Form 10-K for further discussion of
regulatory activity regarding the Tax Cuts and Jobs Act.
The retail one-time bill credit represents the disbursement of settlement
proceeds in the form of a one-time bill credit provided to Entergy Mississippi's
retail customers, effective during the September 2022 billing cycle, as a result
of the System Energy partial settlement agreement with the MPSC. There is no
effect on net income as the reduction in operating revenues was offset by
regulatory credits recorded in third quarter 2022. See Note 2 to the financial
statements herein for discussion of the partial settlement agreement and the
MPSC directive related to the disbursement of settlement proceeds.
Total electric energy sales for Utility for the nine months ended
2022 2021 % Change
(GWh)
Residential 29,218 27,695 5
Commercial 21,697 20,490 6
Industrial 39,903 37,399 7
Governmental 1,928 1,845 4
Total retail 92,746 87,429 6
Sales for resale 12,371 13,365 (7)
Total 105,117 100,794 4
See Note 13 to the financial statements herein for additional discussion of operating revenues.
Operating revenues forEntergy Wholesale Commodities decreased from$559 million for the nine months endedSeptember 30, 2021 to$301 million for the nine months endedSeptember 30, 2022 primarily due to the shutdown ofIndian Point 3 inApril 2021 and Palisades inMay 2022 . 9 -------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Following are key performance measures for
2022 2021
Owned capacity (MW) (a) 394 1,205
GWh billed 4,172 9,265
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor 93% 97%
GWh billed 2,741 8,046
Average energy price ($/MWh) $48.99 $54.65
Average capacity price ($/kW-month) $0.15 $0.26 (a)The reduction in owned capacity is due to the shutdown of the 811 MW
Palisades plant in
Other Income Statement Items Utility Other operation and maintenance expenses increased from$1,937 million for the nine months endedSeptember 30, 2021 to$2,130 million for the nine months endedSeptember 30, 2022 primarily due to: •an increase of$54 million in power delivery expenses primarily due to higher vegetation maintenance costs, higher reliability costs, and higher safety and training costs, partially offset by a decrease in meter reading expenses as a result of the deployment of advanced metering systems; •an increase of$37 million in nuclear generation expenses primarily due to a higher scope of work performed and higher nuclear labor costs in 2022, partially offset by spending in 2021 on sanitation and social distancing protocols as a result of the COVID-19 pandemic; •an increase of$21 million in compensation and benefits costs primarily due to the timing of incentive-based compensation accruals as compared to prior year; •an increase of$16 million in customer service center support costs primarily due to higher contract costs; •a gain of$15 million , recorded in the third quarter 2021, on the sale of a pipeline; •an increase of$14 million in bad debt expense, including the deferral in 2021 of bad debt expense resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory activity associated with the COVID-19 pandemic; and •an increase of$11 million in energy efficiency expenses due to the timing of recovery from customers.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments, increases in franchise taxes, and increases in employment taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includes:
•the reversal in first quarter 2021 of the remaining$39 million regulatory liability forEntergy Arkansas's 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the 2020 formula rate plan filing; •a regulatory charge of$224 million , recorded by Entergy Louisiana in second quarter 2022, to reflect its obligation to provide credits to its customers in recognition of obligations related to an LPSC ancillary order 10 --------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
issued in the Hurricane Laura, Hurricane Delta , Hurricane Zeta, Winter Storm
Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the
financial statements herein for discussion of the storm cost securitization;
•a regulatory credit of $37 million , recorded in the third quarter 2022 at
Entergy Mississippi , to reflect a one-time bill credit to customers as a result
of the partial settlement agreement and offer of settlement with System Energy.
This regulatory credit offsets a reduction in gross revenue from the bill
credits provided to customers in the September bill cycle. See Note 2 to the
financial statements herein for further discussion of the partial settlement
agreement and the MPSC directive related to the disbursement of settlement
proceeds;
•regulatory credits of $20 million , recorded in the second quarter 2021 at
Entergy Mississippi , to reflect the effects of the joint stipulation reached in
the 2021 formula rate plan filing proceeding. See Note 2 to the financial
statements in the Form 10-K for discussion of the 2021 formula rate plan filing;
•regulatory credits of $23 million , recorded in the third quarter 2022 at
Entergy Mississippi , to reflect the effects of the joint stipulation reached in
the 2022 formula rate plan filing proceeding. See Note 2 to the financial
statements herein for discussion of the 2022 formula rate plan filing; and
•a regulatory charge of $551 million , recorded by System Energy in second
quarter 2022, to reflect the effects of the partial settlement agreement and
offer of settlement related to pending proceedings before the FERC . See Note 2
to the financial statements herein for discussion of the partial settlement
agreement and offer of settlement.
In addition, Entergy records a regulatory charge or credit for the difference
between asset retirement obligation-related expenses and nuclear decommissioning
trust earnings plus asset retirement obligation-related costs collected in
revenue.
Other income decreased primarily due to:
•changes in decommissioning trust fund activity, including portfolio rebalancing of the decommissioning trust funds in 2022 and 2021; and •a$32 million charge at Entergy Louisiana for the LURC's 1% beneficial interest in the storm trust established as part of the Hurricane Laura,Hurricane Delta , Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization.
This decrease was partially offset by:
•an increase of$35 million in intercompany dividend income. The increase in intercompany dividend income results from the Entergy Louisiana storm trust's investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana's investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The intercompany dividend income on the affiliate preferred membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary; and •an increase of$12 million due to the recognition of storm restoration carrying costs, primarily related to Hurricane Ida.
See Note 2 to the financial statements herein for discussion of the securitization.
Interest expense increased primarily due to:
•the issuance byEntergy Arkansas of$400 million of 3.35% Series mortgage bonds inMarch 2021 ; •the issuance byEntergy Arkansas of$200 million of 4.20% Series mortgage bonds inMarch 2022 ; •the issuances by Entergy Louisiana of$500 million of 2.35% Series mortgage bonds and$500 million of 3.10% Series mortgage bonds, each inMarch 2021 ; 11 -------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and Analysis •the issuance by Entergy Louisiana of$1 billion of 0.95% Series mortgage bonds inOctober 2021 ; •the$1.2 billion unsecured term loan proceeds received by Entergy Louisiana inJanuary 2022 . The term loan was repaid inJune 2022 ; •the issuance by Entergy Louisiana of$500 million of 4.75% Series mortgage bonds inAugust 2022 ; •the issuance byEntergy Mississippi of$200 million of 3.50% Series mortgage bonds inMarch 2021 ; •the issuance byEntergy Mississippi of$200 million of 2.55% Series mortgage bonds inNovember 2021 ; and •the issuances byEntergy New Orleans of$90 million of 4.19% Series mortgage bonds and$70 million of 4.51% Series mortgage bonds, each inNovember 2021 . The increase was partially offset by the repayment byEntergy Arkansas of$350 million of 3.75% Series mortgage bonds inFebruary 2021 and the repayment by Entergy Louisiana of$200 million of 4.8% Series mortgage bonds inMay 2021 .
Other operation and maintenance expenses decreased from$233 million for the nine months endedSeptember 30, 2021 to$94 million for the nine months endedSeptember 30, 2022 primarily due to a decrease of$127 million resulting from the absence of expenses fromIndian Point 3, after it was shut down inApril 2021 , and Palisades, after it was shut down inMay 2022 , and a decrease of$8 million in severance and retention expenses. Severance and retention expenses were incurred in 2022 and 2021 due to management's strategy to exit theEntergy Wholesale Commodities merchant power business. See "Entergy Wholesale Commodities Exit from the Merchant Power Business" below and in the Form 10-K for a discussion of management's strategy to shut down and sell all plants inEntergy Wholesale Commodities' merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses. Asset write-offs, impairments, and related charges (credits) for the nine months endedSeptember 30, 2022 include a gain of$166 million ($130 million net-of-tax) as a result of the sale of the Palisades plant inJune 2022 . Asset write-offs, impairments, and related charges (credits) for the nine months endedSeptember 30, 2021 include a charge of$340 million ($268 million net-of-tax) as a result of the sale of the Indian Point Energy Center inMay 2021 . See Note 14 to the financial statements herein for discussion of the sale of the Palisades plant and Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. See "Entergy Wholesale Commodities Exit from the Merchant Power Business" below and in the Form 10-K for a discussion of management's strategy to shut down and sell all of the plants in theEntergy Wholesale Commodities merchant nuclear fleet. Depreciation and amortization expenses decreased primarily due to the absence of depreciation expense fromIndian Point 3, after it was shut down inApril 2021 , and Palisades, after it was shut down inMay 2022 . The decrease was partially offset by the effect of recording in 2021 a final judgment to resolve claims in the Palisades damages case against theDOE related to spent nuclear fuel storage costs. The damages awarded included$9 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation. Other income decreased primarily due to the absence of earnings from the nuclear decommissioning trust funds that were transferred in the sale of the Indian Point Energy Center inMay 2021 and the sale of Palisades inJune 2022 , partially offset by lower non-service pension costs. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of the Indian Point Energy Center. See Note 14 to the financial statements herein for discussion of the sale of Palisades. See Note 6 to the financial statements herein for a discussion of pension and other postretirement benefits costs. 12 --------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other expenses decreased primarily due to the absence of decommissioning expense
from Indian Point 2 and Indian Point 3, after the sale of the Indian Point
Energy Center in May 2021 , and from Palisades, after the sale of Palisades in
June 2022 . See Note 14 to the financial statements in the Form 10-K for
discussion of the sale of the Indian Point Energy Center. See Note 14 to the
financial statements herein for discussion of the sale of Palisades.
Parent and Other
Other income decreased primarily due to the elimination for consolidation purposes of intercompany dividend income, as discussed above.
Income Taxes
The effective income tax rate was (12.2%) for the nine months endedSeptember 30, 2022 . The difference in the effective income tax rate for the nine months endedSeptember 30, 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Laura,Hurricane Delta , Hurricane Zeta, Winter Storm Uri, and Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of theLouisiana Legislature's Regular Session of 2021, the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, 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 of and regulatory activity regarding the Tax Cuts and Jobs Act. See Notes 2 and 10 to the financial statements herein for discussion of the Entergy Louisiana securitization. The effective income tax rate was 19.1% for the nine months endedSeptember 30, 2021 . The difference in the effective income tax rate for the nine months endedSeptember 30, 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, a reduction of a valuation allowance, 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, 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 of 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 valuation allowance reduction.
Income Tax Legislation
The Inflation Reduction Act of 2022, signed into law onAugust 16, 2022 , significantly expanded federal tax incentives for clean energy production, including the extension of production tax credits to solar projects and certain qualified nuclear power plants. Additionally, the Inflation Reduction Act of 2022 enacted a 1% excise tax on the buyback of public company stock and a new corporate alternative minimum tax (CAMT). Effective for tax years beginning afterDecember 31, 2022 , the CAMT imposes a 15% tax on the Adjusted Financial Statement Income (AFSI) on each corporation in a group of corporations that averages greater than$1 billion in AFSI over a three-year period. Taxpayers subject to the CAMT regime must pay the greater of 15% of AFSI or their regular federal tax liability. Entergy and the Registrant Subsidiaries are closely monitoring any potential impact associated with the expansion of federal tax incentives, the 1% excise tax, and CAMT. Based on current information and forecasts, Entergy and the Registrant Subsidiaries may be subject to the CAMT beginning in 2026.The United States Treasury Department is expected to issue guidance beginning later this year that will further clarify how the tax credit provisions and CAMT provisions will be interpreted and applied. This guidance will determine the amount of tax credits and incremental cash tax payments Entergy expects in the future as a result of the legislation. Prior to receiving this guidance, Entergy cannot adequately assess the expected future effects on its results of operations, financial position and cash flows. There are no expected effects on the financial statements as of and for the year endedDecember 31, 2022 . 13 -------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Exit from the Merchant Power Business
See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale
Commodities Exit from the Merchant Power Business" in the Form 10-K for a
discussion of management's strategy to shut down and sell all plants in the
InApril 2022 , Entergy andNebraska Public Power District signed an agreement to mutually terminate the management support services contract, under which Entergy provided plant operation support services for the 800MW Cooper Nuclear Station located nearBrownville, Nebraska , effectiveJuly 31, 2022 . InOctober 2022 , Entergy sold its 50% membership interest inRS Cogen LLC , an unconsolidated joint venture which owns the RS Cogen plant, to a subsidiary of the other 50% equity partner. Entergy sold its 50% membership interest inRS Cogen, LLC for approximately$5 million with no resulting income statement effect.
Shutdown and Sale of Palisades
As discussed in the Form 10-K, inJuly 2018 , Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site, for$1,000 (subject to adjustment for net liabilities and other amounts) to aHoltec subsidiary. Palisades was shut down inMay 2022 and defueled inJune 2022 . The transaction closed inJune 2022 . The sale included the transfer of the nuclear decommissioning trust and the asset retirement obligation for spent fuel management and plant decommissioning. The transaction resulted in a gain of$166 million ($130 million net-of-tax) in the second quarter of 2022. See Note 14 to the financial statements herein for further discussion of the sale of the Palisades plant. InDecember 2020 , Entergy andHoltec submitted a license transfer application to the NRC requesting approval to transfer the Palisades andBig Rock Point licenses from Entergy toHoltec . InFebruary 2021 several parties, including theMichigan Attorney General, filed with the NRC petitions to intervene and requests for hearing challenging the license transfer application. The NRC issued an order approving the application inDecember 2021 , subject to the NRC's authority to condition, revise, or rescind the approval order based on the resolution of pending requests for hearing. These petitions and requests for hearing remained pending with the NRC at the time of the closing of the Palisades transaction inJune 2022 . InJuly 2022 the NRC issued an order granting theMichigan Attorney General's petition hearing request.
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.
14
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and AnalysisCapital Structure and Resources
Entergy's debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy as ofSeptember 30, 2022 is primarily due to an increase in equity resulting from net income, partially offset by the net issuance of debt in 2022. September 30, December 31, 2022 2021 Debt to capital 69.0 % 69.5 % Effect of excluding securitization bonds (0.2 %) (0.1 %) Debt to capital, excluding securitization bonds (a) 68.8 % 69.4 % Effect of subtracting cash (0.8 %) (0.3 %) Net debt to net capital, excluding securitization bonds (a) 68.0 % 69.1 %
(a)Calculation excludes the
As ofSeptember 30, 2022 , 20% of the debt outstanding is at the parent company,Entergy Corporation , 79.5% is at the Utility, and 0.5% is atEntergy Wholesale Commodities . Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, finance 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 inJune 2027 . 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 ofEntergy Corporation . The weighted average interest rate for the nine months endedSeptember 30, 2022 was 2.39% on the drawn portion of the facility. As ofSeptember 30, 2022 , amounts outstanding and capacity available under the$3.5 billion credit facility are: Letters Capacity Capacity Borrowings of Credit Available (In Millions)$3,500 $150 $3 $3,347 A covenant inEntergy Corporation's credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio underEntergy Corporation's credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (exceptEntergy New Orleans ) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of theEntergy Corporation credit facility's maturity date may occur. See Note 4 to the financial statements herein for additional discussion of theEntergy Corporation credit facility and discussion of the Utility operating companies' credit facilities. 15 -------------------------------------------------------------------------------- Table of ContentsEntergy Corporation and Subsidiaries Management's Financial Discussion and AnalysisEntergy Corporation has a commercial paper program with a Board-approved program limit of up to$2 billion . As ofSeptember 30, 2022 ,Entergy Corporation had$1.387 billion of commercial paper outstanding. The weighted-average interest rate for the nine months endedSeptember 30, 2022 was 1.52%.
Entergy Louisiana had
Equity Issuances and Equity Distribution Program
As discussed in the Form 10-K, inJanuary 2021 , Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may also enter into forward sale agreements for the sale of its common stock. Initially, the aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement could not exceed an aggregate gross sales price of$1 billion . InMay 2022 , Entergy increased the aggregate gross sales price authorized under the at the market equity distribution program by$1 billion . ThroughSeptember 30, 2022 , Entergy has utilized the equity distribution program either to sell or to enter into forward sale agreements with respect to shares of common stock with an aggregate gross sales price of approximately$1 billion , of which approximately$870 million of aggregate gross sales price is the subject of forward sale agreements that have not been settled and is subject to adjustment pursuant to the forward sale agreements. Entergy currently expects to settle the forward sales agreements byDecember 31, 2022 . In addition to settlement of existing forward sale agreements,Entergy Corporation currently expects to issue approximately$130 million of equity through 2024. See Note 3 to the financial statements herein for discussion of the forward sale agreements and common stock issuances and sales under the equity distribution program.
Hurricane Laura,
As discussed in the Form 10-K, inAugust 2020 andOctober 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. InFebruary 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice toLouisiana . 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 additional outages. InApril 2021 , Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura,Hurricane Delta , Hurricane Zeta, and Winter Storm Uri restoration costs and inJuly 2021 , Entergy Louisiana made a supplemental filing updating the total restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana's electric facilities damaged by these storms were estimated to be approximately$2.06 billion , including approximately$1.68 billion in capital costs and approximately$380 million in non-capital costs. Including carrying costs throughJanuary 2022 , Entergy Louisiana sought an LPSC determination that$2.11 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally, Entergy Louisiana requested that the LPSC determine that re-establishment of a storm escrow account to the previously authorized amount of$290 million was appropriate. InJuly 2021 , Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of theLouisiana Legislature's Regular Session of 2021. 16 --------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In August 2021 , Hurricane Ida caused extensive damage to Entergy Louisiana's
distribution and, to a lesser extent, transmission systems resulting in
widespread power outages. In September 2021 , Entergy Louisiana filed an
application at the LPSC seeking approval of certain ratemaking adjustments in
connection with the issuance of approximately $1 billion of shorter-term
mortgage bonds to provide interim financing for restoration costs associated
with Hurricane Ida, which bonds were issued in October 2021 . Also in September
2021 , Entergy Louisiana sought approval for the creation and funding of a $1
billion restricted escrow account for Hurricane Ida restoration costs, subject
to a subsequent prudence review.
After filing of testimony by the LPSC staff and intervenors, which generally
supported or did not oppose Entergy Louisiana's requests in regard to Hurricane
Laura, Hurricane Delta , Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, the
parties negotiated and executed an uncontested stipulated settlement which was
filed with the LPSC in February 2022 . The settlement agreement contained the
following key terms: $2.1 billion of restoration costs from Hurricane Laura,
Hurricane Delta , Hurricane Zeta, and Winter Storm Uri were prudently incurred
and were eligible for recovery; carrying costs of $51 million were recoverable;
a $290 million cash storm reserve should be re-established; a $1 billion reserve
should be established to partially pay for Hurricane Ida restoration costs; and
Entergy Louisiana was authorized to finance $3.186 billion utilizing the
securitization process authorized by Act 55, as supplemented by Act 293. The
LPSC issued an order approving the settlement in March 2022 . As a result of the
financing order, Entergy Louisiana reclassified $1.942 billion from utility
plant to other regulatory assets.
In May 2022 the securitization financing closed, resulting in the issuance of
$3.194 billion principal amount of bonds by Louisiana Local Government
Environmental Facilities and Community Development Authority (LCDA), a political
subdivision of the State of Louisiana . The securitization was authorized
pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of
Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act
293 of the Louisiana legislature approved in 2021. The LCDA loaned the proceeds
to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to
a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust
I (the storm trust).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust
to purchase 31,635,718.7221 Class A preferred, non-voting membership interest
units (the preferred interests) issued by Entergy Finance Company, LLC , a
majority-owned indirect subsidiary of Entergy. Entergy Finance Company is
required to make annual distributions (dividends) commencing on December 15,
2022 on the preferred interests issued to the storm trust. These annual
dividends received by the storm trust will be distributed to Entergy Louisiana
and the LURC, as beneficiaries of the storm trust. Specifically, 1% of the
annual dividends received by the storm trust will be distributed to the LURC,
for the benefit of customers, and 99% will be distributed to Entergy Louisiana,
net of storm trust expenses. The preferred interests have a stated annual
cumulative cash dividend rate of 7% and a liquidation price of $100 per unit.
The terms of the preferred interests include certain financial covenants to
which Entergy Finance Company is subject.
Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on
their balance sheets because the bonds are the obligation of the LCDA. The bonds
are secured by system restoration property, which is the right granted by law to
the LURC to collect a system restoration charge from customers. The system
restoration charge is adjusted at least semi-annually to ensure that it is
sufficient to service the bonds. Entergy Louisiana collects the system
restoration charge on behalf of the LURC and remits the collections to the bond
indenture trustee. Entergy Louisiana began collecting the system restoration
charge effective with the first billing cycle of June 2022 and the system
restoration charge is expected to remain in place up to 15 years. Entergy and
Entergy Louisiana do not report the collections as revenue because Entergy
Louisiana is merely acting as a billing and collection agent for the LCDA and
the LURC. In the remote possibility that the system restoration charge, as well
as any funds in the excess subaccount and funds in the debt service reserve
account, are insufficient to service the bonds resulting in a payment default,
the storm trust is required to liquidate Entergy Finance Company preferred
interests in an amount equal to what would be required to cure the default. The
estimated value of this indirect guarantee is immaterial.
17
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
From the proceeds from the issuance of the preferred membership interests,
Entergy Finance Company distributed $1.4 billion to its parent, Entergy Holdings
Company, LLC . Subsequently, Entergy Holdings Company liquidated, distributing
the $1.4 billion it received from Entergy Finance Company to Entergy Louisiana
as holder of 6,843,780.24 units of Class A, 4,126,940.15 units of Class B, and
2,935,152.69 units of Class C preferred membership interests. Entergy Louisiana
had acquired these preferred membership interests with proceeds from previous
securitizations of storm restoration costs. Entergy Finance Company loaned the
remaining $1.7 billion from the preferred membership interests proceeds to
Entergy which used the cash to redeem $650 million of 4.00% Series senior notes
due July 2022 and indirectly contributed $1 billion to Entergy Louisiana as a
capital contribution.
Entergy Louisiana used the $1 billion capital contribution to fund its Hurricane
Ida escrow account and subsequently withdrew the $1 billion from the escrow
account. With a portion of the $1 billion withdrawn from the escrow account and
the $1.4 billion from the Entergy Holdings Company liquidation, Entergy
Louisiana deposited $290 million in a restricted escrow account as a storm
damage reserve for future storms, used $1.2 billion to repay its unsecured term
loan due June 2023 , and used $435 million to redeem a portion of its 0.62%
Series mortgage bonds due November 2023 .
As discussed in Note 10 to the financial statements herein, the securitization
resulted in recognition of a reduction of income tax expense of approximately
$290 million by Entergy Louisiana. Entergy's recognition of reduced income tax
expense was partially offset by other tax charges resulting in a net reduction
of income tax expense of $283 million . In recognition of obligations related to
an LPSC ancillary order issued as part of the securitization regulatory
proceeding, Entergy Louisiana recorded a $224 million ($165 million net-of-tax)
regulatory charge and a corresponding regulatory liability to reflect its
obligation to share the benefits of the securitization with customers.
As discussed in Note 12 to the financial statements herein, Entergy Louisiana
consolidates the storm trust as a variable interest entity and the LURC's 1%
beneficial interest is shown as noncontrolling interest in the financial
statements. In second quarter 2022, Entergy Louisiana recorded a charge of $31.6
million in other income to reflect the LURC's beneficial interest in the trust.
In April 2022 , Entergy Louisiana filed an application with the LPSC relating to
Hurricane Ida restoration costs. Total restoration costs for the repair and/or
replacement of Entergy Louisiana's electric facilities damaged by Hurricane Ida
currently are estimated to be approximately $2.54 billion , including
approximately $1.96 billion in capital costs and approximately $586 million in
non-capital costs. Including carrying costs of $57 million through December
2022 , Entergy Louisiana is seeking an LPSC determination that $2.60 billion was
prudently incurred and, therefore, is eligible for recovery from customers. As
part of this filing, Entergy Louisiana also is seeking an LPSC determination
that an additional $32 million in costs associated with the restoration of
Entergy Louisiana's electric facilities damaged by Hurricane Laura, Hurricane
Delta , and Hurricane Zeta as well as Winter Storm Uri was prudently incurred.
This amount is exclusive of the requested $3 million in carrying costs through
December 2022 . In total, Entergy Louisiana is requesting an LPSC determination
that $2.64 billion was prudently incurred and, therefore, is eligible for
recovery from customers. As discussed above, in March 2022 the LPSC approved
financing of a $1 billion storm escrow account from which funds were withdrawn
to finance costs associated with Hurricane Ida restoration. In June 2022 ,
Entergy Louisiana supplemented the application with a request regarding the
financing and recovery of the recoverable storm restoration costs. Specifically,
Entergy Louisiana requested approval to securitize its restoration costs
pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the
Louisiana Legislature's Regular Session of 2021. In October 2022 the LPSC staff
recommended a finding that the requested storm restoration costs of $2.64
billion , including associated carrying costs of $59.1 million , were prudently
incurred and are eligible for recovery from customers. The LPSC staff further
recommended approval of Entergy Louisiana's plans to securitize these costs, net
of the $1 billion in funds withdrawn from the storm escrow account described
above. A procedural schedule has been established with a hearing in December
2022 .
18--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Hurricane Ida (
As discussed in the Form 10-K, inAugust 2021 , Hurricane Ida caused significant damage toEntergy New Orleans's service area, including Entergy's electrical grid. The storm resulted in widespread power outages, including the loss of 100% ofEntergy New Orleans's load and damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. InSeptember 2021 ,Entergy New Orleans withdrew$39 million from its funded storm reserves. InJune 2022 ,Entergy New Orleans filed an application with theCity Council requesting approval and certification that storm restoration costs associated with Hurricane Ida of approximately$170 million , which included$11 million in estimated costs, were reasonable, necessary, and prudently incurred to enableEntergy New Orleans to restore electric service to its customers and to repairEntergy New Orleans's electric utility infrastructure. In addition, estimated carrying costs throughDecember 2022 related to Hurricane Ida restoration costs were$9 million . Also,Entergy New Orleans is requesting approval that the$39 million withdrawal from its funded storm reserve inSeptember 2021 and$7 million in excess storm reserve escrow withdrawals related to Hurricane Zeta and prior miscellaneous storms are properly applied to Hurricane Ida storm restoration costs, the application of which reduces the amount to be recovered fromEntergy New Orleans customers by$46 million . Additionally, as discussed in the Form 10-K, inFebruary 2022 ,Entergy New Orleans filed with theCity Council a securitization application requesting that theCity Council reviewEntergy New Orleans's storm reserve and increase the storm reserve funding level to$150 million , to be funded through securitization. InAugust 2022 theCity Council's advisors recommended that theCity Council authorize a single securitization bond issuance to fundEntergy New Orleans's storm recovery reserves to an amount sufficient to: (1) allow recovery of all ofEntergy New Orleans's unrecovered storm recovery costs following Hurricane Ida, subject toCity Council review and certification; (2) provide initial funding of storm recovery reserves for future storms to a level of$75 million ; and (3) fund the storm recovery bonds' upfront financing costs. InSeptember 2022 ,Entergy New Orleans and theCity Council's advisors entered into an agreement in principle, which was approved by theCity Council along with a financing order inOctober 2022 , authorizingEntergy New Orleans to proceed with a single securitization bond issuance of$206 million , with$125 million interim recovery, subject toCity Council review and certification, to be allocated to unrecovered Hurricane Ida storm recovery costs;$75 million to provide for a storm recovery reserve for future storms; and the remainder to fund the recovery of storm recovery bonds' upfront financing costs. InNovember 2022 theCity Council adopted a procedural schedule regarding the certification of the Hurricane Ida storm restoration costs in which the hearing officer shall certify the record forCity Council consideration no later thanAugust 2023 .
Hurricane Laura,
As discussed in the Form 10-K, inAugust 2020 andOctober 2020 , Hurricane Laura andHurricane Delta caused extensive damage toEntergy Texas's service area. InFebruary 2021 , Winter Storm Uri also caused damage toEntergy 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. InJuly 2021 ,Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization inDecember 2021 . InNovember 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent withEntergy Texas's application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. InJanuary 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022,Entergy Texas reclassified$153 million from utility plant to other regulatory assets.
In
19
--------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
bonds. Entergy Texas began cost recovery through the system restoration charge
effective with the first billing cycle of May 2022 and the system restoration
charge is expected to remain in place up to 15 years. See Note 4 to the
financial statements herein for a discussion of the April 2022 issuance of the
securitization bonds.
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 2022 through 2024. Following are updates to that discussion. Entergy is developing its capital investment plan for 2023 through 2025 and currently anticipates that the Utility will make approximately$15.5 billion in capital investments during that period. The preliminary Utility estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy's portfolio, including Walnut Bend Solar, West Memphis Solar, Driver Solar,Orange County Advanced Power Station , and St. Jacques Louisiana Solar; investments in Entergy's nuclear fleet; transmission spending to drive reliability and resilience while also supporting renewables expansion; distribution and Utility support spending to improve reliability, resilience, and customer experience through projects focused on asset renewals and enhancements and grid stability; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital. While Entergy is still assessing the effect on its planned solar projects, the investigation by theU.S. Department of Commerce into potential circumvention of duties and tariffs may result in increased duties or tariffs on imported solar panels and has exacerbated previously existing supply chain disruptions, which have negatively affected the timing and cost of completion of these projects.
Walnut Bend Solar
As discussed in the Form 10-K, the APSC directedEntergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. InJanuary 2022 ,Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing was expected to occur in 2022. The counter-party notifiedEntergy Arkansas that it was terminating the project, though it was willing to consider an alternative for the site.Entergy Arkansas disputed the right of termination. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024.
West Memphis Solar
As discussed in the Form 10-K, inOctober 2021 the APSC directedEntergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. InApril 2022 ,Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in 2023. The counter-party notifiedEntergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, including with respect to updates arising as a result of the Inflation Reduction Act of 2022, and the updates would require additional APSC approval. At this time the project is expected to achieve commercial operation in 2024. 20 --------------------------------------------------------------------------------
Table of Contents
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Driver Solar
In April 2022 , Entergy Arkansas filed a petition with the APSC seeking a finding
that the purchase of the 250 MW Driver Solar facility is in the public interest
and requested cost recovery through the formula rate plan rider. The APSC
established a procedural schedule with a hearing scheduled in June 2022 , but the
parties later agreed to waive the hearing and submit the matter to the APSC for
a decision consistent with the filed record. In August 2022 the APSC granted
Entergy Arkansas's petition and approved the acquisition of Driver Solar and
cost recovery through the formula rate plan rider. In addition, the APSC
directed Entergy Arkansas to inform the APSC as to the status of a tax equity
partnership once construction is commenced. The parties are evaluating the
effects of certain matters related to the Inflation Reduction Act of 2022,
including with respect to the viability of a tax equity partnership. The
facility is expected to be in service by the end of 2024.
© Edgar Online, source
