Entergy Annual Report 2018

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One) XANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2018 OR TRANSITION REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ CommissionFile NumberRegistrant, State of Incorporation or Organization,Address of Principal Executive Offices, TelephoneNumber, and IRS Employer Identification No. CommissionFile NumberRegistrant, State of Incorporation or Organization,Address of Principal Executive Offices, TelephoneNumber, and IRS Employer Identification No.1-11299ENTERGY CORPORATION(a Delaware corporation)639 Loyola AvenueNew Orleans, Louisiana 70113Telephone (504) 576-400072-1229752 1-35747ENTERGY NEW ORLEANS, LLC(a Texas limited liability company)1600 Perdido StreetNew Orleans, Louisiana 70112Telephone (504) 670-370082-2212934 1-10764ENTERGY ARKANSAS, LLC(a Texas limited liability company)425 West Capitol AvenueLittle Rock, Arkansas 72201Telephone (501) 377-400083-1918668 1-34360ENTERGY TEXAS, INC.(a Texas corporation)10055 Grogans Mill RoadThe Woodlands, Texas 77380Telephone (409) 981-200061-1435798 1-32718ENTERGY LOUISIANA, LLC(a Texas limited liability company)4809 Jefferson HighwayJefferson, Louisiana 70121Telephone (504) 576-400047-4469646 1-09067SYSTEM ENERGY RESOURCES, INC.(an Arkansas corporation)1340 Echelon ParkwayJackson, Mississippi 39213Telephone (601) 368-500072-0752777 1-31508ENTERGY MISSISSIPPI, LLC(a Texas limited liability company)308 East Pearl StreetJackson, Mississippi 39201Telephone (601) 368-500083-1950019 Table of ContentsTable of ContentsSecurities registered pursuant to Section 12(b) of the Act:RegistrantTitle of ClassName of Each Exchangeon Which Registered Entergy CorporationCommon Stock, $0.01 Par Value – 189,580,512 sharesoutstanding at January 31, 2019New York Stock Exchange, Inc.Chicago Stock Exchange, Inc. Entergy Arkansas, LLCMortgage Bonds, 4.90% Series due December 2052New York Stock Exchange, Inc. Mortgage Bonds, 4.75% Series due June 2063New York Stock Exchange, Inc. Mortgage Bonds, 4.875% Series due September 2066New York Stock Exchange, Inc. Entergy Louisiana, LLCMortgage Bonds, 5.25% Series due July 2052New York Stock Exchange, Inc. Mortgage Bonds, 4.70% Series due June 2063New York Stock Exchange, Inc. Mortgage Bonds, 4.875% Series due September 2066New York Stock Exchange, Inc. Entergy Mississippi, LLCMortgage Bonds, 4.90% Series due October 2066New York Stock Exchange, Inc. Entergy New Orleans, LLCMortgage Bonds, 5.0% Series due December 2052New York Stock Exchange, Inc. Mortgage Bonds, 5.50% Series due April 2066New York Stock Exchange, Inc. Entergy Texas, Inc.Mortgage Bonds, 5.625% Series due June 2064New York Stock Exchange, Inc.Securities registered pursuant to Section 12(g) of the Act:RegistrantTitle of Class Entergy Texas, Inc.Common Stock, no par valueTable of ContentsIndicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act. Yes No Entergy Corporationü Entergy Arkansas, LLC üEntergy Louisiana, LLCü Entergy Mississippi, LLC üEntergy New Orleans, LLC üEntergy Texas, Inc. üSystem Energy Resources, Inc. üIndicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Entergy Corporation üEntergy Arkansas, LLC üEntergy Louisiana, LLC üEntergy Mississippi, LLC üEntergy New Orleans, LLC üEntergy Texas, Inc. üSystem Energy Resources, Inc. üIndicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports),and (2) have been subject to such filing requirements for the past 90 days. Yes þ No oIndicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submittedpursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit such files). Yes þ No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not becontained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K. [ ]Table of ContentsIndicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smallerreporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smallerreporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934. Largeacceleratedfiler Acceleratedfiler Non-acceleratedfiler Smallerreportingcompany EmerginggrowthcompanyEntergy Corporationü Entergy Arkansas, LLC ü Entergy Louisiana, LLC ü Entergy Mississippi, LLC ü Entergy New Orleans, LLC ü Entergy Texas, Inc. ü System Energy Resources, Inc. ü If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act.) Yes o No þSystem Energy Resources, Inc. meets the requirements set forth in General Instruction I(1) of Form 10-K and is therefore filing thisForm 10-K with reduced disclosure as allowed in General Instruction I(2). System Energy Resources, Inc. is reducing its disclosure bynot including Part III, Items 10 through 13 in its Form 10-K.The aggregate market value of Entergy Corporation Common Stock, $0.01 Par Value, held by non-affiliates as of the end of the secondquarter of 2018 was $14.6 billion based on the reported last sale price of $80.79 per share for such stock on the New York StockExchange on June 29, 2018. Entergy Corporation is the sole holder of the common stock of Entergy Texas, Inc. and System EnergyResources, Inc. Entergy Corporation is the direct and indirect holder of the common membership interests of Entergy Utility HoldingCompany, LLC, which is the sole holder of the common membership interests of Entergy Arkansas, LLC, Entergy Louisiana, LLC,Entergy Mississippi, LLC, and Entergy New Orleans, LLC.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders, to be heldMay 3, 2019, are incorporated by reference into Part III hereof.Table of Contents(Page left blank intentionally)Table of ContentsTABLE OF CONTENTS SEC Form 10-KReference NumberPageNumber Forward-looking information ivDefinitions viiEntergy Corporation and Subsidiaries Management’s Financial Discussion and AnalysisPart II. Item 7.1Report of Management 43Selected Financial Data - Five-Year ComparisonPart II. Item 6.44Report of Independent Registered Public Accounting Firm 45Consolidated Statements of Operations For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.46Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31,2018, 2017, and 2016Part II. Item 8.47Consolidated Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.48Consolidated Balance Sheets, December 31, 2018 and 2017Part II. Item 8.50Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 2017,and 2016Part II. Item 8.52Notes to Financial Statements Note 1. Summary of Significant Accounting PoliciesPart II. Item 8.53Note 2. Rate and Regulatory MattersPart II. Item 8.65Note 3. Income TaxesPart II. Item 8.108Note 4. Revolving Credit Facilities, Lines of Credit, and Short-term BorrowingsPart II. Item 8.123Note 5. Long-term DebtPart II. Item 8.127Note 6. Preferred EquityPart II. Item 8.136Note 7. Common EquityPart II. Item 8.138Note 8. Commitments and ContingenciesPart II. Item 8.143Note 9. Asset Retirement ObligationsPart II. Item 8.152Note 10. LeasesPart II. Item 8.158Note 11. Retirement, Other Postretirement Benefits, and Defined Contribution PlansPart II. Item 8.161Note 12. Stock-based CompensationPart II. Item 8.190Note 13. Business Segment InformationPart II. Item 8.194Note 14. Acquisitions, Dispositions, and Impairment of Long-lived AssetsPart II. Item 8.198Note 15. Risk Management and Fair ValuesPart II. Item 8.203Note 16. Decommissioning Trust FundsPart II. Item 8.220Note 17. Variable Interest EntitiesPart II. Item 8.227Note 18. Transactions with AffiliatesPart II. Item 8.229Note 19. Revenue RecognitionPart II. Item 8.231Note 20. Quarterly Financial DataPart II. Item 8.234Entergy’s Business UtilityPart I. Item 1.238Entergy Wholesale CommoditiesPart I. Item 1.259Regulation of Entergy’s BusinessPart I. Item 1.263Litigation 278Employees 279Availability of SEC filings and other information on Entergy’s website 279Risk FactorsPart I. Item 1A.281Unresolved Staff CommentsPart I. Item 1B.NoneiTable of ContentsEntergy Arkansas, LLC and Subsidiaries Management’s Financial Discussion and AnalysisPart II. Item 7.305Report of Independent Registered Public Accounting Firm 324Consolidated Income Statements For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.325Consolidated Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.327Consolidated Balance Sheets, December 31, 2018 and 2017Part II. Item 8.328Consolidated Statements of Changes in Member’s Equity for the Years Ended December 31,2018, 2017, and 2016Part II. Item 8.330Selected Financial Data - Five-Year ComparisonPart II. Item 6.331Entergy Louisiana, LLC and Subsidiaries Management’s Financial Discussion and AnalysisPart II. Item 7.332Report of Independent Registered Public Accounting Firm 352Consolidated Income Statements For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.353Consolidated Statements of Comprehensive Income For the Years Ended December 31, 2018,2017, and 2016Part II. Item 8.354Consolidated Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.355Consolidated Balance Sheets, December 31, 2018 and 2017Part II. Item 8.356Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 2017,and 2016Part II. Item 8.358Selected Financial Data - Five-Year ComparisonPart II. Item 6.359Entergy Mississippi, LLC Management’s Financial Discussion and AnalysisPart II. Item 7.360Report of Independent Registered Public Accounting Firm 375Income Statements For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.376Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.377Balance Sheets, December 31, 2018 and 2017Part II. Item 8.378Statements of Changes in Member’s Equity for the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.380Selected Financial Data - Five-Year ComparisonPart II. Item 6.381Entergy New Orleans, LLC and Subsidiaries Management’s Financial Discussion and AnalysisPart II. Item 7.382Report of Independent Registered Public Accounting Firm 397Consolidated Income Statements For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.398Consolidated Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.399Consolidated Balance Sheets, December 31, 2018 and 2017Part II. Item 8.400Consolidated Statements of Changes in Member’s Equity for the Years Ended December 31,2018, 2017, and 2016Part II. Item 8.402Selected Financial Data - Five-Year ComparisonPart II. Item 6.403Entergy Texas, Inc. and Subsidiaries Management’s Financial Discussion and AnalysisPart II. Item 7.404Report of Independent Registered Public Accounting Firm 418Consolidated Income Statements For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.419Consolidated Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.421Consolidated Balance Sheets, December 31, 2018 and 2017Part II. Item 8.422iiTable of ContentsConsolidated Statements of Changes in Common Equity for the Years Ended December 31,2018, 2017, and 2016Part II. Item 8.424Selected Financial Data - Five-Year ComparisonPart II. Item 6.425System Energy Resources, Inc. Management’s Financial Discussion and AnalysisPart II. Item 7.426Report of Independent Registered Public Accounting Firm 437Income Statements For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.438Statements of Cash Flows For the Years Ended December 31, 2018, 2017, and 2016Part II. Item 8.439Balance Sheets, December 31, 2018 and 2017Part II. Item 8.440Statements of Changes in Common Equity for the Years Ended December 31, 2018, 2017, and2016Part II. Item 8.442Selected Financial Data - Five-Year ComparisonPart II. Item 6.443PropertiesPart I. Item 2.444Legal ProceedingsPart I. Item 3.444Mine Safety DisclosuresPart I. Item 4.444Executive Officers of Entergy CorporationPart I. and Part III.Item 10.444Market for Registrants’ Common Equity and Related Stockholder MattersPart II. Item 5.446Selected Financial DataPart II. Item 6.447Management’s Discussion and Analysis of Financial Condition and Results of OperationsPart II. Item 7.447Quantitative and Qualitative Disclosures About Market RiskPart II. Item 7A.447Financial Statements and Supplementary DataPart II. Item 8.447Changes in and Disagreements with Accountants on Accounting and Financial DisclosurePart II. Item 9.447Controls and ProceduresPart II. Item 9A.447Attestation Report of Registered Public Accounting FirmPart II. Item 9A.449Directors and Executive Officers of the RegistrantsPart III. Item 10.450Executive CompensationPart III. Item 11.456Security Ownership of Certain Beneficial Owners and ManagementPart III. Item 12.500Certain Relationships and Related Party Transactions and Director IndependencePart III. Item 13.504Principal Accountant Fees and ServicesPart III. Item 14.505Exhibits and Financial Statement SchedulesPart IV. Item 15.508Form 10-K SummaryPart IV. Item 16.508Exhibit Index 509Signatures 522Consents of Independent Registered Public Accounting Firm 529Report of Independent Registered Public Accounting Firm 530Index to Financial Statement Schedules S-1This combined Form 10-K is separately filed by Entergy Corporation and its six “Registrant Subsidiaries:” EntergyArkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., andSystem Energy Resources, Inc. Information contained herein relating to any individual company is filed by such company on itsown behalf. Each company makes representations only as to itself and makes no other representations whatsoever as to anyother company.The report should be read in its entirety as it pertains to each respective reporting company. No one section of the reportdeals with all aspects of the subject matter. Separate Item 6, 7, and 8 sections are provided for each reporting company, exceptfor the Notes to the financial statements. The Notes to the financial statements for all of the reporting companies arecombined. All Items other than 6, 7, and 8 are combined for the reporting companies.iiiTable of ContentsFORWARD-LOOKING INFORMATIONIn this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as aregistrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statementsare “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 thesestatements. Although each of these registrants believes that these forward-looking statements and the underlying assumptions arereasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current asof the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required bythe 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 todiffer materially from those expressed or implied in the forward-looking statements, including (a) those factors discussed orincorporated by reference in Item 1A. Risk Factors, (b) those factors discussed or incorporated by reference in Management’s FinancialDiscussion and Analysis, and (c) the following factors (in addition to others described elsewhere in this combined report and insubsequent securities filings):•resolution of pending and future rate cases, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;•long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potentialabsence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;•regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’participation in MISO, including the benefits of continued MISO participation, the effect of current or projected MISO marketrules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, andthe effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operatingcompanies;•changes in utility regulation, including with respect to retail and wholesale competition, the ability to recover net utility assetsand other potential stranded costs, and the application of more stringent transmission reliability requirements or market powercriteria by the FERC or the U.S. Department of Justice;•changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel,including with respect to the planned, potential, or actual shutdown of nuclear generating facilities owned or operated byEntergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclearpower plants and nuclear fuel;•resolution of pending or future applications, and related regulatory proceedings and litigation, for license modifications orother authorizations required of nuclear generating facilities and the effect of public and political opposition on theseapplications, regulatory proceedings, and litigation;•the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors atEntergy’s nuclear generating facilities;•increases in costs and capital expenditures that could result from changing regulatory requirements, emerging operating andindustry issues, and the commitment of substantial human and capital resources required for the safe and reliable operationand maintenance of Entergy’s nuclear generating facilities;•Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and otherenergy-related commodities;•prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit supportrequirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities,including the Entergy Wholesale Commodities nuclear plants, especially in light of the planned shutdown or sale of each ofthese nuclear plants;•the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meetcredit support requirements for fuel and power supply contracts;ivTable of ContentsFORWARD-LOOKING INFORMATION (Continued)•volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-relatedcommodities, and the effect of those changes on Entergy and its customers;•changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedgingand risk management transactions to governmental regulation;•changes in environmental laws and regulations, agency positions or associated litigation, including requirements for reducedemissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter and other regulated air emissions,heat and other regulated discharges to water, requirements for waste management and disposal and for the remediation ofcontaminated sites, wetlands protection and permitting, and changes in costs of compliance with environmental laws andregulations;•changes in laws and regulations, agency positions, or associated litigation related to protected species and associated criticalhabitat designations;•the effects of changes in federal, state, or local laws and regulations, and other governmental actions or policies, includingchanges in monetary, fiscal, tax, environmental, trade/tariff, or energy policies;•the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions ordecisions;•uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage anddisposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers relatedto such sites;•variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated withefforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated withrestoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, andinsurance;•effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land andwetland loss;•changes in the quality and availability of water supplies and the related regulation of water use and diversion;•Entergy’s ability to manage its capital projects and operation and maintenance costs;•Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;•the economic climate, and particularly economic conditions in Entergy’s Utility service area and the northern United Statesand events and circumstances that could influence economic conditions in those areas, including power prices, and the riskthat anticipated load growth may not materialize;•federal income tax reform, including the enactment of the Tax Cuts and Jobs Act, and its intended and unintendedconsequences on financial results and future cash flows;•the effects of Entergy’s strategies to reduce tax payments, especially in light of federal income tax reform;•changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access tocapital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments andacquisitions;•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 (i) Entergy’s ability to implement new or emerging technologies, (ii) the impact of changesrelating to new, developing, or alternative sources of generation such as distributed energy and energy storage, renewableenergy, energy efficiency, demand side management and other measures that reduce load, and (iii) competition from othercompanies offering products and services to Entergy’s customers based on new or emerging technologies or alternativesources of generation;•the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches,natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or acatastrophic event such as a nuclear accident or a natural gas pipeline explosion;•Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills;•changes in accounting standards and corporate governance;•declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs forEntergy’s defined benefit pension and other postretirement benefit plans;vTable of ContentsFORWARD-LOOKING INFORMATION (Concluded)•future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;•changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommissionEntergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;•the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by mid-2022,including the implementation of the planned shutdowns of Pilgrim, Indian Point 2, Indian Point 3, and Palisades;•the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties tosatisfy their financial and performance commitments;•factors that could lead to impairment of long-lived assets; and•the ability to successfully complete strategic transactions Entergy may undertake, including mergers, acquisitions, divestitures,or restructurings, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of thebusiness following any such strategic transaction.viTable of ContentsDEFINITIONSCertain abbreviations or acronyms used in the text and notes are defined below:Abbreviation or AcronymTerm AFUDCAllowance for Funds Used During ConstructionALJAdministrative Law JudgeANO 1 and 2Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy ArkansasAPSCArkansas Public Service CommissionASUAccounting Standards Update issued by the FASBBoardBoard of Directors of Entergy CorporationCajunCajun Electric Power Cooperative, Inc.capacity factorActual plant output divided by maximum potential plant output for the periodCity CouncilCouncil of the City of New Orleans, LouisianaD.C. CircuitU.S. Court of Appeals for the District of Columbia CircuitDOEUnited States Department of EnergyEntergyEntergy Corporation and its direct and indirect subsidiariesEntergy CorporationEntergy Corporation, a Delaware corporationEntergy Gulf States, Inc.Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana thatincluded the assets and business operations of both Entergy Gulf States Louisiana and EntergyTexasEntergy Gulf States LouisianaEntergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as partof the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to EntergyGulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisianajurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1,2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.Entergy LouisianaEntergy Louisiana, LLC, a Texas limited liability company formally created as part of thecombination of Entergy Gulf States Louisiana and the company formerly known as EntergyLouisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor toOld Entergy Louisiana for financial reporting purposes.Entergy TexasEntergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation ofEntergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business ofEntergy Gulf States, Inc., as the context requires.Entergy Wholesale CommoditiesEntergy’s non-utility business segment primarily comprised of the ownership, operation, anddecommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants,and the sale of the electric power produced by its operating power plants to wholesale customersEPAUnited States Environmental Protection AgencyERCOTElectric Reliability Council of TexasFASBFinancial Accounting Standards BoardFERCFederal Energy Regulatory CommissionFitzPatrickJames A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary inthe Entergy Wholesale Commodities business segment, which was sold in March 2017Grand GulfUnit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System EnergyGWhGigawatt-hour(s), which equals one million kilowatt-hoursIndependenceIndependence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by EntergyMississippi, and 7% by Entergy Power, LLCviiTable of ContentsDEFINITIONS (Continued)Abbreviation or AcronymTerm Indian Point 2Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the EntergyWholesale Commodities business segmentIndian Point 3Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the EntergyWholesale Commodities business segmentIRSInternal Revenue ServiceISOIndependent System OperatorkVKilovoltkWKilowatt, which equals one thousand wattskWhKilowatt-hour(s)LDEQLouisiana Department of Environmental QualityLPSCLouisiana Public Service CommissionMcf1,000 cubic feet of gasMISOMidcontinent Independent System Operator, Inc., a regional transmission organizationMMBtuOne million British Thermal UnitsMPSCMississippi Public Service CommissionMWMegawatt(s), which equals one thousand kilowattsMWhMegawatt-hour(s)Nelson Unit 6Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned byEntergy Louisiana (57.5%) and Entergy Texas (42.5%) and 10.9% of which is owned by anEntergy subsidiary in the Entergy Wholesale Commodities business segmentNet debt to net capital ratioGross debt less cash and cash equivalents divided by total capitalization less cash and cashequivalentsNet MW in operationInstalled capacity owned and operatedNRCNuclear Regulatory CommissionNYPANew York Power AuthorityPalisadesPalisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy WholesaleCommodities business segmentParent & OtherThe portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments,primarily consisting of the activities of the parent company, Entergy CorporationPilgrimPilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy WholesaleCommodities business segmentPPAPurchased power agreement or power purchase agreementPRPPotentially responsible party (a person or entity that may be responsible for remediation ofenvironmental contamination)PUCTPublic Utility Commission of TexasRegistrant SubsidiariesEntergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans,LLC, Entergy Texas, Inc., and System Energy Resources, Inc.River BendRiver Bend Station (nuclear), owned by Entergy LouisianaRTORegional transmission organizationSECSecurities and Exchange CommissionviiiTable of ContentsDEFINITIONS (Concluded)Abbreviation or AcronymTerm System AgreementAgreement, effective January 1, 1983, as modified, among the Utility operating companies relatingto the sharing of generating capacity and other power resources. The agreement terminatedeffective August 2016.System EnergySystem Energy Resources, Inc.TWhTerawatt-hour(s), which equals one billion kilowatt-hoursUnit Power Sales AgreementAgreement, dated as of June 10, 1982, as amended and approved by the FERC, among EntergyArkansas, 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 GulfUtilityEntergy’s business segment that generates, transmits, distributes, and sells electric power, with asmall amount of natural gas distributionUtility operating companiesEntergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and EntergyTexasVermont YankeeVermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the EntergyWholesale Commodities business segment, which ceased power production in December 2014and was sold in January 2019Waterford 3Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisianaweather-adjusted usageElectric usage excluding the effects of deviations from normal weatherWhite BluffWhite Bluff Steam Electric Generating Station, 57% owned by Entergy ArkansasixTable of Contents(Page left blank intentionally)xTable of ContentsENTERGY CORPORATION AND SUBSIDIARIESMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISEntergy 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 ofArkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gasdistribution business.•The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclearpower plants located in the northern United States and the sale of the electric power produced by its operating plants towholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and ownsinterests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “EntergyWholesale Commodities Exit from the Merchant Power Business” below for discussion of the operation and plannedshutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants.Following are the percentages of Entergy’s consolidated revenues generated by its operating segments and the percentage oftotal assets held by them. Net income or loss generated by the operating segments is discussed in the sections that follow. % of Revenue % of Total AssetsSegment201820172016 201820172016Utility878583 939289Entergy Wholesale Commodities131517 111215Parent & Other——— (4)(4)(4)See Note 13 to the financial statements for further financial information regarding Entergy’s business segments. 1Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisResults of Operations2018 Compared to 2017 Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing2018 to 2017 showing how much the line item increased or (decreased) in comparison to the prior period. Utility EntergyWholesaleCommodities Parent & Other(a) Entergy (In Thousands)2017 Consolidated Net Income (Loss)$773,148 ($172,335) ($175,460) $425,353 Net revenue (operating revenue less fuel expense,purchased power, and other regulatory charges/credits)(692,557) (192,471) (4) (885,032)Other operation and maintenance85,239 (55,736) 10,200 39,703Asset write-offs, impairments, and related charges— (6,051) — (6,051)Taxes other than income taxes25,578 (1,446) 264 24,396Depreciation and amortization23,141 (43,273) (404) (20,536)Other income22,024 (221,550) (6,621) (206,147)Interest expense5,618 9,980 29,407 45,005Other expenses(4,858) (26,644) — (31,502)Income taxes(1,527,164) (122,545) 70,313 (1,579,396)2018 Consolidated Net Income (Loss)$1,495,061 ($340,641) ($291,865) $862,555(a)Parent & Other includes eliminations, which are primarily intersegment activity.Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION ANDSUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect tooperating statistics.Results of operations for 2018 include: 1) $532 million ($421 million net-of-tax) of impairment charges due to costs beingcharged directly to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce thesize of the Entergy Wholesale Commodities’ merchant fleet; 2) a $170 million reduction of income tax expense and a regulatoryliability of $40 million ($30 million net-of-tax) as a result of customer credits recognized by Utility, as a result of internal restructuring;3) a $107 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a restructuring of theinvestment holdings in one of its nuclear plant decommissioning trust funds; 4) a $52 million income tax benefit, recognized byEntergy Louisiana, as a result of the settlement of the 2012-2013 IRS audit, associated with the Hurricane Katrina and Hurricane Ritacontingent sharing obligation associated with the Louisiana Act 55 financing; and 5) a $23 million reduction of income tax expense,recognized by Entergy Wholesale Commodities, as a result of a state income tax audit. See “MANAGEMENT’S FINANCIALDISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for adiscussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 to thefinancial statements for further discussion of the impairment and related charges. See Notes 2 and 3 to the financial statements forfurther discussion of the internal restructuring and customer credits. See Note 3 to the financial statements for further discussion of theIRS audit settlement, the state income tax audit, and restructuring of the decommissioning trust fund investment holdings.2Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisResults of operations for 2017 include: 1) $538 million ($350 million net-of-tax) of impairment charges due to costs beingcharged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assetsdue to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of theEntergy Wholesale Commodities’ merchant fleet; 2) a reduction in net income of $181 million, including a $34 million net-of-taxreduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in net income of $52million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemakingprocess due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax ratefrom 35% to 21%; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a changein the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See “MANAGEMENT’SFINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” belowfor a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 tothe financial statements for further discussion of the impairment and related charges. See Note 3 to the financial statements for furtherdiscussion of the effects of the Tax Cuts and Jobs Act and the change in the tax classification.Net RevenueUtilityFollowing is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue$6,318Return of unprotected excess accumulated deferred incometaxes to customers(770)Grand Gulf recovery(74)Regulatory credit in 2017 resulting from reduction of thefederal corporate income tax rate(56)Formula rate plan regulatory provisions(44)Entergy Arkansas internal restructuring customer credits(40)Retail electric price4Net wholesale revenue57Volume/weather210Other202018 net revenue$5,625The return of unprotected excess accumulated deferred income taxes to customers resulted from activity in 2018 at the Utilityoperating companies and System Energy in response to the enactment of the Tax Cuts and Jobs Act. There is no effect on net income asthe reductions in net revenue were offset by reductions in income tax expense. See Note 2 to the financial statements for furtherdiscussion of regulatory activity regarding the Tax Cuts and Jobs Act.The Grand Gulf recovery variance is primarily due to a reduction in depreciation expense recognized in third quarter 2018 uponFERC approval of the settlement in the Unit Power Sales Agreement proceeding, a reduction in income tax expense associated with thereduction in the federal income tax rate in 2018, and a reduction in recoverable decommissioning costs primarily attributable to changesin decommissioning trust fund activity. The reductions were partially offset by increases in other capacity costs. See Note 2 to thefinancial statements for a discussion of the Unit3Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisPower Sales Agreement settlement. See Note 3 to the financial statements for a discussion of the effects of the Tax Cut and Jobs Act.The regulatory credit in 2017 resulting from reduction of the federal corporate income tax rate variance is due to the reductionof the Vidalia purchased power agreement regulatory liability by $30.5 million and the reduction in 2017 of the Louisiana Act 55financing savings obligation regulatory liabilities by $25 million, in each case, as a result of the enactment of the Tax Cuts and JobsAct, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and JobsAct are discussed further in Note 3 to the financial statements. See Note 8 to the financial statements for further discussion of theVidalia purchased power agreement. The formula rate plan regulatory provisions variance is due to provisions, recorded in the fourth quarter 2018 at EntergyArkansas and Entergy Mississippi, for estimated reductions in future revenue expected to be reflected in upcoming formula rate planfilings based on actual results for 2018. See Note 2 to the financial statements for a discussion of the regulatory provisions related tothese formula rate plan filings.The Entergy Arkansas internal restructuring customer credits variance is due to a regulatory liability recorded by Entergy inDecember 2018 as a result of the internal restructuring of Entergy Arkansas. Pursuant to a settlement agreement approved by the APSC,Entergy Arkansas will credit retail customers $39.6 million over six years, beginning in 2019. See Note 2 to the financial statements forfurther discussion of the internal restructuring and customer credits.The retail electric price variance is primarily due to:•an increase in formula rate plan rates effective with the first billing cycle of January 2018 at Entergy Arkansas, as approved bythe APSC;•an increase in energy efficiency revenues primarily due to an increase in the Entergy Arkansas energy efficiency rider and anew Entergy Louisiana energy efficiency rider effective January 2018;•a base rate increase effective October 2018 at Entergy Texas, as approved by the PUCT;•an increase in formula rate plan revenues at Entergy Louisiana, implemented with the first billing cycle of September 2018; and•higher storm damage rider revenues at Entergy Mississippi.The increases were substantially offset by regulatory charges recorded in 2018 to reflect the effects of regulatory agreements to returnthe benefits of the lower income tax rate in 2018 to Louisiana, New Orleans, and Texas customers.See Note 2 to the financial statements for further discussion of the regulatory proceedings discussed above.The net wholesale revenue variance is primarily because of the regulatory lag experienced by certain Utility operatingcompanies as a result of the change in the federal income tax rate in 2018 and its effect on wholesale rates. See Note 2 to the financialstatements for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.The volume/weather variance is primarily due to an increase of 4,804 GWh, or 4%, in billed electricity usage, including theeffect of more favorable weather on residential and commercial sales and an increase in industrial usage. The increase in industrialusage is primarily driven by small industrials sales, as well as continued growth from new customers and expansion projects, partiallyoffset by decreased demand from existing customers.4Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisEntergy Wholesale CommoditiesFollowing is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue$1,469FitzPatrick reimbursement agreement(98)Nuclear realized price changes(42)Nuclear volume(23)Other(29)2018 net revenue$1,277As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $192 million in 2018 primarily dueto:•a decrease resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy in the firstquarter 2017 for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick thatotherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon underthe reimbursement agreement were offset by other operation and maintenance expenses and taxes other than income taxes andhad no effect on net income. See Note 14 to the financial statements for discussion of the sale of FitzPatrick and thereimbursement agreement with Exelon;•lower realized wholesale energy prices, partially offset by higher capacity prices; and•lower volume in the Entergy Wholesale Commodities nuclear fleet primarily due to more non-refueling outage days in 2018compared to 2017.Following are key performance measures for Entergy Wholesale Commodities for 2018 and 2017. 2018 2017Owned capacity (MW)3,962 3,962GWh billed29,875 30,501 Entergy Wholesale Commodities Nuclear Fleet Capacity factor84% 83%GWh billed27,617 28,178Average energy price ($/MWh)$37.34 $41.60Average capacity price ($/kW-month)$6.80 $6.16Refueling outage days: FitzPatrick— 42Indian Point 233 —Indian Point 3— 66Pilgrim— 43Palisades61 275Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisOther Income Statement ItemsUtilityOther operation and maintenance expenses increased from $2,416 million for 2017 to $2,501 million for 2018 primarily due to:•an increase of $33 million in energy efficiency expenses due to the timing of recovery from customers;•an increase of $23 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in2018 as compared to the prior year and higher long-term service agreement costs;•an increase of $15 million in transmission expenses primarily due to higher labor and contract costs to support industrialcustomers;•an increase of $14 million in information technology costs primarily due to higher software maintenance costs and higher laborcosts, including contract labor;•an increase of $14 million in loss provisions, including an increase in asbestos loss provisions;•an increase of $6 million in storm damage provisions, primarily at Entergy Mississippi. See Note 2 to the financial statements fordiscussion of storm cost recovery;•a $6 million write-off of capitalized skylining tree hazard costs as a result of the settlement of the Entergy Texas rate caseproceeding. See Note 2 to the financial statements for discussion of the rate case proceeding; and•a $6 million loss in 2018 on the sale of fuel oil inventory per an agreement approved by the MPSC in June 2018 resulting fromthe stipulation related to the effects of the Tax Cuts and Jobs Act. There is no effect on net income as the loss on the sale of fueloil inventory is offset by a reduction in income tax expense. See Note 2 to the financial statements for discussion of theagreement.The increase was partially offset by higher nuclear insurance refunds of $15 million and a $15 million gain on disposal from the sale ofEntergy Louisiana’s Willow Glen Power Station. See Note 14 to the financial statements for discussion of the sale of Willow Glen.Taxes other than income taxes increased primarily due to increases in ad valorem taxes and payroll taxes. Ad valorem taxesincreased primarily due to higher assessments and lower capitalized taxes.Depreciation and amortization expenses increased primarily due to additions to plant in service, partially offset by updateddepreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreementas part of a settlement approved by the FERC in August 2018. See Note 2 to the financial statements for further discussion of the UnitPower Sales Agreement.Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higherconstruction work in progress in 2018, which included the St. Charles Power Station and Lake Charles Power Station projects. Theincrease was partially offset by changes in decommissioning trust fund activity, including portfolio rebalancing of certain of thedecommissioning trust funds in 2018 and 2017. Entergy Wholesale CommoditiesOther operation and maintenance expenses decreased from $864 million for 2017 to $808 million for 2018 primarily due to theabsence of other operation and maintenance expenses from the FitzPatrick plant. The decrease was partially offset by an increase of $26million in severance and retention costs as a result of management’s strategy to reduce the size of the Entergy Wholesale Commodities’merchant fleet and a gain on the sale of assets resulting from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergysold the FitzPatrick plant for approximately $110 million, which included a $10 million non-refundable signing fee paid in August2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16million on the sale. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale6Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisCommodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of theEntergy Wholesale Commodities’ merchant fleet. See Note 14 to the financial statements for discussion of the sale of FitzPatrick.The asset write-offs, impairments, and related charges variance is primarily due to impairment charges of $532 million ($421million net-of-tax) in 2018 compared to impairment charges of $538 million ($350 million net-of-tax) in 2017. The impairment chargesare primarily related to nuclear fuel spending, nuclear refueling outage spending, expenditures for capital assets, and asset retirementobligation revisions. These costs were charged to expense as incurred as a result of the impaired fair value of the Entergy WholesaleCommodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated withmanagement’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’SFINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” belowfor a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 9 to thefinancial statements for a discussion of asset retirement obligations. See Note 14 to the financial statements for a discussion ofimpairment of long-lived assets.Depreciation and amortization expenses decreased primarily due to the decision in the third quarter 2017 to continue operatingPalisades until May 31, 2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy WholesaleCommodities Exit from the Merchant Power Business” below for a discussion of the planned shutdown of Palisades.Other income decreased primarily due to losses on decommissioning trust fund investments, including unrealized losses onequity investments, which, prior to 2018, were recorded to other comprehensive income. See Note 16 to the financial statements fordiscussion of the implementation of ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement ofFinancial Assets and Financial Liabilities effective January 1, 2018.Other expenses decreased primarily due to a reduction in deferred refueling outage amortization costs related to the impairmentsof the Indian Point 2, Palisades, and Indian Point 3 plants and related assets and the absence of decommissioning expense from theFitzPatrick plant after it was sold to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale ofFitzPatrick and impairments and related charges.Parent and OtherInterest expense increased primarily due to an increase in commercial paper outstanding, combined with higher variable interestrates on commercial paper in 2018. See Note 4 to the financial statements for discussion of Entergy’s commercial paper program.Income TaxesSee Note 3 to the financial statements for a reconciliation of the federal statutory rates of 21% for 2018 and 35% for 2017 and2016 to the effective income tax rates, and for additional discussion regarding income taxes.The effective income tax rate for 2018 was 595%. The difference in the effective income tax rate versus the statutory rate of21% for 2018 was primarily due to amortization of excess accumulated deferred income taxes, the tax effects of a restructuring withinthe Utility, and a restructuring of the investment holdings in one of the Entergy Wholesale Commodities’ nuclear plantdecommissioning trusts for which additional tax basis is now recoverable. See Notes 2 and 3 to the financial statements for a discussionof the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements for a discussion of therestructuring.The effective income tax rate for 2017 was 56.1%. The difference in the effective income tax rate versus the statutory rate of35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President7Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisTrump in December 2017, which changed the federal corporate income tax rate from 35% to 21% effective in 2018, partially offset bya change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants, which resulted in bothpermanent and temporary differences under the income tax accounting standards. See Note 3 to the financial statements for furtherdiscussion of the effects of the Tax Cuts and Jobs Act and the change in tax classification.2017 Compared to 2016 Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing2017 to 2016 showing how much the line item increased or (decreased) in comparison to the prior period. Utility EntergyWholesaleCommodities Parent & Other(a) Entergy (In Thousands)2016 Consolidated Net Income (Loss)$1,151,133 ($1,493,124) ($222,512) ($564,503) Net revenue (operating revenue less fuel expense,purchased power, and other regulatory charges/credits)138,617 (73,433) (16) 65,168Other operation and maintenance103,302 (26,954) 4,869 81,217Asset write-offs, impairments, and related charges— (2,297,265) — (2,297,265)Taxes other than income taxes38,897 (14,657) 814 25,054Depreciation and amortization49,491 (6,731) 31 42,791Other income59,930 108,128 1,962 170,020Interest expense(10,245) 856 5,362 (4,027)Other expenses24,859 12,874 — 37,733Income taxes370,228 1,045,783 (56,182) 1,359,8292017 Consolidated Net Income (Loss)$773,148 ($172,335) ($175,460) $425,353(a)Parent & Other includes eliminations, which are primarily intersegment activity.Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION ANDSUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect tooperating statistics.Results of operations for 2017 include: 1) $538 million ($350 million net-of-tax) of impairment charges due to costs beingcharged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assetsdue to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of theEntergy Wholesale Commodities’ merchant fleet; 2) a reduction in net income of $181 million, including a $34 million net-of-taxreduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in net income of $52million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemakingprocess due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax ratefrom 35% to 21%; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a changein the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See “MANAGEMENT’SFINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” belowfor a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 tothe financial statements for further discussion of the8Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisimpairment and related charges. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Actand the change in the tax classification.Results of operations for 2016 include: 1) $2,836 million ($1,829 million net-of-tax) of impairment and related chargesprimarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plantsand related assets to their fair values; 2) a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a resultof a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants,income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by EntergyLouisiana related to the treatment of the Vidalia purchased power agreement, and a $54 million net benefit recognized by EntergyLouisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costspursuant to Louisiana Act 55; and 3) a reduction in expenses of $100 million ($64 million net-of-tax) due to the effects of recording in2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 14 to thefinancial statements for further discussion of the impairment and related charges, see Note 3 to the financial statements for additionaldiscussion of the income tax items, and see Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.Net RevenueUtilityFollowing is an analysis of the change in net revenue comparing 2017 to 2016. Amount (In Millions) 2016 net revenue$6,179Retail electric price91Regulatory credit resulting from reduction of the federal corporate income tax rate56Grand Gulf recovery27Louisiana Act 55 financing savings obligation17Volume/weather(61)Other92017 net revenue$6,318The retail electric price variance is primarily due to:•the implementation of formula rate plan rates effective with the first billing cycle of January 2017 at Entergy Arkansas and anincrease in base rates effective February 24, 2016, each as approved by the APSC. A significant portion of the base rate increasewas related to the purchase of Power Block 2 of the Union Power Station in March 2016;•a provision recorded in 2016 related to the settlement of the Waterford 3 replacement steam generator prudence reviewproceeding;•the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase inthe transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT; and•an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.9Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisSee Note 2 to the financial statements for further discussion of the rate proceedings and the Waterford 3 replacement steam generatorprudence review proceeding. See Note 14 to the financial statements for discussion of the Union Power Station purchase.The regulatory credit resulting from reduction of the federal corporate income tax rate variance is due to the reduction of theVidalia purchased power agreement regulatory liability by $30.5 million and the reduction of the Louisiana Act 55 financing savingsobligation regulatory liabilities by $25 million as a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, whichlowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and Jobs Act are discussed further in Note3 to the financial statements.The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.The Louisiana Act 55 financing savings obligation variance results from a regulatory charge in 2016 for tax savings to beshared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement onthe treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financialstatements for additional discussion of the settlement and benefit sharing.The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales,partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primarymetals industry and expansion projects and an increase in demand for existing customers in the chlor-alkali industry.Entergy Wholesale CommoditiesFollowing is an analysis of the change in net revenue comparing 2017 to 2016. Amount (In Millions) 2016 net revenue$1,542FitzPatrick sale(158)Nuclear volume(89)FitzPatrick reimbursement agreement57Nuclear fuel expenses108Other92017 net revenue$1,469As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by approximately $73 million in 2017primarily due to the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017 and lower volume inthe Entergy Wholesale Commodities nuclear fleet resulting from more outage days in 2017 as compared to 2016. The decrease waspartially offset by an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergyfor specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have beenavoided had Entergy shut down FitzPatrick in January 2017 and a decrease in nuclear fuel expenses primarily related to theimpairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. Revenues received from Exelon in 2017under the reimbursement agreement are offset by other operation and maintenance expenses and taxes other than income taxes and hadno effect on net income. See Note 14 to the financial statements for discussion of the sale of FitzPatrick, the reimbursement agreementwith Exelon, and the impairments and related charges.10Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisFollowing are key performance measures for Entergy Wholesale Commodities for 2017 and 2016. 2017 2016Owned capacity (MW) (a)3,962 4,800GWh billed30,501 35,881 Entergy Wholesale Commodities Nuclear Fleet Capacity factor83% 87%GWh billed28,178 33,551Average energy price ($/MWh)$41.60 $41.33Average capacity price ($/kW-month)$6.16 $4.64Refueling outage days: FitzPatrick42 —Indian Point 2— 102Indian Point 366 —Pilgrim43 —Palisades27 —(a)The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017. See Note 14to the financial statements for discussion of the sale of FitzPatrick.Other Income Statement ItemsUtilityOther operation and maintenance expenses increased from $2,313 million for 2016 to $2,416 million for 2017 primarily due to:•an increase of $46 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor,to position the nuclear fleet to meet its operational goals, including additional training and initiatives to support management’soperational goals at Grand Gulf, partially offset by a decrease in regulatory compliance costs. The decrease in regulatorycompliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight processaction matrix. See Note 8 to the financial statements for a discussion of the ANO stator incident and subsequent NRC reviews;•an increase of $24 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in2017 as compared to the prior year;•an increase of $20 million in transmission and distribution expenses due to higher vegetation maintenance costs;•the effects of recording in 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storagecosts. The damages awarded included the reimbursement of approximately $19 million of spent nuclear fuel storage costspreviously recorded as other operation and maintenance expense. See Note 8 to the financial statements for discussion of thespent nuclear fuel litigation; and•the deferral in the first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima complianceand $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February2016 as part of the Entergy Arkansas 2015 rate case settlement. These costs are being amortized over a ten-year periodbeginning March 2016. See Note 2 to the financial statements for further discussion of the rate case settlement.11Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisThe increase was partially offset by a decrease of $23 million in fossil-fueled generation expenses primarily due to lower long-termservice agreement costs.Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise taxes, state franchisetaxes, and employment taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of ad valoremtaxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher revenues in 2017 ascompared to the prior year. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law which becameeffective for 2017.Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union PowerStation purchased in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase.Other income increased primarily due to higher realized gains in 2017 as compared to the prior year on the decommissioningtrust fund investments, including portfolio rebalancing in 2017, and an increase in the allowance for equity funds used duringconstruction due to higher construction work in progress in 2017, including the St. Charles Power Station project.Other expenses increased primarily due to increases in deferred refueling outage amortization costs primarily associated with themost recent ANO plant outages compared to previous outages.Entergy Wholesale CommoditiesOther operation and maintenance expenses decreased from $890 million for 2016 to $864 million for 2017 primarily due to theabsence of other operation and maintenance expenses from the FitzPatrick plant and a gain on the sale of assets resulting from the salein March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, whichincluded a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilitiesrelated to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 14 to the financial statements fordiscussion of the sale of FitzPatrick. The decrease was partially offset by:•FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation andmaintenance expenses as a result of the sale and reimbursement agreements Entergy entered into with Exelon. These costswould have not been incurred absent the sale agreement with Exelon because Entergy planned to shut the plant down inJanuary 2017. The expenses are offset by revenue realized pursuant to the reimbursement agreement and had no effect on netincome. See Note 14 to the financial statements for discussion of the sale and reimbursement agreements;•the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuelstorage costs, which reduced other operation and maintenance expenses in 2016 by $60 million. See Note 8 to the financialstatements for discussion of the spent nuclear fuel litigation; and•an increase of $37 million in severance and retention costs in 2017 as compared to the prior year due to management’s strategyto reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIALDISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below for adiscussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.The asset write-offs, impairments, and related charges variance is primarily due to $538 million ($350 million net-of-tax) ofimpairment charges in 2017 compared to $2,836 million ($1,829 million net-of-tax) of impairment and related charges in 2016. Theimpairment charges in 2017 are due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assetsbeing charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-livedassets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size ofthe Entergy Wholesale12Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisCommodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy WholesaleCommodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to reduce the size of theEntergy Wholesale Commodities’ merchant fleet. The impairment and related charges in 2016 were primarily to write down thecarrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to theirfair values. See Note 14 to the financial statements for further discussion of the impairments and related charges.Taxes other than income taxes decreased primarily due to the absence of ad valorem taxes from the FitzPatrick plant after it wassold to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick. Other income increased primarily due to higher realized gains in 2017 as compared to the prior year on the decommissioningtrust fund investments, including the result of portfolio rebalancing in 2017, and the increase in value realized upon the receipt fromNYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 9 to the financialstatements for discussion of the trust transfer agreement with NYPA.Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transferagreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trusts anddecommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and revisions to the estimated decommissioning costliabilities for the Entergy Wholesale Commodities’ Indian Point 2 and Palisades plants as a result of revised decommissioning coststudies in the fourth quarter 2016. The increase was partially offset by a reduction in deferred refueling outage amortization costsrelated to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. See Note 9 to the financialstatements for discussion of the trust transfer agreement with NYPA and the revised decommissioning cost studies. See Note 14 to thefinancial statements for discussion of the impairments and related charges.Income TaxesSee Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% for 2017 and 2016 to the effectiveincome tax rates, and for additional discussion regarding income taxes.The effective income tax rate for 2017 was 56.1%. The difference in the effective income tax rate versus the statutory rate of35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President Trump in December 2017, whichchanged the federal corporate income tax rate from 35% to 21% effective in 2018, partially offset by a change in the tax classificationof legal entities that own Entergy Wholesale Commodities nuclear power plants, which resulted in both permanent and temporarydifferences under the income tax accounting standards. See Note 3 to the financial statements for further discussion of the effects of theTax Cuts and Jobs Act and the change in tax classification.The effective income tax rate for 2016 was 59.1%. The difference in the effective income tax rate versus the statutory rate of35% for 2016 was primarily due to a change in the tax classification of a legal entity that owned one of the Entergy WholesaleCommodities nuclear power plants and the reversal of a portion of the provision for uncertain tax positions as a result of the settlementof the 2010-2011 IRS audit, partially offset by state income taxes and certain book and tax differences related to utility plant items. SeeNote 3 to the financial statements for additional discussion of the change in the tax classification and the tax settlement.Income Tax LegislationOn December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act (the Act). As a result of the Act, Entergyand the Registrant Subsidiaries re-measured their deferred tax assets and liabilities in December 2017 to reflect the reduction in thefederal corporate income tax rate from 35% to 21% that was effective January 1, 2018. Note 3 to the financial statements containsadditional discussion of the effect of the Act on 2017 and 2018 results of13Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisoperations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 tothe financial statements discusses the regulatory proceedings that have considered the effects of the Act.Entergy’s operating cash flows have been and will be reduced in the near-term by the Act, most significantly over the time thatthe Registrant Subsidiaries will return unprotected excess deferred income taxes to customers. Rate base is expected to increase overtime as a consequence of the Act as the excess deferred income taxes are returned to customers. Entergy is financing its incrementalcash requirements as a consequence of the Act through a combination of Registrant Subsidiary debt and Entergy Corporation debt andequity. In June 2018, Entergy Corporation marketed an equity offering of 15.3 million shares of common stock. In lieu of issuingequity at the time of the offering, Entergy entered into forward sale agreements with several counterparties. In December 2018, Entergyphysically settled a portion of its obligations under the forward sale agreements by delivering 6.8 million shares of its common stock inexchange for cash proceeds of approximately $500 million. Entergy is required to settle its remaining obligations under the forward saleagreements with respect to the remaining 8.5 million shares of common stock on or prior to June 7, 2019.Entergy Wholesale Commodities Exit from the Merchant Power BusinessEntergy Wholesale Commodities includes the ownership of the following nuclear reactors as of December 31, 2018: Location Market Capacity StatusVermont Yankee Vernon, VT ISO-NE 605 MW Plant sold on January 11, 2019Pilgrim Plymouth, MA ISO-NE 688 MW Planned shutdown in 2019Indian Point 2 Buchanan, NY NYISO 1,028 MW Planned shutdown in 2020Indian Point 3 Buchanan, NY NYISO 1,041 MW Planned shutdown in 2021Palisades Covert, MI MISO 811 MW Planned shutdown in 2022As discussed below, Entergy sold its FitzPatrick nuclear power plant to Exelon in March 2017 and the Vermont Yankee plant toNorthStar in January 2019. The Pilgrim and Palisades plants are under contract to be sold, subject to certain conditions, after they areshut down. Entergy also sold the Rhode Island State Energy Center, a natural gas-fired combined cycle generating plant, in December2015.These plant sales and contracts to sell are the result of a strategy that Entergy has undertaken to manage and reduce the risk ofthe Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. Managementevaluated the challenges for each of the plants based on a variety of factors such as their market for both energy and capacity, theirsize, their contracted positions, and the amount of investment required to continue to operate and maintain the safety and integrity ofthe plants, including the estimated asset retirement costs. Management continues to look for ways to mitigate the operational anddecommissioning risks associated with the merchant power business. Changes to current assumptions regarding the operating life of aplant, the decommissioning timeline and process, or the length of time that Entergy will continue to own a plant could result in revisionsto the asset retirement obligations and affect compliance with certain NRC minimum financial assurance requirements for meetingobligations to decommission the plants. Increases in the asset retirement obligations are likely to result in an increase in operatingexpense in the period of a revision. The possibility that a plant may have an operating life shorter than previously assumed could resultin the need for additional contributions to decommissioning trust funds, or the posting of parent guarantees, letters of credit, or othersurety mechanisms. Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point inMichigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants,respectively. These facilities are in various stages of the decommissioning process, and Big Rock Point is also under contract to be soldwith the Palisades plant. In addition, Entergy Wholesale Commodities14Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisprovides operations and management services, including decommissioning services, to nuclear power plants owned by other utilities inthe United States. A relatively minor portion of the Entergy Wholesale Commodities business is the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.Shutdown and Sale of Vermont YankeeOn December 29, 2014, the Vermont Yankee plant ceased power production and entered its decommissioning phase. InNovember 2016, Entergy entered into an agreement to sell 100% of the membership interests in Entergy Nuclear Vermont Yankee,LLC to a subsidiary of NorthStar. Entergy Nuclear Vermont Yankee was the owner of the Vermont Yankee plant. The sale of EntergyNuclear Vermont Yankee to NorthStar included the transfer of the nuclear decommissioning trust fund and the asset retirementobligation for the spent fuel management and decommissioning of the plant.In March 2018, Entergy and NorthStar entered into a settlement agreement and a Memorandum of Understanding with State ofVermont agencies and other interested parties that set forth the terms on which the agencies and parties supported the Vermont PublicUtility Commission’s approval of the transaction. The agreements provided additional financial assurance for decommissioning, spentfuel management and site restoration, and detailed the site restoration standards. In October 2018 the NRC issued an order approvingthe application to transfer Vermont Yankee’s license to NorthStar for decommissioning. In December 2018 the Vermont Public UtilityCommission issued an order approving the transaction consistent with the Memorandum of Understanding’s terms. On January 11,2019, Entergy and NorthStar closed the transaction.Entergy Nuclear Vermont Yankee had an outstanding credit facility that was used to pay for dry fuel storage costs. This creditfacility was guaranteed by Entergy Corporation. A subsidiary of Entergy assumed the obligations under the credit facility. At theclosing of the sale transaction, NorthStar caused Entergy Nuclear Vermont Yankee, renamed NorthStar Vermont Yankee, to issue a$139 million promissory note to the Entergy subsidiary that assumed the credit facility obligations. The amount of the note includes thebalance outstanding on the credit facility, as well as borrowing fees and costs incurred by Entergy in connection with the credit facility.With the receipt of the NRC and Vermont Public Utility Commission approvals and the resolution among the parties of thesignificant conditions of the sale, Entergy concluded that as of December 31, 2018 Vermont Yankee was in held for sale status. Entergyaccordingly evaluated Vermont Yankee’s asset retirement obligation in light of the terms of the sale transaction and evaluated theremaining values of the Vermont Yankee assets. These evaluations resulted in an increase in the asset retirement obligation and $173million of related asset impairment and other charges in the fourth quarter 2018. See Note 9 to the financial statements herein foradditional discussion of the asset retirement obligation. See Note 14 to the financial statements for discussion of the closing of theVermont Yankee transaction.Sale of Top Deer InvestmentIn November 2016, Entergy sold its 50% membership interest in Top Deer Wind Ventures, LLC, a wind-powered electricgeneration joint venture owned by Entergy in the Entergy Wholesale Commodities segment and accounted for as an equity methodinvestment. Entergy sold its 50% membership interest in Top Deer for approximately $0.5 million and realized a pre-tax loss of $0.2million on the sale.Sale of FitzPatrickIn October 2015, Entergy determined that it would close the FitzPatrick plant. The original expectation was to shut down theFitzPatrick plant at the end of its fuel cycle in January 2017.In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds anddecommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. When Entergy15Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysispurchased Indian Point 3 and FitzPatrick in 2000 from NYPA, NYPA retained the decommissioning trust funds and thedecommissioning liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specified theirdecommissioning obligations. NYPA had the right to require the Entergy subsidiaries to assume each of the decommissioning liabilitiesprovided that it assigned the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. Under theoriginal agreements, if the decommissioning liabilities were retained by NYPA, the Entergy subsidiaries would perform thedecommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trust funds. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of thedifference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated inindependent decommissioning cost studies. The asset was increased by monthly accretion based on the applicable discount ratenecessary to ultimately provide for the estimated future value of the decommissioning contract. The monthly accretion was recorded asinterest income. As a result of the agreement with NYPA, in the third quarter 2016, Entergy removed the contract asset from its balancesheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for thedecommissioning liabilities. The decommissioning trust funds for the Indian Point 3 and FitzPatrick plants were transferred to Entergyby NYPA in January 2017.In August 2016, Entergy entered into an agreement to sell the FitzPatrick plant to Exelon. NRC approval of the sale wasreceived in March 2017. The transaction closed in March 2017 for a purchase price of $110 million, which included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant,resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the proration ofcertain expenses prepaid by Entergy. See Note 14 to the financial statements for further discussion of the sale of FitzPatrick. Asdiscussed in Note 3 to the financial statements, as a result of the sale of FitzPatrick, Entergy re-determined the plant’s tax basis, resultingin a $44 million income tax benefit in the first quarter 2017.Planned Shutdown of PilgrimIn October 2015, Entergy determined that it would close the Pilgrim plant. The decision came after management’s extensiveanalysis of the economics and operating life of the plant following the NRC’s decision in September 2015 to place the plant in its“multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix. In January 2019 theNRC found that the Pilgrim plant had completed the corrective actions required to address the concerns that led to the plant’s placementin Column 4 and had demonstrated sustained improvement. The Pilgrim plant is expected to cease operations on May 31, 2019, at theend of its current fuel cycle. See Note 14 to the financial statements for discussion of the impairment charges associated with thedecision to cease operations earlier than expected and see Note 8 for further discussion on the placement of Pilgrim in Column 4.Planned Shutdown of Indian Point 2 and Indian Point 3In April 2007, Entergy submitted to the NRC a joint application to renew the operating licenses for Indian Point 2 and IndianPoint 3 for an additional 20 years. In January 2017, Entergy reached a settlement with New York State, several State agencies, andRiverkeeper, Inc., under which Indian Point 2 and Indian Point 3 will cease commercial operation by April 30, 2020 and April 30,2021, respectively, subject to certain conditions, including New York State’s withdrawal of opposition to Indian Point’s licenserenewals and issuance of contested permits and similar authorizations. Operations may be extended up to four additional years for eachunit by mutual agreement of Entergy and New York State based on an exigent reliability need for Indian Point generation. In September2018 the NRC issued renewed operating licenses for Indian Point 2 through April 2024 and for Indian Point 3 through April 2025.Other provisions of the settlement include termination of all then-existing investigations of Indian Point by the parties to theagreement, which include the New York State Department of Environmental Conservation, the New York State Department of State, theNew York State Department of Public Service, the New York State Department of Health, and the New York State Attorney General.The settlement recognizes the right of New York State agencies16Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisto pursue new investigations and enforcement actions with respect to new circumstances or existing conditions that become materiallyexacerbated.Another provision of the settlement obligates Entergy to establish a $15 million fund for environmental projects and communitysupport. Apportionment and allocation of funds to beneficiaries are to be determined by mutual agreement of New York State andEntergy. The settlement recognizes New York State’s right to perform an annual inspection of Indian Point, with scope and timing to bedetermined by mutual agreement.See Note 14 to the financial statements for further discussion of the impairment charges associated with management’s decisionto shut down the Indian Point plants.Planned Shutdown of PalisadesMost of the Palisades output is sold under a power purchase agreement (PPA) with Consumers Energy, entered into when theplant was acquired in 2007, that is scheduled to expire in 2022. The PPA prices currently exceed market prices and escalate each year,up to $61.50/MWh in 2022. In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA toterminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 millionfor the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by theMichigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently onOctober 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle.In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendmenttransaction, but only granting Consumers Energy recovery of $136.6 million of the $172 million requested early termination payment.As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operatePalisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergyintends to shut down the Palisades nuclear power plant permanently on May 31, 2022. As a result of the increase in the expectedoperating life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceeded thecarrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expendituresfor capital assets incurred at Palisades after September 30, 2017 are no longer charged to expense as incurred, but recorded as assetsand depreciated or amortized, subject to the typical periodic impairment reviews prescribed in the accounting rules. See Note 9 to thefinancial statements for discussion of the associated asset retirement obligation revision. See Note 14 to the financial statements fordiscussion of the updated calculation of the PPA liability amortization and discussion of the impairment charges associated with thedecision to cease operations at Palisades.Planned Sales of Pilgrim and PalisadesOn July 30, 2018, Entergy entered into purchase and sale agreements with Holtec International to sell to a Holtec subsidiary (i)100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, and (ii) 100% of the equity interests inEntergy Nuclear Palisades, LLC, the owner of Palisades and the Big Rock Point Site. The sales of Entergy Nuclear Generation Companyand Entergy Nuclear Palisades will include the transfer of each entity’s nuclear decommissioning trust and obligation for spent fuelmanagement and plant decommissioning. At the closing of each sale transaction, the Holtec subsidiary will pay $1,000 each (subject toadjustment for net liabilities and other amounts) for the equity interests in Entergy Nuclear Generation Company and Entergy NuclearPalisades.The Pilgrim transaction is subject to certain closing conditions, including: the permanent shutdown of Pilgrim and the transfer ofall nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC approval for the transfer of the operating and theindependent spent fuel storage installation licenses; FERC approval for the change in control of the switchyard; receipt of a favorableprivate letter ruling from the IRS; the market value of the nuclear decommissioning trust for Pilgrim, less the hypothetical income tax onthe aggregate unrealized gain of such fund17Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisassets at closing, equaling or exceeding a specified minimum amount; and, the Palisades purchase and sale agreement having not beenterminated due to a breach by Holtec or its subsidiary.The Palisades transaction is subject to certain closing conditions, including: the permanent shutdown of Palisades and thetransfer of all nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC regulatory approval for the transfer of thePalisades and Big Rock Point operating and independent spent fuel storage installation licenses; receipt of a favorable private letterruling from the IRS; the market value of the nuclear decommissioning trust for Palisades, less the hypothetical income tax on theaggregate unrealized gain of such fund assets at closing, equaling or exceeding a specified minimum amount; and, the Pilgrimtransaction having closed.Subject to the above conditions, the Pilgrim transaction is expected to close by the end of 2019 and the Palisades transaction isexpected to close by the end of 2022. The Pilgrim transaction is expected currently to result in an approximate $120 million loss andthe Palisades transaction is expected currently to result in an approximate $80 million gain based on the difference between Entergy’snet investment in each subsidiary and the sale price plus any agreed adjustments. The primary variables in the ultimate loss or gain thatEntergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, financial resultsfrom plant operations until the closing, and the level of any deferred tax balances at closing.Costs Associated with Entergy Wholesale Commodities Strategic TransactionsEntergy incurred approximately $139 million in costs in 2018, $113 million in costs in 2017, and $95 million in costs in 2016associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet, primarily employeeretention and severance expenses and other benefits-related costs, and contracted economic development contributions. Entergyexpects to incur employee retention and severance expenses of approximately $120 million in 2019, and a total of approximately $110million from 2020 through 2022 associated with these strategic transactions. See Note 13 to the financial statements for furtherdiscussion of these costs.In 2018, Entergy Wholesale Commodities incurred $532 million, and in 2017 it incurred $538 million, of impairment chargesrelated to nuclear fuel spending, nuclear refueling outage spending, expenditures for capital assets, and asset retirement obligationrevisions. These costs were charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commoditiesnuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’sstrategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associatedwith nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge thesecosts to expense as incurred because Entergy expects the value of the plants to continue to be impaired. In 2016, Entergy WholesaleCommodities incurred impairment charges of $2.8 billion primarily to write down the carrying values of the Entergy WholesaleCommodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values. See Note 14 to the financialstatements for further discussion of these impairment charges.Liquidity and Capital ResourcesThis section discusses Entergy’s capital structure, capital spending plans and other uses of capital, sources of capital, and thecash flow activity presented in the cash flow statement.18Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisCapital StructureEntergy’s debt to capital ratio is balanced between equity and debt, as shown in the following table. December 31, 2018 December 31, 2017Debt to capital66.7% 67.1%Effect of excluding securitization bonds(0.5%) (0.8%)Debt to capital, excluding securitization bonds (a)66.2%66.3%Effect of subtracting cash(0.6%) (1.1%)Net debt to net capital, excluding securitization bonds (a)65.6%65.2%(a)Calculation excludes the Arkansas, Louisiana, New Orleans, and Texas securitization bonds, which are non-recourse to EntergyArkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas, respectively.Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital leaseobligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, andsubsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the debtto capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to itsinvestors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, asmore fully described in Note 5 to the financial statements. Entergy also uses the net debt to net capital ratio excluding securitizationbonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluatingEntergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cashand cash equivalents on hand.Long-term debt, including the currently maturing portion, makes up most of Entergy’s total debt outstanding. Following areEntergy’s long-term debt principal maturities and estimated interest payments as of December 31, 2018. To estimate future interestpayments for variable rate debt, Entergy used the rate as of December 31, 2018. The amounts below include payments on SystemEnergy’s Grand Gulf sale-leaseback transaction, which are included in long-term debt on the balance sheet.Long-term debt maturities and estimatedinterest payments 2019 2020 2021 2022-2023 after 2023 (In Millions)Utility $1,336 $1,012 $1,908 $2,554 $16,282Entergy Wholesale Commodities 4 142 — — —Parent and Other 79 522 56 933 810Total $1,419 $1,676 $1,964 $3,487 $17,092Note 5 to the financial statements provides more detail concerning long-term debt outstanding.Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September 2023.The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacity of thecredit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates onloans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weightedaverage interest rate for the year ended December 31, 2018 was 3.60% on the drawn portion of the facility.19Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisAs of December 31, 2018, amounts outstanding and capacity available under the $3.5 billion credit facility are:Capacity Borrowings Letters of Credit Capacity Available(In Millions)$3,500 $220 $6 $3,274A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less ofits total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation ofthe debt to capital ratio above. One such difference is that it excludes the effects, among other things, of certain impairments related tothe Entergy Wholesale Commodities nuclear generation assets. Entergy is currently in compliance with the covenant and expects toremain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies(except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of theEntergy Corporation credit facility’s maturity date may occur.Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As ofDecember 31, 2018, Entergy Corporation had $1.942 billion of commercial paper outstanding. The weighted-average interest rate forthe year ended December 31, 2018 was 2.50%.Capital lease obligations are a minimal part of Entergy’s overall capital structure. Following are Entergy’s payment obligationsunder those leases. 2019 2020 2021 2022-2023 after 2023 (In Millions)Capital lease payments$3 $3 $3 $6 $16The capital leases are discussed in Note 10 to the financial statements.Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilitiesavailable as of December 31, 2018 as follows:Company Expiration Date Amount of Facility InterestRate (a) Amount Drawn as ofDecember 31, 2018 Letters of CreditOutstanding as ofDecember 31, 2018Entergy Arkansas April 2019 $20 million (b) 3.77% — —Entergy Arkansas September 2023 $150 million (c) 3.77% — —Entergy Louisiana September 2023 $350 million (c) 3.77% — —Entergy Mississippi May 2019 $10 million (d) 4.02% — —Entergy Mississippi May 2019 $35 million (d) 4.02% — —Entergy Mississippi May 2019 $37.5 million (d) 4.02% — —Entergy New Orleans November 2021 $25 million (c) 3.80% — $0.8 millionEntergy Texas September 2023 $150 million (c) 4.02% — $1.3 million(a)The interest rate is the estimated interest rate as of December 31, 2018 that would have been applied to outstanding borrowingsunder the facility.(b)Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable atEntergy Arkansas’s option.20Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacityof the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy NewOrleans; and $30 million for Entergy Texas. (d)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable atEntergy Mississippi’s option. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of itstotal capitalization. Each Registrant Subsidiary is in compliance with this covenant.In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each enteredinto one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO.Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2018:Company Amount ofUncommitted Facility Letter of CreditFee Letters of Credit Issued as ofDecember 31, 2018 (a)Entergy Arkansas $25 million 0.70% $1 millionEntergy Louisiana $125 million 0.70% $25.9 millionEntergy Mississippi $40 million 0.70% $16.7 millionEntergy New Orleans $15 million 1.00% $2 millionEntergy Texas $50 million 0.70% $20.9 million(a)As of December 31, 2018, letters of credit posted with MISO covered financial transmission right exposure of $0.2 million forEntergy Mississippi and $4.1 million for Entergy Texas. See Note 15 to the financial statements for discussion of financialtransmission rights.As of December 31, 2018, Entergy Nuclear Vermont Yankee had a credit facility guaranteed by Entergy Corporation with aborrowing capacity of $145 million that expires in November 2020. As of December 31, 2018, $139 million in cash borrowings wereoutstanding under the credit facility. The weighted average interest rate for the year ended December 31, 2018 was 3.50% on the drawnportion of the facility. In anticipation of the transfer of Entergy Nuclear Vermont Yankee to NorthStar, the credit facility was assumedby Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergysubsidiary after the transfer, in January 2019 and the borrowing capacity was reduced to $139 million. See Note 4 to the financialstatements for additional discussion of the Vermont Yankee credit facility. See Note 14 to the financial statements for discussion of thetransfer of Entergy Nuclear Vermont Yankee to NorthStar.Operating Lease Obligations and Guarantees of Unconsolidated ObligationsEntergy has a minimal amount of operating lease obligations and guarantees in support of unconsolidated obligations. Entergy’sguarantees in support of unconsolidated obligations are not likely to have a material effect on Entergy’s financial condition, results ofoperations, or cash flows. Following are Entergy’s payment obligations as of December 31, 2018 on non-cancelable operating leaseswith a term over one year: 2019 2020 2021 2022-2023 after 2023 (In Millions)Operating lease payments$94 $82 $75 $108 $88Operating leases are discussed in Note 10 to the financial statements.21Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisSummary of Contractual Obligations of Consolidated EntitiesContractual Obligations 2019 2020-2021 2022-2023 after 2023 Total (In Millions)Long-term debt (a) $1,419 $3,640 $3,487 $17,092 $25,638Capital lease payments (b) $3 $6 $6 $16 $31Operating leases (b) (c) $94 $157 $108 $88 $447Purchase obligations (d) $1,331 $2,301 $2,743 $3,340 $9,715(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Lease obligations are discussed in Note 10 to the financial statements.(c)Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations.(d)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. Almost all of the total are fuel and purchased power obligations.In addition to the contractual obligations stated above, Entergy currently expects to contribute approximately $176.9 million to itspension plans and approximately $47.6 million to other postretirement plans in 2019, although the 2019 required pension contributionswill be known with more certainty when the January 1, 2019 valuations are completed, which is expected by April 1, 2019. See“Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below for a discussion of qualified pensionand other postretirement benefits funding.Also in addition to the contractual obligations, Entergy has $1,213 million of unrecognized tax benefits and interest net ofunused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in thetiming of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognizedtax benefits.Capital Funds AgreementPursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capitalto: •maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt);•permit the continued commercial operation of Grand Gulf;•pay in full all System Energy indebtedness for borrowed money when due; and•enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigningSystem Energy’s rights in the agreement as security for the specific debt.22Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisCapital Expenditure Plans and Other Uses of CapitalFollowing are the amounts of Entergy’s planned construction and other capital investments by operating segment for 2019through 2021.Planned construction and capital investments 2019 2020 2021 (In Millions)Utility: Generation $1,915 $1,090 $1,515Transmission 1,060 845 570Distribution 1,040 1,095 1,325Utility Support 515 405 325Total 4,530 3,435 3,735Entergy Wholesale Commodities 110 40 20Total $4,640 $3,475 $3,755Planned construction and capital investments refer to amounts Entergy plans to spend on routine capital projects that arenecessary to support reliability of its service, equipment, or systems and to support normal customer growth, and includes spending forthe nuclear and non-nuclear plants at Entergy Wholesale Commodities. In addition to routine capital projects, they also refer to amountsEntergy plans to spend on non-routine capital investments for which Entergy is either contractually obligated, has Board approval, orotherwise expects to make to satisfy regulatory or legal requirements. Amounts include the following types of construction and capitalinvestments:•Investments, including the St. Charles Power Station, Lake Charles Power Station, Washington Parish Energy Center, ChoctawGenerating Station, Sunflower Solar Facility, New Orleans Power Station, and Montgomery County Power Station, eachdiscussed below, and potential construction of additional generation.•Entergy Wholesale Commodities investments such as component replacements, software and security, and dry cask storage.•Investments in Entergy’s nuclear fleet.•Transmission spending to enhance reliability, reduce congestion, and enable economic growth.•Distribution spending to enhance reliability and improve service to customers, including investment to support advancedmetering.For the next several years, the Utility’s owned generating capacity is projected to be adequate to meet MISO reserve requirements;however, in the longer-term additional supply resources will be needed, and its supply plan initiative will continue to seek to transformits generation portfolio with new generation resources. Opportunities resulting from the supply plan initiative, including new projects orthe exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above.Estimated capital expenditures are also subject to periodic review and modification and may vary based on the ongoing effects ofbusiness restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility,economic trends, changes in project plans, and the ability to access capital.St. Charles Power StationIn August 2015, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity andconvenience would be served by the construction of the St. Charles Power Station, a nominal 980 megawatt combined-cycle generatingunit, on land adjacent to the existing Little Gypsy plant in St. Charles Parish, Louisiana. It is currently estimated to cost $869 million toconstruct, including transmission interconnection and other related costs. The LPSC issued an order approving certification of St.Charles Power Station in December 2016. Construction is in progress and commercial operation is expected to occur by mid-2019.23Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisLake Charles Power StationIn November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience andnecessity would be served by the construction of the Lake Charles Power Station, a nominal 994 megawatt combined-cycle generatingunit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the LakeCharles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in thepublic interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving thestipulation and approved certification of the unit. Construction is in progress and commercial operation is expected to occur by mid-2020.Washington Parish Energy CenterIn April 2017, Entergy Louisiana signed an agreement with a subsidiary of Calpine Corporation for the construction andpurchase of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with atotal nominal capacity of approximately 361 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa,Louisiana and, subject to permits and approvals, is expected to be completed by 2021. Subject to regulatory approvals, EntergyLouisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, includingtransmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of theplant. In April 2018 the parties reached a settlement recommending certification and cost recovery through the additional capacitymechanism of the formula rate plan, consistent with prior LPSC precedent with respect to the certification and recovery of plantspreviously acquired by Entergy Louisiana. The LPSC issued an order approving the settlement in May 2018.Choctaw Generating StationIn August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary ofGenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near FrenchCamp, Mississippi. The purchase price is expected to be approximately $314 million. Entergy Mississippi also expects to invest invarious plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million. Thepurchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federaland state regulatory and permitting agencies. These include regulatory approvals from the MPSC and the FERC. Clearance under theHart-Scott-Rodino Antitrust Improvements Act has occurred. In October 2018, Entergy Mississippi filed an application with the MPSCseeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to itsformula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan torecover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annualownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacityadditions approved by the MPSC. Closing is expected to occur by the end of 2019.Sunflower Solar FacilityIn November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MWto-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi. Theestimated base purchase price is approximately $138.4 million. The estimated total investment, including the base purchase price andother related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase iscontingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and stateregulatory and permitting agencies. The project will be built by Sunflower County Solar Project, LLC, a sub-subsidiary of RecurrentEnergy,24Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisLLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have beenmet. In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for Sunflower Solar Projectto construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility. EntergyMississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustmentmechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi,including the annual ownership costs of the Sunflower Solar Facility. Closing is expected to occur by the end of 2021.New Orleans Power StationIn June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination andauthorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at thesite of the existing Michoud generating facility, which was retired effective May 31, 2016. In January 2017 several intervenors filedtestimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleanssubmitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and arelated cost recovery plan. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed thecommitment to pursue up to 100 MW of renewable resources to serve New Orleans. In March 2018 the City Council adopted aresolution approving construction of the 128 MW unit. The targeted commercial operation date is mid-2020, subject to receipt of allnecessary permits. In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council arequest for rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed alawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced thatit would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in payingcertain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the CityCouncil. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation.The City Council issued a request for qualifications for an investigator and in June 2018 selected two investigators. In October 2018 theinvestigators for the City Council released their report, concluding that individuals were paid to attend and/or speak in support of theNew Orleans Power Station and that Entergy New Orleans “knew or should have known that such conduct occurred or reasonablymight occur.” The City Council held a special meeting on October 31, 2018 to allow the investigators to present the report and for theCity Council to consider next steps. At that meeting, the City Council issued a resolution requiring Entergy New Orleans to show causewhy it should not be fined $5 million as a result of the findings in the report. In November 2018, Entergy New Orleans submitted itsresponse to the show cause resolution, disagreeing with certain characterizations and omissions of fact in the report and asserting thatthe City Council could not legally impose the proposed fine. Simultaneous with the filing of its response to the show cause resolution,Entergy New Orleans sent a letter to the City Council re-asserting that the City Council’s imposition of the proposed fine would beunlawful, but acknowledging that the actions of a subcontractor, which was retained by an Entergy New Orleans contractor without theknowledge or contractually-required consent of Entergy New Orleans, were contrary to Entergy’s values. In that letter, Entergy NewOrleans offered to donate $5 million to the City Council to resolve the show cause proceeding. In January 2019, Entergy New Orleanssubmitted a new settlement proposal to the City Council. The proposal retains the components of the first offer but adds to it acommitment to make reasonable efforts to limit the costs of the project to the $210 million cost estimate with advanced notification ofanticipated cost overruns, additional reporting requirements for cost and environmental items, and a commitment regarding reliabilityinvestment and to work with the New Orleans Sewerage and Water Board to provide a reliable source of power. In February 2019 theCity Council approved a resolution approving the settlement proposal and allowing the construction of the New Orleans Power Stationto commence.Montgomery County Power StationIn October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience andnecessity would be served by the construction of the Montgomery County Power Station, a nominal25Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The currentestimated cost of the Montgomery County Power Station is $937 million, including approximately $111 million of transmissioninterconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process,filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request forproposal process that showed no undue preference to any proposal. In June 2017 parties to the proceeding filed an unopposedstipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generationconstruction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeureevents. Transmission interconnection and network upgrades and other related costs are not subject to the $831 million cap. In July 2017the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated tooccur by mid-2021.Advanced Metering Infrastructure (AMI)See Note 2 to the financial statements for discussion of filings made by the Utility operating companies regarding thedeployment of AMI. The filings included estimates of implementation costs for AMI of $208 million for Entergy Arkansas, $330million for Entergy Louisiana, $132 million for Entergy Mississippi, $75 million for Entergy New Orleans, and $132 million for EntergyTexas.Dividends and Stock RepurchasesDeclarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Boardevaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and theParent and Other portion of the business, financial strength, and future investment opportunities. At its January 2019 meeting, the Boarddeclared a dividend of $0.91 per share. Entergy paid $648 million in 2018, $629 million in 2017, and $612 million in 2016 in cashdividends on its common stock.In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options, restricted stock,performance units, and restricted stock unit awards to key employees, which may be exercised to obtain shares of Entergy’s commonstock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market.Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fundthe exercise of grants under the plans.In addition to the authority to fund grant exercises, the Board has authorized share repurchase programs to enable opportunisticpurchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program.As of December 31, 2018, $350 million of authority remains under the $500 million share repurchase program. The amount ofrepurchases may vary as a result of material changes in business results or capital spending or new investment opportunities, or iflimitations in the credit markets continue for a prolonged period.Sources of CapitalEntergy’s sources to meet its capital requirements and to fund potential investments include:•internally generated funds;•cash on hand ($481 million as of December 31, 2018);•securities issuances;•bank financing under new or existing facilities or commercial paper; and•sales of assets.26Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisCircumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, includingunscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future.Provisions within the organizational documents relating to preferred stock or membership interests of certain of EntergyCorporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred equity. Alldebt and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their debt issuances are alsosubject to issuance tests set forth in bond indentures and other agreements. Entergy believes that the Registrant Subsidiaries havesufficient capacity under these tests to meet foreseeable capital needs.The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy. The City Councilhas concurrent jurisdiction over Entergy New Orleans’s securities issuances with maturities longer than one year. The APSC hasconcurrent jurisdiction over Entergy Arkansas’s issuances of securities secured by Arkansas property, including first mortgage bondissuances. No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-termborrowing limits and long-term borrowing limits for Entergy New Orleans are effective through October 2019. The current FERC-authorized short-term borrowing limits and long-term financing authorization for Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy Texas, and System Energy are effective through November 2020. Entergy Arkansas has obtained first mortgagebond/secured financing authorization from the APSC that extends through December 2020. Entergy New Orleans also has obtainedlong-term financing authorization from the City Council that extends through October 2019. Entergy Arkansas, Entergy Louisiana, andSystem Energy each have obtained long-term financing authorization from the FERC that extends through November 2020 forissuances by the nuclear fuel company variable interest entities. In addition to borrowings from commercial banks, the RegistrantSubsidiaries may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements. Themoney pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce Entergy’ssubsidiaries’ dependence on external short-term borrowings. Borrowings from internal and external short-term borrowings combinedmay not exceed the FERC-authorized limits. See Notes 4 and 5 to the financial statements for further discussion of Entergy’s borrowinglimits, authorizations, and amounts outstanding.Cash Flow ActivityAs shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the years ended December 31, 2018, 2017, and2016 were as follows: 2018 2017 2016 (In Millions)Cash and cash equivalents at beginning of period$781 $1,188 $1,351 Net cash provided by (used in): Operating activities2,385 2,624 2,999Investing activities(4,106) (3,841) (3,850)Financing activities1,421 810 688Net decrease in cash and cash equivalents(300) (407) (163) Cash and cash equivalents at end of period$481 $781 $1,18827Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisOperating Activities2018 Compared to 2017Net cash flow provided by operating activities decreased by $239 million in 2018 primarily due to:•the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statementsfor a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act;•lower Entergy Wholesale Commodities net revenue in 2018 as compared to the same period in 2017 (except for revenuesresulting from the FitzPatrick reimbursement agreement with Exelon). See Note 14 to the financial statements for discussion ofthe reimbursement agreement;•a decrease due to the timing of recovery of fuel and purchased power costs in 2018 as compared to the prior year. See Note 2 tothe financial statements for a discussion of fuel and purchased power cost recovery;•an increase of $56 million in interest paid in 2018 as compared to the prior year resulting from an increase in interest expense;•income tax payments of $20 million in 2018 compared to income tax refunds of $13 million in 2017. Entergy made income taxpayments in 2018 for estimated federal income taxes. Entergy received income tax refunds in 2017 resulting from the carrybackof net operating losses; and•proceeds of $2 million received in 2018 compared to proceeds of $23 million received in 2017 from the DOE resulting fromlitigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements fordiscussion of the spent nuclear fuel litigation.The decrease was partially offset by:•the effect of favorable weather on billed Utility sales in 2018;•the timing of collection of receivables from Utility customers;•a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC relatedto the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlementand refund;•a decrease of $58 million in spending on nuclear refueling outages in 2018 as compared to the prior year; and•a decrease of $57 million in severance and retention payments in 2018 as compared to the prior year. See “MANAGEMENT’SFINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business”above for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.2017 Compared to 2016Net cash flow provided by operating activities decreased by $375 million in 2017 primarily due to:•lower Entergy Wholesale Commodities net revenue (except for revenues resulting from the FitzPatrick reimbursementagreement with Exelon) in 2017 as compared to prior year, as discussed above. See Note 14 to the financial statements fordiscussion of the reimbursement agreement;•an increase of $141 million in spending on nuclear refueling outages in 2017 as compared to the prior year;•an increase of $94 million in severance and retention payments in 2017 as compared to the prior year. See “MANAGEMENT’SFINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business”above for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet;•a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC relatedto the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlementand refund;28Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis•proceeds of $23 million received in 2017 compared to proceeds of $102 million received in 2016 from the DOE resulting fromlitigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements fordiscussion of the spent nuclear fuel litigation; and•an increase of $20 million in pension contributions in 2017. See “MANAGEMENT’S FINANCIAL DISCUSSION ANDANALYSIS - Critical Accounting Estimates” below and Note 11 to the financial statements for discussion of qualified pensionand other postretirement benefits funding.The decrease was partially offset by:•income tax refunds of $13 million in 2017 compared to income tax payments of $95 million in 2016. Entergy received incometax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related tothe effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions inwhich the utilization of net operating loss carryovers are limited;•a decrease of $68 million in interest paid in 2017 as compared to the prior year primarily due to an interest payment of $60million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 10 to thefinancial statements for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets;and•an increase due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the prior year. See Note 2to the financial statements for a discussion of fuel and purchased power cost recovery.Investing Activities2018 Compared to 2017Net cash flow used in investing activities increased by $265 million in 2018 primarily due to:•an increase of $334 million in construction expenditures, primarily in the Utility business. The increase in constructionexpenditures in the Utility business is primarily due to an increase of $205 million in fossil-fueled generation constructionexpenditures primarily due to higher spending in 2018 on self-build projects in the Utility business and an increase of $88million in nuclear construction expenditures primarily due to a higher scope of work performed during the Grand Gulf outage in2018;•proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statementsfor a discussion of the sale of FitzPatrick; and•collateral posted to provide credit support to secure its obligations under agreements to sell power produced by EntergyWholesale Commodities’ power plants.The increase was partially offset by:•changes in the decommissioning trust funds, including portfolio rebalancing of certain decommissioning trust funds in 2018;•a decrease of $75 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reloadrequirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and•an increase of $34 million in proceeds received from the DOE in 2018 as compared to the prior year resulting from litigationregarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussionof the spent nuclear fuel litigation.29Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis2017 Compared to 2016Net cash flow used in investing activities decreased by $9 million in 2017 primarily due to the purchase of the Union PowerStation for approximately $949 million in March 2016 and proceeds of $100 million from the sale in March 2017 of the FitzPatrickplant to Exelon. See Note 14 to the financial statements for discussion of the Union Power Station purchase and the sale of FitzPatrick.The decrease was partially offset by:•an increase of $827 million in construction expenditures, primarily in the Utility business. The increase in constructionexpenditures in the Utility business is primarily due to an increase of $452 million in fossil-fueled generation constructionexpenditures primarily due to higher spending in 2017 on the St. Charles Power Station project and the Lake Charles PowerStation project and a higher scope of work performed on various other fossil projects in 2017 as compared to 2016; an increaseof $133 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performedin 2017 as compared to 2016 and higher storm restoration spending in 2017; an increase of $102 million in nuclear constructionexpenditures primarily due to increased spending on various nuclear projects in 2017 as compared to 2016; an increase of $101million in transmission construction expenditures primarily due to a higher scope of work performed on transmission projects in2017 as compared to 2016; and an increase of $51 million due to increased spending on advanced metering infrastructure in2017;•a decrease of $144 million in proceeds received from the DOE in 2017 as compared to the prior year resulting from litigationregarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussionof the spent nuclear fuel litigation; and•a decrease of $63 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reloadrequirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.Financing Activities2018 Compared to 2017Net cash flow provided by financing activities increased by $611 million in 2018 primarily due to:•long-term debt activity providing approximately $1,070 million of cash in 2018 compared to $224 million in 2017. Borrowingsand repayments of borrowings on Entergy’s long-term credit facility are included in long-term debt activity; and•proceeds from the issuance of common stock of $499 million as a result of the settlement of equity forwards in 2018. See Note7 to the financial statements for discussion of the equity forward sale agreements.The increase was partially offset by a decrease of $647 million in net issuances of commercial paper in 2018 compared to 2017 and anet decrease of $152 million in 2018 in short-term borrowings by the nuclear fuel company variable interest entities.2017 Compared to 2016Net cash flow provided by financing activities increased by $122 million in 2017 primarily due to:•Entergy’s net issuances of $1,123 million of commercial paper in 2017 compared to net repayments of $78 million ofcommercial paper in 2016;•an increase of $95 million resulting from lower redemptions of preferred stock. In 2017, Entergy New Orleans redeemed its$7.8 million of 4.75% Series preferred stock, its $6 million of 5.56% Series preferred stock, and its $6 million of 4.36% Seriespreferred stock. In 2016, Entergy Arkansas redeemed its $75 million of 6.45% Series preferred stock and its $10 million of6.08% Series preferred stock and Entergy Mississippi redeemed its $30 million of 6.25% Series preferred stock;30Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis•an increase of $48 million in treasury stock issuances in 2017 primarily due to a larger amount of previously repurchasedEntergy Corporation common stock issued in 2017 to satisfy stock option exercises; and•net borrowings of $41 million by the nuclear fuel company variable interest entities in 2017 compared to net repayments of $1million in 2016.The increase was partially offset by long-term debt activity providing approximately $224 million of cash in 2017 compared toproviding approximately $1,489 million of cash in 2016. Borrowings and repayments of borrowings on Entergy’s long-term creditfacility are included in long-term debt activity.For the details of Entergy’s commercial paper program and the nuclear fuel company variable interest entities’ short-term borrowings,see Note 4 to the financial statements. See Note 5 to the financial statements for details of long-term debt.Rate, Cost-recovery, and Other RegulationState and Local Rate Regulation and Fuel-Cost RecoveryThe rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy’sfinancial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers aredetermined in regulatory proceedings. Governmental agencies, including the APSC, the LPSC, the MPSC, the City Council, the PUCT,and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operatingcompanies’ authorized returns on common equity:Company Authorized Return on Common Equity Entergy Arkansas 9.25% - 10.25%Entergy Louisiana 9.95% Electric (a); 9.45% - 10.45% GasEntergy Mississippi 9.28% - 11.36%Entergy New Orleans 10.7% - 11.5% Electric; 10.25% - 11.25% GasEntergy Texas 9.65%(a)Based on 2017 test year. Authorized return on common equity for 2018 and 2019 test years will be 9.2% - 10.4%.The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussedin Note 2 to the financial statements.Federal RegulationThe FERC regulates wholesale sales of electricity rates and interstate transmission of electricity, including rates for SystemEnergy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy NewOrleans pursuant to the Unit Power Sales Agreement. The current return on equity and capital structure of System Energy are currentlythe subject of complaints filed by certain of the operating companies’ retail regulators. The current return on equity under the UnitPower Sales Agreement is 10.94%. Prior to each operating company’s termination of participation in the System Agreement (EntergyArkansas in December 2013, Entergy Mississippi in November 2015, and Entergy Louisiana, Entergy New Orleans, and Entergy Texaseach in August 2016), the Utility operating companies engaged in the coordinated planning, construction, and operation of generatingand bulk transmission facilities under the terms of the System Agreement, which was a rate schedule approved by the FERC. Certain ofthe Utility operating companies’ retail regulators are pursuing litigation involving the System Agreement at the FERC and in federalcourts. See Note 2 to the financial statements for discussion of the31Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisSystem Agreement proceedings, the complaints filed with the FERC challenging System Energy’s return on equity, and theamendments to the Unit Power Sales Agreement approved by the FERC in 2018.Market and Credit Risk Sensitive InstrumentsMarket risk is the risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, inresponse to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the followingsignificant market risks.•The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business.•The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trustfunds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trustfunds.•The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds,particularly in the Entergy Wholesale Commodities business. See Note 16 to the financial statements for details regardingEntergy’s decommissioning trust funds.•The interest rate risk associated with changes in interest rates as a result of Entergy’s outstanding indebtedness. Entergymanages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization.See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding.The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To theextent approved by their retail regulators, the Utility operating companies use commodity and financial instruments to hedge theexposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered fromcustomers.Entergy’s commodity and financial instruments are also exposed to credit risk. Credit risk is the risk of loss fromnonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is also exposed to a potentialdemand on liquidity due to credit support requirements within its supply or sales agreements.Commodity Price RiskPower GenerationAs a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to itscustomers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead orspot markets. Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specifiedreserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forwardphysical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sellsboth capacity and energy. While the terminology and payment mechanics vary in these contracts, each of these types of contractsrequires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forwardphysical power contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars,and options, to manage forward commodity price risk. The sensitivities may not reflect the total maximum upside potential from highermarket prices. The information contained in the following table represents projections at a point in time and will vary over time basedon numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy WholesaleCommodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as ofDecember 31, 2018.32Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisEntergy Wholesale Commodities Nuclear Portfolio 2019 2020 2021 2022Energy Percent of planned generation under contract (a): Unit-contingent (b) 98% 94% 91% 66%Planned generation (TWh) (c) (d) 25.6 17.7 9.6 2.8Average revenue per MWh on contracted volumes: Expected based on market prices as of December 31,2018 $39.7 $42.1 $56.8 $58.8 Capacity Percent of capacity sold forward (e): Bundled capacity and energy contracts (f) 26% 37% 68% 97%Capacity contracts (g) 32% 5% —% —%Total 58% 42% 68% 97%Planned net MW in operation (average) (d) 3,167 2,195 1,158 338Average revenue under contract per kW per month(applies to capacity contracts only) $5.9 $2.3 $— $— Total Energy and Capacity Revenues (h) Expected sold and market total revenue per MWh $44.4 $45.1 $54.9 $47.3Sensitivity: -/+ $10 per MWh market price change $44.2 -$44.6 $44.9 -$45.3 $54.0 -$55.8 $43.9 -$50.8(a)Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financialcontracts, or options that mitigate price uncertainty. Positions that are not classified as hedges are netted in the plannedgeneration under contract.(b)Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generallynot liable to the buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guaranteesprovide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as aresult of the failure of the specified generation unit to generate power at or above a specified availability threshold. All ofEntergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.(c)Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operatingcharacteristics, outage schedules, and expected market conditions that affect dispatch.(d)Assumes the planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, plannedshutdown of Indian Point 3 on April 30, 2021, and planned shutdown of Palisades on May 31, 2022. For a discussion regardingthe planned shutdown of the Pilgrim, Indian Point 2, Indian Point 3, and Palisades plants, see “Entergy Wholesale CommoditiesExit from the Merchant Power Business” above.(e)Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.(f)A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.(g)A contract for the sale of an installed capacity product in a regional market.(h)Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, andservice revenues.Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the EntergyWholesale Commodities nuclear business sells power, based on the respective year-end market33Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisconditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of $6 million in2019 and would have had a corresponding effect on pre-tax income of $3 million in 2018. A negative $10 per MWh change in theannual average energy price in the markets based on the respective year-end market conditions, planned generation volumes, andhedged positions, would have a corresponding effect on pre-tax income of ($6) million in 2019 and would have had a correspondingeffect on pre-tax income of ($3) million in 2018.Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions thatrequire an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary isrequired to provide credit support based upon the difference between the current market prices and contracted power prices in theregions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is anEntergy Corporation guarantee. Cash and letters of credit are also acceptable forms of credit support. At December 31, 2018, based onpower prices at that time, Entergy had liquidity exposure of $126 million under the guarantees in place supporting Entergy WholesaleCommodities transactions and $52 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating tobelow investment grade, based on power prices as of December 31, 2018, Entergy would have been required to provide approximately$69 million of additional cash or letters of credit under some of the agreements. As of December 31, 2018, the liquidity exposureassociated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral fromcounterparties, would increase by $310 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.As of December 31, 2018, substantially all of the credit exposure associated with the planned energy output under contract forEntergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investmentgrade credit ratings.Nuclear MattersEntergy’s Utility and Entergy Wholesale Commodities businesses include the ownership and operation of nuclear generatingplants and are, therefore, subject to the risks related to such ownership and operation. These include risks related to: the use, storage,and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capitalinvestments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financial requirementsto address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushima event; theimplementation of plans to cease merchant generation at all Entergy Wholesale Commodities nuclear plants by 2022 and the post-shutdown decommissioning of these plants; regulatory requirements and potential future regulatory changes, including changesaffecting the regulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; theperformance and capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclearfuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets andearnings to complete decommissioning of each site when required; and limitations on the amounts and types of insurance commerciallyavailable for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident.NRC Reactor Oversight ProcessThe NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for itssafety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing twodistinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee.The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licenseeresponse column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and“multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities.Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general,progressively increasing levels of associated costs.34Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisANOSee Note 8 to the financial statements for discussion of the NRC’s decision in March 2015 to move ANO into the“multiple/repetitive degraded cornerstone column,” or Column 4, of the NRC’s Reactor Oversight Process Action Matrix, and theresulting significant additional NRC inspection activities at the ANO site. In June 2018 the NRC moved ANO 1 and ANO 2 into the“licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRCinspections to review ANO 1’s and ANO 2’s performance in addressing issues that had previously resulted in classification in Column4.PilgrimSee Note 8 to the financial statements for discussion of the NRC’s decision in September 2015 to place Pilgrim in Column 4 ofits Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program thatcontributed to repeated unscheduled shutdowns and equipment failures.Grand GulfBased on the plant’s performance indicators, in November 2016 the NRC placed Grand Gulf in the “regulatory responsecolumn,” or Column 2, of its Reactor Oversight Process Action Matrix. In August 2018 the NRC moved Grand Gulf into the “licenseeresponse column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections toreview Grand Gulf’s performance in addressing issues that had previously resulted in classification in Column 2. Based on performanceindicator data for the third quarter 2018, Grand Gulf moved back to Column 2 due to a reduction in power to address an operationalissue with a plant system that resulted in the threshold for one of the NRC’s performance indicators being exceeded.Critical Accounting EstimatesThe preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requiresmanagement to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect onreported financial position, results of operations, and cash flows. Management has identified the following accounting estimates ascritical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for futurechanges in these assumptions and measurements could produce estimates that would have a material effect on the presentation ofEntergy’s financial position, results of operations, or cash flows.Nuclear Decommissioning CostsEntergy subsidiaries own nuclear generation facilities in both the Utility and Entergy Wholesale Commodities operatingsegments. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service,and cash is deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conductsperiodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following keyassumptions have a significant effect on these estimates. •Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning.First, the date of the plant’s retirement must be estimated for those plants that do not have an announced shutdown date. Theestimate may include assumptions regarding the possibility that the plant may have an operating life shorter than the operatinglicense expiration. Second, an assumption must be made regarding whether all decommissioning activity will proceedimmediately upon plant retirement, or whether the plant will be placed in SAFSTOR status. SAFSTOR is decommissioning afacility by placing it in a safe, stable condition that is maintained until it is subsequently decontaminated and dismantled tolevels that permit license termination, normally within 60 years from permanent cessation of operations. A change ofassumption35Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisregarding either the period of continued operation, the use of a SAFSTOR period, or whether Entergy will continue to hold theplant or the plant is held for sale can change the present value of the asset retirement obligation.•Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costswill escalate over present cost levels by factors ranging from approximately 2% to 3% annually. A 50-basis point change in thisassumption could change the estimated present value of the decommissioning liabilities by approximately 6% to 18%. Thetiming assumption influences the significance of the effect of a change in the estimated inflation or cost escalation rate becausethe effect increases with the length of time assumed before decommissioning activity ends.•Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislationhas been passed by Congress to develop a repository at Yucca Mountain, Nevada. The DOE has not yet begun accepting spentnuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy’snuclear plant owners are continuing to pursue damage claims against the DOE for its failure to provide timely spent fuel storage.Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plantsite, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developingand maintaining these facilities during the decommissioning period can have a significant effect (as much as an average of 20%to 30% of total estimated decommissioning costs). Entergy’s decommissioning studies include cost estimates for spent fuelstorage. These estimates could change in the future, however, based on the expected timing of when the DOE begins to fulfill itsobligation to receive and store spent nuclear fuel. See Note 8 to the financial statements for further discussion of Entergy’s spentnuclear fuel litigation.•Technology and Regulation - Over the past several years, more practical experience with the actual decommissioning of nuclearfacilities has been gained and that experience has been incorporated into Entergy’s current decommissioning cost estimates.Given the long duration of decommissioning projects, additional experience, including technological advancements indecommissioning, could be gained, however, and affect current cost estimates. In addition, if regulations regarding nucleardecommissioning were to change, this could significantly affect cost estimates.•Interest Rates - The estimated decommissioning costs that are the basis for the recorded decommissioning liability arediscounted to present value using a credit-adjusted risk-free rate. When the decommissioning liability is revised, increases incash flows are discounted using the current credit-adjusted risk-free rate. Decreases in estimated cash flows are discounted usingthe credit-adjusted risk-free rate used previously in estimating the decommissioning liability that is being revised. Therefore, tothe extent that a revised cost study results in an increase in estimated cash flows, a change in interest rates from the time of theprevious cost estimate will affect the calculation of the present value of the revised decommissioning liability. Revisions of estimated decommissioning costs that decrease the liability also result in a decrease in the asset retirement costasset. For the non-rate-regulated portions of Entergy’s business for which the plant’s value is impaired, these reductions willimmediately reduce operating expenses in the period of the revision if the reduction of the liability exceeds the amount of theundepreciated plant asset at the date of the revision. Revisions of estimated decommissioning costs that increase the liability result in anincrease in the asset retirement cost asset, which is then depreciated over the asset’s remaining economic life. For a plant in the non-rate-regulated portions of Entergy’s business for which the plant’s value is impaired, however, including a plant that is shutdown, or isnearing its shutdown date, the increase in the liability is likely to immediately increase operating expense in the period of the revisionand not increase the asset retirement cost asset. See Note 14 to the financial statements for further discussion of impairment of long-lived assets and Note 9 to the financial statements for further discussion of asset retirement obligations.Utility Regulatory AccountingEntergy’s Utility operating companies and System Energy are subject to retail regulation by their respective state and localregulators and to wholesale regulation by the FERC. Because these regulatory agencies set the rates the Utility operating companies andSystem Energy are allowed to charge customers based on allowable costs, including a reasonable return on equity, the Utility operatingcompanies and System Energy apply accounting standards that36Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysisrequire the financial statements to reflect the effects of rate regulation, including the recording of regulatory assets and liabilities.Regulatory assets represent incurred costs that have been deferred because they are probable of future recovery from customers throughregulated rates. Regulatory liabilities represent the excess recovery of costs that have been deferred because it is probable such amountswill be returned to customers through future regulated rates. See Note 2 to the financial statements for a discussion of rate andregulatory matters, including details of Entergy’s and the Registrant Subsidiaries’ regulatory assets and regulatory liabilities.For each regulatory jurisdiction in which they conduct business, the Utility operating companies and System Energy assesswhether the regulatory assets and regulatory liabilities continue to meet the criteria for probable future recovery or settlement at eachbalance sheet date and when regulatory events occur. This assessment includes consideration of recent rate orders, historical regulatorytreatment for similar costs, and factors such as changes in applicable regulatory and political environments. If the assessments made bythe Utility operating companies and System Energy are ultimately different than actual regulatory outcomes, it could materially affectthe results of operations, financial position, and cash flows of Entergy or the Registrant Subsidiaries.Impairment of Long-lived Assets and Trust Fund InvestmentsEntergy has significant investments in long-lived assets in both of its operating segments, and Entergy evaluates these assetsagainst the market economics and under the accounting rules for impairment when there are indications that an impairment may exist.This evaluation involves a significant degree of estimation and uncertainty. In the Entergy Wholesale Commodities business, Entergy’sinvestments in merchant generation assets are subject to impairment if adverse market or regulatory conditions arise, particularly if itleads to a decision or an expectation that Entergy will operate or own a plant for a shorter period than previously expected; if there is asignificant adverse change in the physical condition of a plant; or, if investment in a plant significantly exceeds previously-expectedamounts.If an asset is considered held for use, and Entergy concludes that events and circumstances are present indicating that animpairment analysis should be performed under the accounting standards, the sum of the expected undiscounted future cash flows fromthe asset are compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement costassociated with the decommissioning liability; therefore, changes in assumptions that affect the decommissioning liability can increaseor decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carryingvalue, no impairment is recorded. If the expected undiscounted future cash flows are less than the carrying value and the carrying valueexceeds the fair value, Entergy is required to record an impairment charge to write the asset down to its fair value. If an asset isconsidered held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than itscarrying value.The expected future cash flows are based on a number of key assumptions, including:•Future power and fuel prices - Electricity and gas prices can be very volatile. This volatility increases the imprecision inherent inthe long-term forecasts of commodity prices that are a key determinant of estimated future cash flows.•Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets.While market transactions provide evidence for this valuation, these transactions are relatively infrequent, the market for suchassets is volatile, and the value of individual assets is affected by factors unique to those assets.•Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatorychanges that have a significant effect on operations could cause a significant change in these assumptions.•Timing and the life of the asset - Entergy assumes an expected life of the asset. A change in the timing assumption, whether dueto management decisions regarding operation of the plant, the regulatory process, or operational or other factors, could have asignificant effect on the expected future cash flows and result in a significant effect on operations.37Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisSee Note 14 to the financial statements for a discussion of impairment conclusions related to the Entergy WholesaleCommodities nuclear plants.Entergy evaluates the available-for-sale debt securities in the Entergy Wholesale Commodities’ nuclear decommissioning trustfunds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. Theassessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergyhas the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. If Entergydoes not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary-impairment is considered tohave occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and placerestrictions on the purchases and sales of investments. Effective January 1, 2018 with the adoption of ASU 2016-01, unrealized lossesand gains on investments in equity securities held by the Entergy Wholesale Commodities’ nuclear decommissioning trust funds arerecorded in earnings as they occur. See Note 16 to the financial statements for details on the decommissioning trust funds.Taxation and Uncertain Tax PositionsManagement exercises significant judgment in evaluating the potential tax effects of Entergy’s operations, transactions, andother events. Entergy accounts for uncertain income tax positions using a recognition model under a two-step approach with a morelikely-than-not recognition threshold and a measurement approach based on the largest amount of tax benefit that is greater than 50%likely of being realized upon settlement. Management evaluates each tax position based on the technical merits and facts andcircumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevantinformation. Significant judgment is required to determine whether available information supports the assertion that the recognitionthreshold has been met. Additionally, measurement of unrecognized tax benefits to be recorded in the consolidated financial statementsis based on the probability of different potential outcomes. Income tax expense and tax positions recorded could be significantlyaffected by events such as additional transactions contemplated or consummated by Entergy as well as audits by taxing authorities ofthe tax positions taken in transactions. Management believes that the financial statement tax balances are accounted for and adjustedappropriately each quarter as necessary in accordance with applicable authoritative guidance; however, the ultimate outcome of taxmatters could result in favorable or unfavorable effects on the consolidated financial statements. Entergy’s income taxes, includingunrecognized tax benefits, open audits, and other significant tax matters are discussed in Note 3 to the financial statements.See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” above and Note 3 to thefinancial statements for discussion of the effects of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December2017.Qualified Pension and Other Postretirement BenefitsEntergy sponsors qualified, defined benefit pension plans that cover substantially all employees, including cash balance plansand final average pay plans. Additionally, Entergy currently provides other postretirement health care and life insurance benefits forsubstantially all full-time employees whose most recent date of hire or rehire is before July 1, 2014 and who reach retirement age andmeet certain eligibility requirements while still working for Entergy.Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are affected bynumerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations,assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations,and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility andEntergy Wholesale Commodities segments.38Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisAssumptionsKey actuarial assumptions utilized in determining qualified pension and other postretirement health care and life insurance costsinclude discount rates, projected healthcare cost rates, expected long-term rate of return on plan assets, rate of increase in futurecompensation levels, retirement rates, expected timing and form of payments, and mortality rates.Annually, Entergy reviews and, when necessary, adjusts the assumptions for the pension and other postretirement plans. Everythree-to-five years, a formal actuarial assumption experience study that compares assumptions to the actual experience of the pensionand other postretirement health care and life insurance plans is conducted. The interest rate environment over the past few years andvolatility in the financial equity markets have affected Entergy’s funding and reported costs for these benefits.Discount ratesIn selecting an assumed discount rate to calculate benefit obligations, Entergy uses a yield curve based on high-qualitycorporate debt with cash flows matching the expected plan benefit payments. In estimating the service cost and interest costcomponents of net periodic benefit cost, Entergy discounts the expected cash flows by the applicable spot rates.Projected health care cost trend ratesEntergy’s health care cost trend is affected by both medical cost inflation, and with respect to capped costs under the plan, theeffects of general inflation. Entergy reviews actual recent cost trends and projected future trends in establishing its health care cost trendrates.Expected long-term rate of return on plan assetsIn determining its expected long-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviewspast performance, current and expected future asset allocations, and capital market assumptions of its investment consultant and someof its investment managers. Entergy conducts periodic asset/liability studies in order to set its target asset allocations.In 2017, Entergy confirmed its liability-driven investment strategy for its pension assets, which recommended that the targetasset allocation adjust dynamically over time, based on the funded status of the plan, to an ultimate allocation of 35% equity securitiesand 65% fixed income securities. The ultimate asset allocation is expected to be attained when the plan is 105% funded. The targetpension asset allocation for 2018 was 58% equity and 42% fixed income securities.In 2017, Entergy implemented a new asset allocation strategy for its non-taxable and taxable other postretirement assets, basedon the funded status of each sub-account within each trust. The new strategy no longer focuses on targeting an overall asset allocationfor each trust, but rather a target asset allocation for each sub-account within each trust that adjusts dynamically based on the fundedstatus. The 2018 weighted average target postretirement asset allocation is 45% equity and 55% fixed income securities. See Note 11 tothe financial statements for discussion of the current asset allocations for Entergy’s pension and other postretirement assets.39Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisCosts and SensitivitiesThe estimated 2019 and actual 2018 qualified pension and other postretirement costs and related underlying assumptions andsensitivities are shown below:Costs Estimated 2019 2018 (In Millions)Qualified pension cost $248.4 $255.6Other postretirement (income)/cost ($5.6) $13.1 Assumptions 2019 2018Discount rates Qualified pension Service cost 4.57% 3.89%Interest cost 4.15% 3.44%Other postretirement Service cost 4.62% 3.88%Interest cost 4.01% 3.33% Expected long-term rates of return Qualified pension assets 7.25% 7.50%Other postretirement - non-taxable assets 6.50% - 7.25% 6.50% - 7.50%Other postretirement - taxable assets - after tax rate 5.50% 5.50% Weighted-average rate of future compensation 3.98% 3.98% Assumed health care cost trend rates Pre-65 retirees 6.59% 6.95%Post-65 retirees 7.15% 7.25%Ultimate rate 4.75% 4.75%Year ultimate rate is reached and beyond Pre-65 retirees 2027 2027Post-65 retirees 2026 2027Actual asset returns have an effect on Entergy’s qualified pension and other postretirement costs. In 2018, Entergy’s actual averageannual return on qualified pension assets was approximately (5%) and for other postretirement assets was approximately (4%), ascompared with the 2018 expected long-term rates of return discussed above.The following chart reflects the sensitivity of qualified pension cost and qualified pension projected benefit obligation tochanges in certain actuarial assumptions (dollars in millions):Actuarial Assumption Change in Assumption Impact on 2019Qualified Pension Cost Impact on 2018Qualified ProjectedBenefit Obligation Increase/(Decrease)Discount rate (0.25%) $21 $210Rate of return on plan assets (0.25%) $14 $—Rate of increase in compensation 0.25% $7 $3440Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and AnalysisThe following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation tochanges in certain actuarial assumptions (dollars in millions):Actuarial Assumption Change in Assumption Impact on 2019Postretirement BenefitCost Impact on 2018AccumulatedPostretirement BenefitObligation Increase/(Decrease)Discount rate (0.25%) $2 $37Health care cost trend 0.25% $3 $29Each fluctuation above assumes that the other components of the calculation are held constant.Accounting MechanismsIn accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatilityof reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized intoexpense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-relatedvalue of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees. Additionally,accounting standards allow for the deferral of prior service costs/credits arising from plan amendments that attribute an increase ordecrease in benefits to employee service in prior periods. Prior service costs/credits are then amortized into expense over the averagefuture working life of active employees. Certain decisions, including workforce reductions, plan amendments, and plant shutdownsmay significantly reduce the expense amortization period and result in immediate recognition of certain previously-deferred costs andgains/losses in the form of curtailment gains or losses. Similarly, payments made to settle benefit obligations, including lump sumbenefit payments, can also result in recognition in the form of settlement losses or gains.Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-termexpected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assetsby calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirementbenefit plan assets Entergy uses fair value when determining MRV.Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans. See Note 11 tothe financial statements for a further discussion of Entergy’s funded status.FundingEntergy’s pension funding in 2018 was $383.5 million. Entergy estimates pension contributions will be approximately $176.9million in 2019; although the 2019 required pension contributions will be known with more certainty when the January 1, 2019valuations are completed, which is expected by April 1, 2019.Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as ofJanuary 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of thefunding liability over the calculated fair market value of assets results in a funding shortfall that, under the Pension Protection Act, mustbe funded over a seven-year rolling period. The Pension Protection Act also imposes certain plan limitations if the funded percentage,which is based on calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For fundingpurposes, asset gains and losses are smoothed in to the calculated fair market value of assets. The funding liability is based upon aweighted average 24-month corporate bond rate published by the U.S. Treasury which is generally subject to a corridor of the 25-yearaverage of prior segment rates. Periodic changes in asset returns and interest rates can affect funding shortfalls and future cashcontributions.41Table of ContentsEntergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis Entergy contributed $43.8 million to its postretirement plans in 2018 and plans to contribute $47.6 million in 2019.Other ContingenciesAs a company with multi-state utility operations, Entergy is subject to a number of federal and state laws and regulations andother factors and conditions in the areas in which it operates, which potentially subjects it to environmental, litigation, and other risks.Entergy periodically evaluates its exposure for such risks and records a provision for those matters which are considered probable andestimable in accordance with generally accepted accounting principles.EnvironmentalEntergy must comply with environmental laws and regulations applicable to air emissions, water discharges, solid waste(including coal combustion residuals), hazardous waste, toxic substances, protected species, and other environmental matters. Underthese various laws and regulations, Entergy could incur substantial costs to comply or address any impacts to the environment. Entergyconducts studies to determine the extent of any required remediation and has recorded liabilities based upon its evaluation of thelikelihood of loss and expected dollar amount for each issue. Additional sites or issues could be identified which require environmentalremediation or corrective action for which Entergy could be liable. The amounts of environmental liabilities recorded can besignificantly affected by the following external events or conditions.•Changes to existing federal, state, or local regulation by governmental authorities having jurisdiction over air quality, waterquality, control of toxic substances and hazardous and solid wastes, and other environmental matters.•The identification of additional impacts, sites, issues, or the filing of other complaints in which Entergy may be asserted to be apotentially responsible party.•The resolution or progression of existing matters through the court system or resolution by the EPA or relevant state or localauthority.LitigationEntergy is regularly named as a defendant in a number of lawsuits involving employment, customers, and injuries and damagesissues, among other matters. Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihoodof loss in each case as probable, reasonably possible, or remote and records liabilities for cases that have a probable likelihood of lossand the loss can be estimated. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases inwhich Entergy is named as a defendant, the ultimate outcome of the litigation to which Entergy is exposed has the potential tomaterially affect the results of operations, financial position, and cash flows of Entergy or the Registrant Subsidiaries.New Accounting Pronouncements See Note 1 to the financial statements for discussion of new accounting pronouncements.42Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESREPORT OF MANAGEMENTManagement of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and relatedfinancial information included in this document. To meet this responsibility, management establishes and maintains a system of internalcontrols over financial reporting designed to provide reasonable assurance regarding the preparation and fair presentation of financialstatements in accordance with generally accepted accounting principles. This system includes communication through written policiesand procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibilityand training of personnel. This system is also tested by a comprehensive internal audit program. Entergy management assesses the design and effectiveness of Entergy’s internal control over financial reporting on an annualbasis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO) in Internal Control - Integrated Framework. The 2013 COSO Framework was utilized for management’sassessment. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherentlimitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.Entergy Corporation’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation reporton the effectiveness of Entergy Corporation’s internal control over financial reporting as of December 31, 2018.In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets with theindependent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing andfinancial reporting matters. The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of theappointment, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meetsperiodically with the independent auditors and the chief internal auditor without management present, providing free access to the AuditCommittee.Based on management’s assessment of internal controls using the 2013 COSO criteria, management believes that Entergy andeach of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2018. Managementfurther believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance thatEntergy’s and each of the Registrant Subsidiaries’ financial statements are fairly and accurately presented in accordance with generallyaccepted accounting principles.LEO P. DENAULTChairman of the Board and Chief Executive Officer of EntergyCorporationANDREW S. MARSHExecutive Vice President and Chief Financial Officer of EntergyCorporation, Entergy Arkansas, LLC, Entergy Louisiana, LLC,Entergy Mississippi, LLC, Entergy New Orleans, LLC, EntergyTexas, Inc., and System Energy Resources, Inc. LAURA R. LANDREAUXChair of the Board, President, and Chief Executive Officer ofEntergy Arkansas, LLC PHILLIP R. MAY, JR.Chairman of the Board, President, and Chief Executive Officer ofEntergy Louisiana, LLCHALEY R. FISACKERLYChairman of the Board, President, and Chief Executive Officer ofEntergy Mississippi, LLC DAVID D. ELLISChairman of the Board, President, and Chief Executive Officer ofEntergy New Orleans, LLC SALLIE T. RAINERChair of the Board, President, and Chief Executive Officer ofEntergy Texas, Inc. RODERICK K. WESTChairman of the Board, President, and Chief Executive Officer ofSystem Energy Resources, Inc.43Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESSELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 20182017201620152014 (In Thousands, Except Percentages and Per Share Amounts) Operating revenues$11,009,452$11,074,481 $10,845,645 $11,513,251$12,494,921Net income (loss)$862,555$425,353 ($564,503) ($156,734)$960,257Earnings (loss) per share: Basic$4.68$2.29 ($3.26) ($0.99)$5.24Diluted$4.63$2.28 ($3.26) ($0.99)$5.22Dividends declared per share$3.58$3.50 $3.42 $3.34$3.32Return on common equity10.08%5.12% (6.73%) (1.83%)9.58%Book value per share, year-end$46.78$44.28 $45.12 $51.89$55.83Total assets$48,275,066$46,707,149 $45,904,434 $44,647,681$46,414,455Long-term obligations (a)$15,758,083$14,535,077 $14,695,422 $13,456,742$12,627,180(a) Includes long-term debt (excluding currently maturing debt), non-current capital lease obligations, and subsidiary preferred stock without sinking fundthat is not presented as equity on the balance sheet. 20182017201620152014 (Dollars In Millions) Utility electric operatingrevenues: Residential$3,566$3,355$3,288$3,518$3,555Commercial2,4262,4802,3622,5162,553Industrial2,4992,5842,3272,4622,623Governmental226231217223227Total retail8,7178,6508,1948,7198,958Sales for resale300253236249330Other367376437341304Total$9,384$9,279$8,867$9,309$9,592 Utility billed electric energysales (GWh): Residential37,10733,83435,11236,06835,932Commercial29,42628,74529,19729,34828,827Industrial48,38447,76945,73944,38243,723Governmental2,5812,5112,5472,5142,428Total retail117,498112,859112,595112,312110,910Sales for resale11,71511,55011,0549,2749,462Total129,213124,409123,649121,586120,372 Entergy WholesaleCommodities: Operating revenues$1,469 $1,657 $1,850 $2,062 $2,719Billed electric energy sales(GWh)29,875 30,501 35,881 39,745 44,42444Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholders and Board of Directors ofEntergy Corporation and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the “Corporation”) as ofDecember 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), cash flows, and changesin equity, for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of theCorporation as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in theperiod ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),the Corporation’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report datedFebruary 26, 2019, expressed an unqualified opinion on the Corporation’s internal control over financial reporting.Basis for OpinionThese financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on theCorporation’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required tobe independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Ouraudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used andsignificant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe thatour audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Corporation’s auditor since 2001.45Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2018 2017 2016 (In Thousands, Except Share Data)OPERATING REVENUES Electric $9,384,111 $9,278,895 $8,866,659Natural gas 156,436 138,856 129,348Competitive businesses 1,468,905 1,656,730 1,849,638TOTAL 11,009,452 11,074,481 10,845,645 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 2,147,793 1,991,589 1,809,200Purchased power 1,658,799 1,427,950 1,220,527Nuclear refueling outage expenses 153,826 168,151 208,678Other operation and maintenance 3,346,397 3,306,694 3,225,477Asset write-offs, impairments, and related charges 532,321 538,372 2,835,637Decommissioning 388,508 405,685 327,425Taxes other than income taxes 641,952 617,556 592,502Depreciation and amortization 1,369,442 1,389,978 1,347,187Other regulatory charges (credits) - net 301,049 (131,901) 94,243TOTAL 10,540,087 9,714,074 11,660,876 OPERATING INCOME (LOSS) 469,365 1,360,407 (815,231) OTHER INCOME Allowance for equity funds used during construction 129,602 95,088 67,563Interest and investment income 63,864 288,197 145,127Miscellaneous - net (129,754) (113,426) (112,851)TOTAL 63,712 269,859 99,839 INTEREST EXPENSE Interest expense 768,322 707,212 700,545Allowance for borrowed funds used during construction (60,974) (44,869) (34,175)TOTAL 707,348 662,343 666,370 INCOME (LOSS) BEFORE INCOME TAXES (174,271) 967,923 (1,381,762) Income taxes (1,036,826) 542,570 (817,259) CONSOLIDATED NET INCOME (LOSS) 862,555 425,353 (564,503) Preferred dividend requirements of subsidiaries 13,894 13,741 19,115 NET INCOME (LOSS) ATTRIBUTABLE TO ENTERGY CORPORATION $848,661 $411,612 ($583,618) Earnings (loss) per average common share: Basic $4.68 $2.29 ($3.26)Diluted $4.63 $2.28 ($3.26) Basic average number of common shares outstanding 181,409,597 179,671,797 178,885,660Diluted average number of common shares outstanding 183,378,513 180,535,893 178,885,660 See Notes to Financial Statements. 46Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) For the Years Ended December 31, 2018 2017 2016 (In Thousands) Net Income (Loss)$862,555 $425,353 ($564,503) Other comprehensive income (loss) Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $5,830, ($22,570), and ($55,298))22,098 (41,470) (101,977)Pension and other postretirement liabilities (net of tax expense (benefit) of $30,299, ($4,057), and ($3,952))90,143 (61,653) (2,842)Net unrealized investment gains (losses) (net of tax expense of $6,393, $80,069, and $57,277)(28,771) 115,311 62,177Foreign currency translation (net of tax benefit of $-, $403, and $689)— (748) (1,280)Other comprehensive income (loss)83,470 11,440 (43,922) Comprehensive Income (Loss)946,025 436,793 (608,425)Preferred dividend requirements of subsidiaries13,894 13,741 19,115Comprehensive Income (Loss) Attributable to Entergy Corporation$932,131 $423,052 ($627,540) See Notes to Financial Statements. 47Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING ACTIVITIES Consolidated net income (loss) $862,555 $425,353 ($564,503)Adjustments to reconcile consolidated net income (loss) to net cash flow provided byoperating activities: Depreciation, amortization, and decommissioning, including nuclear fuel amortization 2,040,555 2,078,578 2,123,291Deferred income taxes, investment tax credits, and non-current taxes accrued (256,848) 529,053 (836,257)Asset write-offs, impairments, and related charges 491,739 357,251 2,835,637Changes in working capital: Receivables 98,546 (97,637) (96,975)Fuel inventory 45,839 (3,043) 38,210Accounts payable 97,312 101,802 174,421Prepaid taxes and taxes accrued 39,272 33,853 (28,963)Interest accrued 5,220 742 (7,335)Deferred fuel costs (25,829) 56,290 (241,896)Other working capital accounts (164,173) (4,331) 31,197Changes in provisions for estimated losses 35,706 (3,279) 20,905Changes in other regulatory assets 189,193 595,504 (48,469)Changes in other regulatory liabilities (803,323) 2,915,795 158,031Deferred tax rate change recognized as regulatory liability / asset — (3,665,498) —Changes in pensions and other postretirement liabilities (304,941) (130,686) (136,919)Other 34,424 (566,247) (421,676)Net cash flow provided by operating activities 2,385,247 2,623,500 2,998,699 INVESTING ACTIVITIES Construction/capital expenditures (3,942,010) (3,607,532) (2,780,222)Allowance for equity funds used during construction 130,195 96,000 68,345Nuclear fuel purchases (302,584) (377,324) (314,706)Payment for purchase of plant or assets (26,623) (16,762) (949,329)Proceeds from sale of assets 24,902 100,000 —Insurance proceeds received for property damages 18,270 26,157 20,968Changes in securitization account (5,844) 1,323 4,007Payments to storm reserve escrow account (6,551) (2,878) (1,544)Receipts from storm reserve escrow account — 11,323 —Decrease (increase) in other investments (54,500) 1,078 9,055Litigation proceeds for reimbursement of spent nuclear fuel storage costs 59,643 25,493 169,085Proceeds from nuclear decommissioning trust fund sales 6,484,791 3,162,747 2,408,920Investment in nuclear decommissioning trust funds (6,485,676) (3,260,674) (2,484,627)Net cash flow used in investing activities (4,105,987) (3,841,049) (3,850,048) See Notes to Financial Statements. 48Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands) FINANCING ACTIVITIES Proceeds from the issuance of: Long-term debt 8,035,536 1,809,390 6,800,558Preferred stock of subsidiary 73,330 14,399 —Treasury stock 103,315 80,729 33,114Common stock 499,272 — —Retirement of long-term debt (6,965,738) (1,585,681) (5,311,324)Repurchase / redemptions of preferred stock (53,868) (20,599) (115,283)Changes in credit borrowings and commercial paper - net 364,031 1,163,296 (79,337)Other 26,453 (7,731) (6,872)Dividends paid: Common stock (647,704) (628,885) (611,835)Preferred stock (14,185) (13,940) (20,789)Net cash flow provided by financing activities 1,420,442 810,978 688,232 Net decrease in cash and cash equivalents (300,298) (406,571) (163,117) Cash and cash equivalents at beginning of period 781,273 1,187,844 1,350,961 Cash and cash equivalents at end of period $480,975 $781,273 $1,187,844 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $734,845 $678,371 $746,779Income taxes $19,825 ($13,375) $95,317 See Notes to Financial Statements. 49Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $56,690 $56,629Temporary cash investments 424,285 724,644Total cash and cash equivalents 480,975 781,273Accounts receivable: Customer 558,494 673,347Allowance for doubtful accounts (7,322) (13,587)Other 167,722 169,377Accrued unbilled revenues 395,511 383,813Total accounts receivable 1,114,405 1,212,950Deferred fuel costs 27,251 95,746Fuel inventory - at average cost 117,304 182,643Materials and supplies - at average cost 752,843 723,222Deferred nuclear refueling outage costs 230,960 133,164Prepayments and other 234,326 156,333TOTAL 2,958,064 3,285,331 OTHER PROPERTY AND INVESTMENTS Investment in affiliates - at equity — 198Decommissioning trust funds 6,920,164 7,211,993Non-utility property - at cost (less accumulated depreciation) 304,382 260,980Other 437,265 441,862TOTAL 7,661,811 7,915,033 PROPERTY, PLANT, AND EQUIPMENT Electric 49,196,578 47,287,370Property under capital lease 634,908 620,544Natural gas 496,150 453,162Construction work in progress 2,888,639 1,980,508Nuclear fuel 861,272 923,200TOTAL PROPERTY, PLANT AND EQUIPMENT 54,077,547 51,264,784Less - accumulated depreciation and amortization 22,103,101 21,600,424PROPERTY, PLANT AND EQUIPMENT - NET 31,974,446 29,664,360 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Other regulatory assets (includes securitization property of $360,790 as of December 31, 2018 and $485,031 asof December 31, 2017) 4,746,496 4,935,689Deferred fuel costs 239,496 239,298Goodwill 377,172 377,172Accumulated deferred income taxes 54,593 178,204Other 262,988 112,062TOTAL 5,680,745 5,842,425 TOTAL ASSETS $48,275,066 $46,707,149 See Notes to Financial Statements. 50Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $650,009 $760,007Notes payable and commercial paper 1,942,339 1,578,308Accounts payable 1,496,058 1,452,216Customer deposits 411,505 401,330Taxes accrued 254,241 214,967Interest accrued 193,192 187,972Deferred fuel costs 52,396 146,522Obligations under capital leases 1,617 1,502Pension and other postretirement liabilities 61,240 71,612Current portion of unprotected excess accumulated deferred income taxes 248,127 —Other 132,820 221,771TOTAL 5,443,544 5,036,207 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 4,107,152 4,466,503Accumulated deferred investment tax credits 213,101 219,634Obligations under capital leases 20,378 22,015Regulatory liability for income taxes-net 1,817,021 2,900,204Other regulatory liabilities 1,620,254 1,588,520Decommissioning and asset retirement cost liabilities 6,355,543 6,185,814Accumulated provisions 514,107 478,273Pension and other postretirement liabilities 2,616,085 2,910,654Long-term debt (includes securitization bonds of $423,858 as of December 31, 2018 and $544,921 as ofDecember 31, 2017) 15,518,303 14,315,259Other 985,871 393,748TOTAL 33,767,815 33,480,624 Commitments and Contingencies Subsidiaries’ preferred stock without sinking fund 219,402 197,803 COMMON EQUITY Common stock, $.01 par value, authorized 500,000,000 shares; issued 261,587,009 shares in 2018 and254,752,788 shares in 2017 2,616 2,548Paid-in capital 5,951,431 5,433,433Retained earnings 8,721,150 7,977,702Accumulated other comprehensive loss (557,173) (23,531)Less - treasury stock, at cost (72,530,866 shares in 2018 and 74,235,135 shares in 2017) 5,273,719 5,397,637TOTAL 8,844,305 7,992,515 TOTAL LIABILITIES AND EQUITY $48,275,066 $46,707,149 See Notes to Financial Statements. 51Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Common Shareholders’ Equity Subsidiaries’Preferred Stock CommonStock Treasury Stock Paid-in Capital RetainedEarnings Accumulated OtherComprehensiveIncome (Loss) Total (In Thousands) Balance at December 31, 2015$— $2,548 ($5,552,379) $5,403,758 $9,393,913 $8,951 $9,256,791 Consolidated net income (loss)19,115 — — — (583,618) — (564,503)Other comprehensive loss— — — — — (43,922) (43,922)Common stock issuances related tostock plans— — 53,795 13,487 — — 67,282Common stock dividends declared— — — — (611,835) — (611,835)Subsidiaries' capital stock redemptions— — — — (2,889) — (2,889)Preferred dividend requirements ofsubsidiaries(19,115) — — — — — (19,115)Balance at December 31, 2016$— $2,548 ($5,498,584) $5,417,245 $8,195,571 ($34,971) $8,081,809 Consolidated net income13,741 — — — 411,612 — 425,353Other comprehensive income— — — — — 11,440 11,440Common stock issuances related tostock plans— — 100,947 16,188 — — 117,135Common stock dividends declared— — — — (628,885) — (628,885)Subsidiaries' capital stock redemptions— — — — (596) — (596)Preferred dividend requirements ofsubsidiaries(13,741) — — — — — (13,741)Balance at December 31, 2017$— $2,548 ($5,397,637) $5,433,433 $7,977,702 ($23,531) $7,992,515Implementation of accountingstandards— — — — 576,257 (632,617) (56,360)Balance at January 1, 2018$— $2,548 ($5,397,637) $5,433,433 $8,553,959 ($656,148) $7,936,155 Consolidated net income13,894 — — — 848,661 — 862,555Other comprehensive income— — — — — 83,470 83,470Settlement of equity forwards throughcommon stock issuance— 68 — 499,932 — — 500,000Common stock issuance costs— — — (728) — — (728)Common stock issuances related tostock plans— — 123,918 18,794 — — 142,712Common stock dividends declared— — — — (647,704) — (647,704)Subsidiaries' capital stock redemptions— — — — (1,723) — (1,723)Preferred dividend requirements ofsubsidiaries(13,894) — — — — — (13,894)Reclassification pursuant to ASU2018-02— — — — (32,043) 15,505 (16,538)Balance at December 31, 2018$— $2,616 ($5,273,719) $5,951,431 $8,721,150 ($557,173) $8,844,305 See Notes to Financial Statements. 52Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESNOTES TO FINANCIAL STATEMENTSNOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries. Asrequired by generally accepted accounting principles in the United States of America, all intercompany transactions have beeneliminated in the consolidated financial statements. Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K. The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and otherregulatory guidelines. Use of Estimates in the Preparation of Financial StatementsIn conformity with generally accepted accounting principles in the United States of America, the preparation of EntergyCorporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requiresmanagement to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and thedisclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in thefuture to the extent that future estimates or actual results are different from the estimates used.Revenues and Fuel CostsEntergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric powerprimarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively. Entergy Louisiana also distributes natural gasto retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retailcustomers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales ofelectric power generated by plants owned by subsidiaries in that segment.Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To theextent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of therevenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon severalfactors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and pricesin effect in Entergy’s Utility operating companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed toreflect changes in billing practices. Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accountsreceivable, and the prior month’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors suchas weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenuesfrom one period to the next as prior estimates are reversed and new estimates recorded.For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probablerefunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which alloweither current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuelcomponent of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed aspart of a general rate case, fuel reconciliation, or fixed fuel factor53Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsfiling. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, andEntergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing areturn on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interestcost for its debt allocable to its investment in Grand Gulf.Property, Plant, and EquipmentProperty, plant, and equipment is stated at original cost less regulatory disallowances and impairments. Depreciation iscomputed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For theRegistrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normalmaintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries’plant is subject to mortgage liens.Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods. For financialreporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisianacompleted the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased byacquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assetstransferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of theWaterford 3 leased assets.Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulatedamortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:2018 Entergy Utility EntergyWholesaleCommodities Parent &Other (In Millions)Production Nuclear $7,096 $6,964 $132 $—Other 4,171 4,069 102 —Transmission 6,592 6,590 2 —Distribution 8,343 8,343 — —Other 2,022 2,011 2 9Construction work in progress 2,889 2,815 74 —Nuclear fuel 861 754 107 —Property, plant, and equipment - net $31,974 $31,546 $419 $954Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 Entergy Utility EntergyWholesaleCommodities Parent &Other (In Millions)Production Nuclear $6,946 $6,694 $252 $—Other 4,215 4,118 97 —Transmission 5,844 5,842 2 —Distribution 8,000 8,000 — —Other 1,755 1,748 3 4Construction work in progress 1,981 1,951 30 —Nuclear fuel 923 822 101 —Property, plant, and equipment - net $29,664 $29,175 $485 $4Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in2016. Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reducedremaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter2017 to continue operating Palisades until May 31, 2022.Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in theincome statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantlyreduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense whenincurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177million as of December 31, 2018 and $167 million as of December 31, 2017.Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as ofDecember 31, 2017.Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associatedaccumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:55Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy (In Millions)Production Nuclear $1,494 $3,725 $— $— $— $1,745Other 820 2,029 509 196 515 —Transmission 1,792 2,571 1,046 78 1,063 40Distribution 2,329 2,882 1,342 471 1,319 —Other 311 699 242 233 193 39Construction work inprogress 244 1,865 128 147 325 70Nuclear fuel 221 298 — — — 235Property, plant, andequipment - net $7,211 $14,069 $3,267 $1,125 $3,415 $2,1292017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy (In Millions)Production Nuclear $1,368 $3,664 $— $— $— $1,660Other 806 2,016 560 207 531 —Transmission 1,650 2,148 900 81 1,021 42Distribution 2,226 2,748 1,316 440 1,270 —Other 247 592 203 204 168 39Construction work inprogress 281 1,281 149 47 102 70Nuclear fuel 277 337 — — — 208Property, plant, andequipment - net $6,855 $12,786 $3,128 $979 $3,092 $2,019Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below: EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy20182.5% 2.3% 3.2% 3.5% 2.7% 1.9%20172.5% 2.3% 3.1% 3.5% 2.6% 2.8%20162.5% 2.3% 3.1% 3.4% 2.5% 2.8%Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciationof $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (lessaccumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018and $0.5 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reportednet of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas,$104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million forEntergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accountspayable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.56Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsJointly-Owned Generating StationsCertain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required toprovide their own financing. The investments, fuel expenses, and other operation and maintenance expenses associated with thesegenerating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As ofDecember 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:57Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsGenerating Stations FuelType TotalMegawattCapability(a) Ownership Investment AccumulatedDepreciation (In Millions)Utility business: Entergy Arkansas - IndependenceUnit 1 Coal 810 31.50% $141 $103 IndependenceCommon Facilities Coal 15.75% $35 $28 White BluffUnits 1 and 2 Coal 1,637 57.00% $553 $368 Ouachita (b)Common Facilities Gas 66.67% $173 $151 Union (c)Units 1 and 2 CommonFacilities Gas 50.00% $1 $— Union (c)Common Facilities Gas 25.00% $29 $4Entergy Louisiana - Roy S. NelsonUnit 6 Coal 550 40.25% $282 $200 Roy S. NelsonUnit 6 Common Facilities Coal 20.83% $19 $8 Big Cajun 2Unit 3 Coal 581 24.15% $151 $120 Big Cajun 2Unit 3 Common Facilities Coal 8.05% $5 $2 Ouachita (b)Common Facilities Gas 33.33% $90 $76 AcadiaCommon Facilities Gas 50.00% $20 $1 Union (c)Common Facilities Gas 50.00% $57 $5Entergy Mississippi - IndependenceUnits 1 and 2 andCommon Facilities Coal 1,652 25.00% $270 $158Entergy New Orleans - Union (c)Units 1 and 2 CommonFacilities Gas 50.00% $1 $— Union (c)Common Facilities Gas 25.00% $29 $4Entergy Texas - Roy S. NelsonUnit 6 Coal 550 29.75% $201 $116 Roy S. NelsonUnit 6 Common Facilities Coal 15.39% $7 $3 Big Cajun 2Unit 3 Coal 581 17.85% $113 $77 Big Cajun 2Unit 3 Common Facilities Coal 5.95% $3 $1System Energy - Grand Gulf (d)Unit 1 Nuclear 1,391 90.00% $5,036 $3,212Entergy WholesaleCommodities: IndependenceUnit 2 Coal 842 14.37% $74 $52 IndependenceCommon Facilities Coal 7.18% $17 $12 Roy S. NelsonUnit 6 Coal 550 10.90% $114 $64 Roy S. NelsonUnit 6 Common Facilities Coal 5.64% $2 $158Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements(a)“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions basedon the primary fuel (assuming no curtailments) that each station was designed to utilize.(b)Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana. Theinvestment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.(c)Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4are owned 100% by Entergy Louisiana. The investment and accumulated depreciation numbers above are only for the specifiedcommon facilities and not for the generating units.(d)Includes a leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 tothe financial statements.Nuclear Refueling Outage CostsNuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outagebecause these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to betaken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantlyreduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly toexpense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.Allowance for Funds Used During Construction (AFUDC)AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity fundsused for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cashthrough depreciation provisions included in the rates charged to customers.Income TaxesEntergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. EntergyArkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the EntergyCorporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLCconsolidated federal income tax filing group. Each tax-paying entity records income taxes as if it were a separate taxpayer andconsolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocationagreements. Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, andfor certain losses and credits available for carryforward.Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not thatsome portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes intax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section inNote 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as areduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.59Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEarnings (Loss) per ShareThe following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statementsof operations: For the Years Ended December 31, 2018 2017 2016 (In Millions, Except Per Share Data) $/share $/share $/shareNet income (loss) attributable toEntergy Corporation$848.7 $411.6 ($583.6) Basic shares and earnings (loss) peraverage common share181.4 $4.68 179.7 $2.29 178.9 ($3.26)Average dilutive effect of: Stock options0.3 (0.01) 0.2 — — —Other equity plans0.7 (0.02) 0.6 (0.01) — —Equity forwards1.0 (0.02) — — — —Diluted shares and earnings (loss) peraverage common shares183.4 $4.63 180.5 $2.28 178.9 ($3.26)The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.Stock-based Compensation PlansEntergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of theEntergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans. These plansare described more fully in Note 12 to the financial statements. The cost of the stock-based compensation is charged to income overthe vesting period. Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-basedcompensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the incomestatement.Accounting for the Effects of RegulationEntergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specifiedin accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator)empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteriamay also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classesof customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, whichwould otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in futurerevenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterpriseconcludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balancesheet.An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financialstatements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets andliabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all ofits costs, it is possible that an impairment may exist that could require further write-offs of plant assets.60Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariffrates. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion(approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The planallows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers andshareholders.Regulatory Asset or Liability for Income TaxesAccounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currentlydeterminable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers throughfuture rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related tothe ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized toproperty, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, andequipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment ofEntergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate incometax rate, which is discussed in Note 3 to the financial statements.Cash and Cash EquivalentsEntergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date ofpurchase to be cash equivalents.Securitization Recovery Trust AccountsThe funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitizationrecovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature,uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframewithin which the Registrant Subsidiary expects to use the funds.Allowance for Doubtful AccountsThe allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. Theallowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operatingcompany customer accounts receivable are written off consistent with approved regulatory requirements.InvestmentsEntergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with theadoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trustfunds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the RegistrantSubsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trustfunds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in otherregulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsettingamount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission theplant. Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do notmeet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the61Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementstrust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds arerecognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceedsfair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensiveincome component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Aportion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains andlosses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment ofwhether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whetherEntergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment isconsidered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis(credit loss). Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investmentguidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on thedecommissioning trust funds.Equity Method InvestmentsEntergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership levelresults in significant influence, but not control, over the investee and its operations. Entergy records its share of the investee’scomprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions arecharged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of lossesequals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. Derivative Financial Instruments and Commodity DerivativesThe accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair valueon the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal salecriteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensiveincome, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due toregulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for theRegistrant Subsidiaries.Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course ofbusiness, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are notrecognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenueand expense categories as the commodities are received or delivered.For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset,liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments arereported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and thehedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, theeffectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in othercomprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur. The ineffectiveportions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there willno longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivativeinstruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accountingstandards for derivative instruments because they do not provide for net settlement and the uranium markets62Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsare not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do becomesufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value ofthese contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statementsfor further details on Entergy’s derivative instruments and hedging activities.Fair ValuesThe estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices,market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore,estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realizedon financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income. Entergyconsiders the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate oftheir fair value because of the short maturity of these instruments. See Note 15 to the financial statements for further discussion of fairvalue.Impairment of Long-lived AssetsEntergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstancesindicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted netcash flows expected to result from such operations and assets. Projected net cash flows depend on the expected operating life of theassets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and thefuture market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets areimpaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants,except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because theirundiscounted cash flows are insufficient to recover the carrying amount of these capital additions. See Note 14 to the financialstatements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.River Bend AFUDCThe River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC betweenthe AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDCwould have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed inrate base and is being amortized through August 2025.Reacquired DebtThe premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (exceptthat portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized overthe life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance withratemaking treatment.Taxes Imposed on Revenue-Producing TransactionsGovernmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transactionbetween a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents thesetaxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.63Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNew Accounting PronouncementsIn February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).” The ASU’s core principle is that “a lessee shouldrecognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” andaccordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. In January 2018 theFASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providingentities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard.In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify thetransition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead ofat the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components forlessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. Inadopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately$263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy NewOrleans, and $16 million for Entergy Texas.In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of CreditLosses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded atamortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument.Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergyfor the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, andcash flows. In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements toAccounting for Hedging Activities.” The ASU makes a number of amendments to hedge accounting, most significantly changing therecognition and presentation of highly effective hedges. Upon adoption of the standard there will no longer be separate recognition orpresentation of the ineffective portion of highly effective hedges. In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosurerequirements for hedges. ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 willaffect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales. Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately$8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.” The ASUrequires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangementsand amortize those costs over the contract term. These costs are required to be capitalized in the same line as prepayments of the costs,and subsequently amortized in the same lines as the hosting service element of the arrangement. ASU 2018-15 is effective for Entergyfor the first quarter 2020. Entergy does not expect to early adopt the standard. Entergy expects that it will elect to adopt ASU 2018-15on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangementsas prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of thearrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.64Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy) Regulatory Assets and Regulatory LiabilitiesRegulatory assets represent probable future revenues associated with costs that Entergy expects to recover from customersthrough the regulatory ratemaking process under which the Utility business operates. Regulatory liabilities represent probable futurereductions in revenues associated with amounts that Entergy expects to benefit customers through the regulatory ratemaking processunder which the Utility business operates. In addition to the regulatory assets and liabilities that are specifically disclosed on the face ofthe balance sheets, the tables below provide detail of “Other regulatory assets” and “Other regulatory liabilities” that are included onEntergy’s and the Registrant Subsidiaries’ balance sheets as of December 31, 2018 and 2017: Other Regulatory AssetsEntergy 2018 2017 (In Millions)Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other PostretirementBenefits, and Non-Qualified Pension Plans) (a)$2,611.5 $2,642.3Asset retirement obligation - recovery dependent upon timing of decommissioning of nuclearunits or dismantlement of non-nuclear power plants (Note 9) (a)814.3 746.0Storm damage costs, including hurricane costs - recovered through securitization and retail rates(Note 2 – Storm Cost Recovery Filings with Retail Regulators) (Note 5)452.7 558.9Removal costs - recovered through depreciation rates (Note 9)375.8 436.5Opportunity Sales - recovery will be determined after final order in proceeding (Note 2 - EntergyArkansas Opportunity Sales Proceeding)116.3 109.8Unamortized loss on reacquired debt - recovered over term of debt74.5 82.9Little Gypsy costs – recovered through securitization (Note 5 – Entergy Louisiana SecuritizationBonds - Little Gypsy)52.1 73.7Retail rate deferrals - recovered through rate riders as rates are redetermined by retail regulators39.0 86.4New nuclear generation development costs (Note 2 - New Nuclear Generation DevelopmentCosts) (b)29.0 36.4Transition to competition costs - recovered over a 15-year period through February 202126.7 37.7Other154.6 125.1Entergy Total$4,746.5 $4,935.765Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Arkansas 2018 2017 (In Millions)Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other PostretirementBenefits, and Non-Qualified Pension Plans) (a)$747.2 $757.0Asset retirement obligation - recovery dependent upon timing of decommissioning of nuclearunits or dismantlement of non-nuclear power plants (Note 9) (a)381.7 345.2Removal costs - recovered through depreciation rates (Note 9)138.3 176.9Opportunity sales - recovery will be determined after final order in proceeding (Note 2 - EntergyArkansas Opportunity Sales Proceeding)116.3 109.8Storm damage costs - recovered either through securitization or retail rates (Note 5 - EntergyArkansas Securitization Bonds)60.7 76.2Unamortized loss on reacquired debt - recovered over term of debt21.2 24.3Retail rate deferrals - recovered through rate riders as rates are redetermined annually20.5 28.2ANO Fukushima and Flood Barrier costs - recovered through retail rates through February 2026(Note 2 - Retail Rate Proceedings) (b)12.6 14.4Other36.5 35.4Entergy Arkansas Total$1,535.0 $1,567.4Entergy Louisiana 2018 2017 (In Millions)Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified PensionPlans) (a)$711.8 $724.6Asset Retirement Obligation - recovery dependent upon timing of decommissioning of nuclearunits or dismantlement of non-nuclear power plants (Note 9) (a)232.9 218.6Little Gypsy costs – recovered through securitization (Note 5 – Entergy Louisiana SecuritizationBonds - Little Gypsy)49.8 71.4New nuclear generation development costs - recovery through formula rate plan December 2014through November 2022 (Note 2 - New Nuclear Generation Development Costs) (b)28.5 35.8Unamortized loss on reacquired debt - recovered over term of debt22.5 24.7Storm damage costs - recovered through retail rates (Note 2 - Storm Cost Recovery Filings withRetail Regulators)17.9 14.3Business combination external costs deferral - recovery through formula rate plan December2015 through November 2025 (b)12.4 14.1River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC)11.0 12.9Other18.3 29.4Entergy Louisiana Total$1,105.1 $1,145.866Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Mississippi 2018 2017 (In Millions)Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other PostretirementBenefits, and Non-Qualified Pension Plans) (a)$215.9 $218.7Removal costs - recovered through depreciation rates (Note 9)63.5 91.6Attorney General litigation costs (Note 2 - Mississippi Attorney General Complaint) (b)23.6 9.3Retail rate deferrals - recovered through rate riders as rates are redetermined annually16.6 49.4Unamortized loss on reacquired debt - recovered over term of debt16.2 17.6Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclearpower plants (Note 9) (a)7.2 7.6Other— 3.7Entergy Mississippi Total$343.0 $397.9Entergy New Orleans 2018 2017 (In Millions)Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other PostretirementBenefits, and Non-Qualified Pension Plans) (a)$96.2 $102.8Storm damage costs, including hurricane costs - recovered through retail rates and securitization(Note 2 - Storm Cost Recovery Filings with Retail Regulators)70.4 82.3Removal costs - recovered through depreciation rates (Note 9)49.3 44.8Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclearpower plants (Note 9) (a)4.5 4.3Unamortized loss on reacquired debt - recovered over term of debt2.6 3.0Rate case costs - recovered over a 6-year period through September 2021 (Note 2 - Retail RateProceedings)1.9 2.6Retail rate deferrals - recovered through rate riders as rates are redetermined monthly orannually— 4.4Other4.9 7.2Entergy New Orleans Total$229.8 $251.467Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Texas 2018 2017 (In Millions)Storm damage costs, including hurricane costs - recovered through securitization and retail rates(Note 5 - Entergy Texas Securitization Bonds)$303.6 $386.1Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other PostretirementBenefits, and Non-Qualified Pension Plans) (a)171.8 169.2Removal costs - recovered through depreciation rates (Note 9)50.9 55.2Transition to competition costs - recovered over a 15-year period through February 202126.7 37.7Neches and Sabine costs - recovered over a ten-year period through September 2028 (Note 2 -Retail Rate Proceedings) (b)23.6 —Unamortized loss on reacquired debt - recovered over term of debt8.2 8.7Other13.2 4.5Entergy Texas Total$598.0 $661.4System Energy 2018 2017 (In Millions)Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other PostretirementBenefits) (a)$179.3 $202.7Asset retirement obligation - recovery dependent upon timing of decommissioning (Note 9) (a)186.9 169.1Removal costs - recovered through depreciation rates (Note 9)76.4 67.9Unamortized loss on reacquired debt - recovered over term of debt3.8 4.6System Energy Total$446.4 $444.3(a)Does not earn a return on investment, but is offset by related liabilities.(b)Does not earn a return on investment.68Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsOther Regulatory LiabilitiesEntergy 2018 2017 (In Millions)Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)$815.9 $989.3Vidalia purchased power agreement (Note 8) (b)139.7 151.6Louisiana Act 55 financing savings obligation (Note 2 - Storm Cost Recovery Filings withRetail Regulators) (b)111.1 124.8Income tax rate change - returned to electric and gas customers through retail rates (Note 2 -Retail Rate Proceedings)74.7 —Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions)67.9 67.9Business combination guaranteed customer benefits - returned to customers through retail ratesand fuel rates December 2015 through November 2024 (Note 2 - Entergy Louisiana andEntergy Gulf States Louisiana Business Combination)50.8 65.8Grand Gulf over-recovery - will be refunded through rate riders as rates are redeterminedannually48.6 —Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned tocustomers when approved by the APSC and the FERC44.4 44.4Future formula rate plan revenue reductions (Note 2 - Retail Rate Proceedings)44.4 —Internal restructuring guaranteed customer credits (Note 2 - Retail Rate Proceedings)39.6 —Asset retirement obligation - return to customers dependent upon timing of decommissioning(Note 9) (a)39.1 36.7Excess decommissioning recovery for Willow Glen - (Note 14 - Dispositions)31.9 —Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized andcredited through the Unit Power Sales Agreement25.0 32.1Removal costs - returned to customers through depreciation rates (Note 9)18.8 32.4Other68.4 43.5Entergy Total$1,620.3 $1,588.5Entergy Arkansas 2018 2017 (In Millions)Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)$297.2 $354.0Internal restructuring guaranteed customer credits (Note 2 - Retail Rate Proceedings)39.6 —Future formula rate plan revenue reductions (Note 2 - Retail Rate Proceedings)35.1 —Grand Gulf over-recovery - will be refunded through rate riders as rates are redeterminedannually26.0 —Other4.8 9.6Entergy Arkansas Total$402.7 $363.669Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Louisiana 2018 2017 (In Millions)Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)$274.1 $323.7Vidalia purchased power agreement (Note 8) (b)139.7 151.6Louisiana Act 55 financing savings obligation (Note 2 - Storm Cost Recovery Filings withRetail Regulators) (b)111.1 124.8Business combination guaranteed customer benefits - returned to customers through retail ratesand fuel rates December 2015 through November 2024 (Note 2 - Entergy Louisiana andEntergy Gulf States Louisiana Business Combination)50.8 65.8Income tax rate change - returned to electric customers through retail rates September 2018through August 2019 (Note 2 - Retail Rate Proceedings)49.9 —Asset Retirement Obligation - return to customers dependent upon timing of decommissioning(Note 9) (a)39.1 36.7Excess decommissioning recovery for Willow Glen - (Note 14 - Dispositions)31.9 —Removal costs - returned to customers through depreciation rates (Note 9)18.8 32.4Other33.4 26.1Entergy Louisiana Total$748.8 $761.1Entergy Mississippi 2018 2017 (In Millions)Grand Gulf Over-Recovery - returned to customers through rate riders when rates areredetermined annually$22.6 $—Future formula rate plan revenue reductions (Note 2 - Retail Rate Proceedings)9.3 —Other1.7 0.9Entergy Mississippi Total$33.6 $0.9Entergy Texas 2018 2017 (In Millions)Income tax rate change - refunded through a rate rider (Note 2 - Retail Rate Proceedings)$23.1 $—Advanced metering system surcharge (Note 2 - Advanced Metering Infrastructure (AMI)Filings)16.5 —Transition to competition costs - returned to customers through rate riders when rates areredetermined periodically4.2 4.8Other4.1 2.1Entergy Texas Total$47.9 $6.970Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsSystem Energy 2018 2017 (In Millions)Unrealized gains on nuclear decommissioning trust funds (Note 17) (a)$244.6 $311.6Grand Gulf sale-leaseback - (Note 10 - Sale and Leaseback Transactions)67.9 67.9Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will be returned tocustomers when approved by the APSC and the FERC44.4 44.4Entergy Mississippi’s accumulated accelerated Grand Gulf amortization - amortized andcredited through the Unit Power Sales Agreement25.0 32.1System Energy Total$381.9 $456.0(a)Offset by related asset.(b)As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the federal corporate incometax rate from 35% to 21% effective January 2018, the Vidalia purchased power agreement regulatory liability was reduced by$30.5 million and the Louisiana Act 55 financing savings obligation regulatory liabilities were reduced by $25.0 million, withcorresponding increases to Other regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act arediscussed further in Note 3 to the financial statements.Regulatory activity regarding the Tax Cuts and Jobs ActSee the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of theeffects of the December 2017 enactment of the Tax Cuts and Jobs Act, including its effects on Entergy’s and the RegistrantSubsidiaries’ regulatory asset/liability for income taxes.Entergy ArkansasConsistent with its previously stated intent to return unprotected excess accumulated deferred income taxes to customers asexpeditiously as possible, Entergy Arkansas initiated a tariff proceeding in February 2018 proposing to establish a tax adjustment riderto provide retail customers with certain tax benefits of $467 million associated with the Tax Act. For the residential customer class,unprotected excess accumulated deferred income taxes will be returned to customers over a 21-month period from April 2018 throughDecember 2019. For all other customer classes, unprotected excess accumulated deferred income taxes were returned to customersover a nine-month period from April 2018 through December 2018. A true-up provision also was included in the rider, with any over-or under-returned unprotected excess accumulated deferred income taxes to be credited or billed to customers during the billing monthof January 2020, with any residual amounts of over- or under-returned unprotected excess accumulated deferred income taxes to beflowed through Entergy Arkansas’s energy cost recovery rider. In March 2018 the APSC approved the tax adjustment rider effectivewith the first billing cycle of April 2018.As discussed below, in July 2018, Entergy Arkansas made its formula rate plan filing to set its formula rate for the 2019calendar year. A hearing was held in May 2018 regarding the APSC’s inquiries into the effects of the Tax Act, including EntergyArkansas’s proposal to utilize its existing formula rate plan rider for its customers to realize the remaining benefits of the Tax Act.Entergy Arkansas’s formula rate plan rider includes a netting adjustment that compares actual annual results to the allowed rate ofreturn on common equity. In July 2018 the APSC issued an order agreeing with Entergy Arkansas’s proposal to have the effects of theTax Act on current income tax expense flow through Entergy Arkansas’s formula rate plan rider and with Entergy Arkansas’streatment of protected and unprotected excess accumulated deferred income taxes. The APSC also directed Entergy Arkansas to submitin the tax adjustment rider proceeding, discussed above, the adjustments to all other riders affected by the Tax Act and to include anamendment for a true up mechanism where a rider affected by the Tax Act does not already contain a true-up mechanism. Pursuant toa 2018 settlement agreement in Entergy Arkansas’s formula rate plan proceeding, Entergy Arkansas also removed71Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsthe net operating loss accumulated deferred income tax asset caused by the Tax Act from Entergy Arkansas’s tax adjustment rider.Entergy Arkansas’s compliance tariff filings were accepted by the APSC in October 2018.Entergy LouisianaIn a formula rate plan settlement approved by the LPSC in April 2018 the parties agreed that Entergy Louisiana would return tocustomers one-half of its eligible unprotected excess deferred income taxes from May 2018 through December 2018 and return tocustomers the other half from January 2019 through August 2022. In addition, the settlement provided that in order to flow back tocustomers certain other tax benefits created by the Tax Act, Entergy Louisiana established a regulatory liability effective January 1,2018 in the amount of $9.1 million per month to reflect these tax benefits already included in retail rates until new base rates under theformula rate plan were established in September 2018, and this regulatory liability will be returned to customers over the September2018 through August 2019 formula rate plan rate-effective period. The LPSC staff and intervenors in the settlement reserved the rightto obtain data from Entergy Louisiana to confirm the determination of excess accumulated deferred income taxes resulting from theTax Act and the analysis thereof as part of the formula rate plan review proceeding for the 2017 test year filing which, as discussedbelow, Entergy Louisiana filed in June 2018.Entergy MississippiEntergy Mississippi filed its 2018 formula rate plan in March 2018 and included a proposal to return all of its unprotectedexcess accumulated deferred income taxes to customers through rates or in exchange for other assets, or a combination of both, by theend of 2018. In June 2018 the MPSC approved a stipulation filed by Entergy Mississippi and the Mississippi Public Utilities Staff inEntergy Mississippi’s formula rate plan filing that addressed Entergy Mississippi’s 2018 formula rate plan evaluation report and theratemaking effects of the Tax Act. The stipulation provided for incorporating the reduction of the statutory federal income tax ratethrough Entergy Mississippi’s formula rate plan. Entergy Mississippi’s formula rate plan includes a look-back evaluation report filing inMarch 2019 that will compare actual 2018 results to the allowed return on rate base. The stipulation approved in June 2018 providesfor the flow-back of protected excess accumulated deferred income taxes over the remaining lives of the assets through the formularate plan. The stipulation also provided for the offset of unprotected excess accumulated deferred income taxes of $127.2 millionagainst net utility plant and $2.2 million against other regulatory assets, and the return to customers of the remaining balance ofunprotected excess accumulated deferred income taxes as recovery of a portion of fuel oil inventory and customer bill credits over athree-month period from July 2018 through September 2018, with any true-up to be reflected in the November 2018 powermanagement rider filing. Entergy Mississippi recorded the reduction against net utility plant and other regulatory assets in June 2018.In third quarter 2018, Entergy Mississippi returned unprotected excess accumulated deferred income taxes of $25.8 million throughcustomer bill credits and $5.8 million through the sale of fuel oil inventory. In November 2018, Entergy Mississippi’s annualredetermination of the annual factor to be applied under the power management rider included an insignificant true-up to the amount ofunprotected excess accumulated deferred income taxes. In January 2019 the MPSC approved the proposed power management costfactor effective for February 2019 bills.Entergy New OrleansAfter enactment of the Tax Act the City Council passed a resolution ordering Entergy New Orleans to, effective January 1,2018, record deferred regulatory liabilities to account for the Tax Act’s effect on Entergy New Orleans’s revenue requirement and tomake a filing by mid-March 2018 regarding the Tax Act’s effects on Entergy New Orleans’s operating income and rate base andpotential mechanisms for customers to receive benefits of the Tax Act. The City Council’s resolution also directed Entergy New Orleansto request that Entergy Services file with the FERC for revisions of the Unit Power Sales Agreement and MSS-4 replacement tariffs toaddress the return of excess accumulated deferred income taxes. Entergy submitted filings of this type to the FERC.In March 2018, Entergy New Orleans filed its response to the resolution stating that the Tax Act reduced income tax expensefrom what was then reflected in rates by approximately $8.2 million annually for electric operations and72Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsby approximately $1.3 million annually for gas operations. In the filing, Entergy New Orleans proposed to return to customers fromJune 2018 through August 2019 the benefits of the reduction in income tax expense and its unprotected excess accumulated deferredincome taxes through a combination of bill credits and investments in energy efficiency programs, grid modernization, and Smart Cityprojects. Entergy New Orleans submitted supplemental information in April 2018 and May 2018. Shortly thereafter, Entergy NewOrleans and the City Council’s advisors reached an agreement in principle that provides for benefits that will be realized by EntergyNew Orleans customers through bill credits that started in July 2018 and offsets to future investments in energy efficiency programs,grid modernization, and Smart City projects, as well as additional benefits related to the filings made at the FERC. The agreement inprinciple was approved by the City Council in June 2018.Entergy TexasAfter enactment of the Tax Act the PUCT issued an order requiring most utilities, including Entergy Texas, beginning January25, 2018, to record a regulatory liability for the difference between revenues collected under existing rates and revenues that wouldhave been collected had existing rates been set using the new federal income tax rates and also for the balance of excess accumulateddeferred income taxes. In both a memorandum issued prior to the open meeting when the order was discussed and during thediscussions at the open meeting regarding the order, the PUCT indicated that it would consider utility earnings in determining thetreatment of the liability and the effects of the Tax Act. Entergy Texas had previously provided information to the PUCT staff andstated that it expected the PUCT to address the lower tax expense as part of Entergy Texas’s rate case expected to be filed in May2018. Entergy Texas also stated that it would be inappropriate for the PUCT to require a refund of the reduction in income tax expensein 2018 resulting from the Act on a retroactive basis and without a comprehensive review of Entergy Texas’s cost of service andearned return on equity.In May 2018, Entergy Texas filed its 2018 base rate case with the PUCT. Entergy Texas’s proposed rates and revenuesreflected the inclusion of the federal income tax reductions due to the Tax Act. The PUCT issued an order in December 2018establishing that 1) $25 million will be credited to customers through a rider to reflect the lower federal income tax rate applicable toEntergy Texas from January 2018 through the date new rates were implemented, 2) $242.5 million of protected excess accumulateddeferred income taxes will be returned to customers through base rates under the average rate assumption method over the lives of theassociated assets, and 3) $185.2 million of unprotected excess accumulated deferred income taxes will be returned to customersthrough a rider. The unprotected excess accumulated deferred income taxes rider will include carrying charges and will be in effectover a period of 12 months for larger customers and over a period of four years for other customers.System EnergyIn a filing made with the FERC in March 2018, Entergy proposed revisions to the Unit Power Sales Agreement, among otheragreements, to reflect the effects of the Tax Act. In the filing System Energy proposed to return all of its unprotected excessaccumulated deferred income taxes to its customers by the end of 2018. In May 2018 the FERC accepted System Energy’s proposedtax revisions with an effective date of June 1, 2018, subject to refund and the outcome of settlement and hearing procedures. Settlement discussions are ongoing.73Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsFuel and purchased power cost recoveryThe Utility operating companies are allowed to recover fuel and purchased power costs through fuel mechanisms included inelectric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fueland purchased power costs is generally recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements. Thetable below shows the amount of deferred fuel costs as of December 31, 2018 and 2017 that Entergy expects to recover (or return tocustomers) through fuel mechanisms, subject to subsequent regulatory review. 2018 2017 (In Millions)Entergy Arkansas (a)$86.5 $130.4Entergy Louisiana (b)$136.7 $96.7Entergy Mississippi$8.0 $32.4Entergy New Orleans (b)$2.8 ($3.7)Entergy Texas($19.7) ($67.3)(a)Includes $67.3 million in 2018 and $67.1 million in 2017 of fuel and purchased power costs whose recovery periods areindeterminate but are expected to be recovered over a period greater than twelve months.(b)Includes $168.1 million in both years for Entergy Louisiana and $4.1 million in both years for Entergy New Orleans of fuel,purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods areindeterminate but are expected to be recovered over a period greater than twelve months.Entergy ArkansasProduction Cost Allocation RiderThe APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated toEntergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System Agreement Cost EqualizationProceedings” section below.In May 2016, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflectedrecovery of the production cost allocation rider true-up adjustment of the 2014 and 2015 unrecovered retail balance in the amount of$1.9 million. Additionally, the redetermined rates reflected the recovery of a $1.9 million System Agreement bandwidth remedypayment resulting from a compliance filing pursuant to the FERC’s December 2015 order related to test year 2009 production costs.The rates for the 2016 production cost allocation rider update were effective July 2016 through June 2017.In May 2017, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflecteda credit amount of $0.3 million resulting from a compliance filing pursuant to the FERC’s September 2016 order. Additionally, theredetermined rate reflected recovery of the production cost allocation rider true-up adjustment of the 2016 unrecovered retail balance inthe amount of $0.3 million. Because of the small effect of the 2017 production cost allocation rider update, Entergy Arkansas proposedto reduce the effective period of the update to one month, July 2017. After the one month collection period, rates were set to zero for allrate classes for the period August 2017 through June 2018.In May 2018, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflectedrecovery of the 2017 under-recovered retail balance and a $2.8 million payment by Entergy Arkansas associated with a compliancefiling pursuant to a March 2018 FERC order related to 2010 production costs. The rates for the 2018 production cost allocation riderupdate are effective July 2018 through June 2019.74Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEnergy Cost Recovery RiderEntergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthlycustomer bills. The rider utilizes the prior calendar-year energy costs and projected energy sales for the twelve-month periodcommencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustmentreflecting the over- or under-recovery, including carrying charges, of the energy costs for the prior calendar year. The energy costrecovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchasedenergy costs.In January 2014, Entergy Arkansas filed a motion with the APSC relating to its upcoming energy cost rate redetermination filingthat was made in March 2014. In that motion, Entergy Arkansas requested that the APSC authorize Entergy Arkansas to exclude fromthe redetermination of its 2014 energy cost rate $65.9 million of incremental fuel and replacement energy costs incurred in 2013 as aresult of the ANO stator incident. Entergy Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in itsdeferred fuel balance, with recovery to be reviewed in a later period after more information was available regarding various claimsassociated with the ANO stator incident. In February 2014 the APSC approved Entergy Arkansas’s request to retain that amount in itsdeferred fuel balance. In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In thatproceeding, the APSC approved a settlement agreement agreed upon by the parties, including a provision that requires EntergyArkansas to initiate a regulatory proceeding for the purpose of recovering funds currently withheld from rates and related to the statorincident, including the $65.9 million of deferred fuel and purchased energy costs previously noted, subject to certain timelines andconditions set forth in the settlement agreement. See the “ANO Damage, Outage, and NRC Reviews” section in Note 8 to the financialstatements for further discussion of the ANO stator incident.In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recoveryrider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March2017 recommending that the redetermined rate be implemented with the first billing cycle of April 2017 under the normal operation ofthe tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the ArkansasAttorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rateredetermination.In March 2018, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recoveryrider, which reflected an increase in the rate from $0.01547 per kWh to $0.01882 per kWh. The Arkansas Attorney General filed aresponse to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate theamount of the redetermination or, alternatively, to allow recovery subject to refund. Among the reasons the Attorney General cited forsuspension were questions pertaining to how Entergy Arkansas forecasted sales and potential implications of the Tax Act. EntergyArkansas replied to the Attorney General’s filing and stated that, to the extent there are questions pertaining to its load forecasting or theoperation of the energy cost recovery rider, those issues exceed the scope of the instant rate redetermination. Entergy Arkansas alsostated that potential effects of the Tax Act are appropriately considered in the APSC’s separate proceeding regarding potentialimplications of the tax law. The APSC general staff filed a reply to the Attorney General’s filing and agreed that Entergy Arkansas’sfiling complied with the terms of the energy cost recovery rider. The redetermined rate became effective with the first billing cycle ofApril 2018. Subsequently in April 2018 the APSC issued an order declining to suspend Entergy Arkansas’s energy cost recovery riderrate and declining to require further investigation at that time of the issues suggested by the Attorney General in the proceeding.Following a period of discovery, the Attorney General filed a supplemental response in October 2018 raising new issues with EntergyArkansas’s March 2018 rate redetermination and asserting that $45.7 million of the increase should be collected subject to refundpending further investigation. Entergy Arkansas filed to dismiss the Attorney General’s supplemental response, the APSC general stafffiled a motion to strike the Attorney General’s filing, and the Attorney General filed a supplemental response disputing EntergyArkansas and the APSC staff’s filing. Applicable APSC rules and processes authorize its general staff to initiate periodic audits ofEntergy Arkansas’s energy cost recovery rider. In late-2018 the APSC general staff notified75Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Arkansas it has initiated an audit of the 2017 fuel costs. The time in which the audit will be complete is uncertain at this time.Entergy LouisianaEntergy Louisiana recovers electric fuel and purchased power costs for the billing month based upon the level of such costsincurred two months prior to the billing month. Entergy Louisiana’s purchased gas adjustments include estimates for the billing monthadjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed tocustomers, including carrying charges.In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of EntergyGulf States Louisiana and its affiliates. The audit included a review of the reasonableness of charges flowed by Entergy Gulf StatesLouisiana through its fuel adjustment clause for the period 2005 through 2009. In March 2016 the LPSC staff consultant issued itsaudit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million, plusinterest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustmentclause to base rates. In September 2016 the LPSC staff filed testimony stating that it was no longer recommending a disallowance of$3.4 million of the $8.6 million discussed above, but otherwise maintained the positions from its report. Subsequently, the partiesentered into a settlement, which was approved by the LPSC in November 2016. The settlement recognized the dry cask storagerecovery method issue, which was addressed in the separate proceeding approved by the LPSC in October 2017, provided for a refundof $5 million, which was made to legacy Entergy Gulf States Louisiana customers in December 2016, and resolved all other issuesraised in the audit.In July 2014 the LPSC authorized its staff to initiate an audit of the fuel adjustment clause filings by Entergy Gulf StatesLouisiana, whose business was combined with Entergy Louisiana in 2015. The audit includes a review of the reasonableness of chargesflowed through Entergy Gulf States Louisiana’s fuel adjustment clause for the period from 2010 through 2013. In January 2019, theLPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refundapproximately $900,000, plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant.Entergy Louisiana is evaluating the staff’s recommended disallowance.In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The auditincludes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from2010 through 2013. In January 2019, the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultantrecommended that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the imputation of aclaim of vendor fault in servicing its nuclear plant. Entergy Louisiana is evaluating the staff’s recommended disallowance.In June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gasadjustment clause filings. In recognition of the business combination that occurred in 2015, the audit notice was issued to EntergyLouisiana and will also include a review of charges to legacy Entergy Gulf States Louisiana customers prior to the businesscombination. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clausefor the period from 2014 through 2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the periodfrom 2012 through 2015. Discovery commenced in March 2017. No report of audit has been issued.In May 2018 the LPSC staff provided notice of audits of Entergy Louisiana’s purchased gas adjustment clause filings. The auditincludes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the periodfrom 2016 through 2017. Discovery commenced in September 2018. No report of audit has been issued.76Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy MississippiEntergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted annually to reflect accumulated over-or under-recoveries. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of theMPSC.In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected throughJanuary 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC furtherordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015Entergy Mississippi should file a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order, EntergyMississippi submitted a revised fuel factor. Additionally, because Entergy Mississippi’s projected over-recovery balance for the periodending January 31, 2016 was $68 million, in February 2016, Entergy Mississippi filed for another interim adjustment to the energy costfactor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interimadjustment was approved by the MPSC in February 2016 effective for April 2016 bills.In November 2016, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included an over-recovery of less than $2 million as of September 30, 2016. InJanuary 2017 the MPSC approved the annual factor effective with February 2017 bills. Also in January 2017 the MPSC certified to theMississippi Legislature the audit reports of its independent auditors for the fuel year ending September 30, 2016. In its order, the MPSCexpressly reserved the right to review and determine the recoverability of any and all purchased power expenditures made during fiscalyear 2016. The MPSC hired independent auditors to conduct an annual operations audit and a financial audit. The independent auditorsissued their audit reports in December 2017. The audit reports included several recommendations for action by Entergy Mississippi butdid not recommend any cost disallowances. In January 2018 the MPSC certified the audit reports to the Mississippi Legislature. InNovember 2017 the Public Utilities Staff separately engaged a consultant to review the outage at the Grand Gulf Nuclear Station thatbegan in 2016. The review is currently in progress.In November 2017, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included an under-recovery of approximately $61.5 million as of September 30,2017. Entergy Mississippi proposed a two-tiered energy cost factor designed to promote overall rate stability throughout 2018particularly during the summer months. In January 2018 the MPSC approved the proposed energy cost factors effective for February2018 bills.In November 2018, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included an under-recovery of approximately $57 million as of September 30, 2018.In January 2019 the MPSC approved the proposed energy cost factor effective for February 2019 bills.Mississippi Attorney General ComplaintThe Mississippi Attorney General filed a complaint in state court in December 2008 against Entergy Corporation, EntergyMississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach ofgood faith and fair dealing, and requesting an accounting and restitution. The complaint is wide ranging and relates to tariffs andprocedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believesthe complaint is unfounded. In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S.District Court in Jackson, Mississippi. In June 2010 the MPSC authorized the deferral of certain legal expenses associated with thislitigation until it is resolved. As of December 31, 2018, Entergy Mississippi has a regulatory asset of $23.6 million for these deferredlegal expenses. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trialto April 2019.77Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy New OrleansEntergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel andpurchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fueland purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billingmonth, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.Entergy TexasEntergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including interest, notrecovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price ofnatural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge orrefund are subject to fuel reconciliation proceedings before the PUCT. A fuel reconciliation is required to be filed at least once everythree years and outside of a base rate case filing. In July 2015 certain parties filed briefs in a PUCT proceeding asserting that Entergy Texas should refund to retail customers anadditional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs. InOctober 2015 an ALJ issued a proposal for decision recommending that the additional bandwidth remedy payments be refunded toretail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion forrehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in Federal District Court forthe Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. The pendingappeals did not stay the PUCT’s decision. In April 2016, Entergy Texas filed with the PUCT an application to refund to customersapproximately $56.2 million. The refund resulted from (i) $41.8 million of fuel cost recovery over-collections through February 2016,(ii) the $10.9 million in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendar year 2006production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 productioncosts. In June 2016, Entergy Texas filed an unopposed settlement agreement that added additional over-recovered fuel costs for themonths of March and April 2016. The settlement resulted in a $68 million refund. The ALJ approved the refund on an interim basis andit was made to most customers over a four-month period beginning with the first billing cycle of July 2016. In July 2016 the PUCTissued an order approving the interim refund. The federal appeal of the PUCT’s January 2016 decision was heard in December 2016,and the Federal District Court granted Entergy Texas’s requested relief. In January 2017 the PUCT and an intervenor filed petitions forappeal of the Federal District Court ruling to the U.S. Court of Appeals for the Fifth Circuit. Oral argument was held before the FifthCircuit in February 2018. In April 2018 the Fifth Circuit reversed the decision of the Federal District Court, reinstating the originalPUCT decision. In October 2018, Entergy Texas filed notice of nonsuit in its appeal to the Travis County District Court regarding thePUCT’s January 2016 decision.In July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013through March 31, 2016. During the reconciliation period, Entergy Texas incurred approximately $1.77 billion in Texas jurisdictionaleligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texasestimated an over-recovery balance of approximately $19.3 million, including interest, which Entergy Texas requested authority tocarry over as the beginning balance for the subsequent reconciliation period beginning April 2016. Entergy Texas also noted, however,that the estimated $19.3 million over collection was being refunded to customers as a portion of the interim fuel refund beginning withthe first billing cycle of July 2016, discussed above. Entergy Texas also requested a prudence finding for each of the fuel-relatedcontracts and arrangements entered into or modified during the reconciliation period that have not been reviewed by the PUCT in aprior proceeding. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting78Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsin a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million asof November 30, 2016, to most customers beginning April 2017 through June 2017. This settlement was developed concurrently withthe stipulation and settlement agreement in the 2016 transmission cost recovery factor rider amendment discussed below, and the termsand conditions in both settlements are interdependent. The fuel reconciliation settlement was approved by the PUCT in March 2017 andthe refunds were made.In June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December2016 through April 2017. For most customers, the refunds flowed through bills for the months of July 2017 through September 2017.The fuel refund was approved by the PUCT in August 2017.In December 2017, Entergy Texas filed an application for a fuel refund of approximately $30.5 million for the months of May2017 through October 2017. Also in December 2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers,the refunds flowed through bills from January 2018 through March 2018. The fuel refund was approved by the PUCT in March 2018. Retail Rate ProceedingsFilings with the APSC (Entergy Arkansas)Retail Rates2015 Base Rate Filing In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notified theAPSC of Entergy Arkansas’s intent to implement a forward test year formula rate plan pursuant to Arkansas legislation passed in 2015,and requested a retail rate increase of $268.4 million, with a net increase in revenue of $167 million. The filing requested a 10.2%return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors in the rate case filedwith the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 millionwith a net increase in revenue of approximately $133 million; an authorized return on common equity of 9.75%; and a formula rateplan tariff that provides a +/- 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rateincrease is related to Entergy Arkansas’s acquisition in March 2016 of Union Power Station Power Block 2 for a base purchase price of$237 million. The settlement agreement also provided for amortization over a 10-year period of $7.7 million of previously-incurredcosts related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barriercompliance. In February 2016 the APSC approved the settlement with one exception that reduced the retail rate increase proposed inthe settlement by $5 million. The settling parties agreed to the APSC modifications in February 2016. The new rates were effectiveFebruary 24, 2016 and began billing with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliancefiling regarding the new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016,to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. The interim base rateadjustment surcharge was designed to recover a total of $21.1 million over the nine-month period from April 2016 through December2016.2016 Formula Rate Plan Filing In July 2016, Entergy Arkansas filed with the APSC its 2016 formula rate plan filing showing Entergy Arkansas’s projectedearned return on common equity for the twelve months ended December 31, 2017 test period to be below the formula rate planbandwidth. The filing requested a $67.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return oncommon equity of 9.75%. In October 2016, Entergy Arkansas filed with the APSC revised formula rate plan attachments with anupdated request for a $54.4 million revenue requirement increase based on acceptance of certain adjustments and recommendationsmade by the APSC staff and other intervenors, as well as three additional adjustments identified as appropriate by Entergy Arkansas. InNovember 201679Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsa hearing was held and the APSC issued an order directing the parties to brief certain issues. In December 2016 the APSC approved asettlement agreement and the $54.4 million revenue requirement increase with approximately $25 million of the $54.4 million revenuerequirement subject to possible future adjustment and refund to customers with interest. The APSC requested supplemental informationfor some of Entergy Arkansas’s requested nuclear expenditures. In December 2016 the APSC approved Entergy Arkansas’s formularate plan compliance tariff, and the rates became effective with the first billing cycle of January 2017. In April 2017, Entergy Arkansasfiled a motion consented to by all parties requesting that it be permitted to submit the supplemental information requested by the APSCin conjunction with its 2017 formula rate plan filing, which was subsequently made in July 2017 and is discussed below. In May 2017the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplemental information on a concurrent schedulewith the 2017 formula rate plan filing. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion toapprove a unanimous settlement agreement resolving all issues in the proceeding and providing for recovery of the 2017 and 2018nuclear costs. In December 2017 the APSC approved the settlement agreement and recovery of the 2017 and 2018 nuclear costs.2017 Formula Rate Plan FilingIn July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projectedearned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate planbandwidth. The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return oncommon equity of 9.75%. Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and theprojected annual revenue requirement increase exceeded the four percent, resulting in a proposed increase for the 2017 formula rateplan of $70.9 million. In October 2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments that projected a$126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staffand other intervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on arevision to the four percent constraint calculation. In October 2017, Entergy Arkansas and the parties to the proceeding filed a jointmotion to approve a unanimous settlement agreement resolving all issues in the proceeding and providing for recovery of the 2017 and2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and the $71.1 million revenue requirementincrease, as well as Entergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle ofJanuary 2018. 2018 Formula Rate Plan FilingIn July 2018, Entergy Arkansas filed with the APSC its 2018 formula rate plan filing to set its formula rate for the 2019 calendaryear. The filing shows Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2019test period to be below the formula rate plan bandwidth. Additionally, the filing includes the first netting adjustment under the currentformula rate plan for the historical test year 2017, reflecting the change in formula rate plan revenues associated with actual 2017results when compared to the allowed rate of return on equity. The filing includes a projected $73.4 million revenue deficiency for 2019and a $95.6 million revenue deficiency for the 2017 historical test year, for a total revenue requirement of $169 million for this filing.By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annualrevenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeds the constraint, the resulting increase islimited to four percent of total revenue, which originally was $65.4 million but was increased to $66.7 million based upon the APSCstaff’s updated calculation of 2018 revenue, which included additional actual revenues for 2018. In October 2018, Entergy Arkansasand the parties to the proceeding filed joint motions to approve a partial settlement agreement as to certain factual issues and agreed tobrief contested legal issues. In November 2018 the APSC held a hearing and was briefed on a certain contested legal issue. InDecember 2018 the APSC issued a decision related to the initial legal brief, approved the partial settlement agreement and $66.7 millionrevenue requirement increase, as well as Entergy Arkansas’s formula rate plan, with updated rates going into effect for the first billingcycle of January 2019. An additional schedule was issued by the APSC for briefing other contested issues, the outcome of which didnot affect the 2018 filing but could affect future Entergy Arkansas formula rate plan filings. That briefing was completed in February2019, and the APSC has not indicated when a decision on those issues can be expected.80Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsSimilar to the 2018 filing, the formula rate plan filing that will be made in 2019 to set the formula rates for the 2020 calendaryear will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017 formula rateplan filing to actual 2018 costs and sales data. In the fourth quarter 2018, Entergy Arkansas recorded a provision of $35.1 million thatreflects the estimate of the historical year netting adjustment that will be included in the 2019 filing to reflect the change in formula rateplan revenues associated with actual 2018 results when compared to the allowed rate of return on equity. Internal RestructuringIn November 2017, Entergy Arkansas filed an application with the APSC seeking authorization to undertake a restructuring thatwould result in the transfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimatelybe owned by an existing Entergy subsidiary holding company. Entergy Arkansas also filed a notice with the Missouri Public ServiceCommission in December 2017 out of an abundance of caution, although Entergy Arkansas does not serve any retail customers inMissouri. In April 2018 the Missouri Public Service Commission approved Entergy Arkansas’s filing. In July 2018, Entergy Arkansasfiled a settlement, reached by all parties in the APSC proceeding, resolving all issues. The APSC approved the settlement agreement andrestructuring in August 2018. Pursuant to the settlement agreement, Entergy Arkansas will credit retail customers $39.6 million over sixyears, beginning in 2019. Entergy Arkansas also received the required FERC and NRC approvals.In November 2018, Entergy Arkansas undertook a multi-step restructuring, including the following:•Entergy Arkansas, Inc. redeemed its outstanding preferred stock at the aggregate redemption price of approximately $32.7million.•Entergy Arkansas, Inc. converted from an Arkansas corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy Arkansas, Inc. allocated substantially all of its assets to a newsubsidiary, Entergy Arkansas Power, LLC, a Texas limited liability company (Entergy Arkansas Power), and Entergy ArkansasPower assumed substantially all of the liabilities of Entergy Arkansas, Inc., in a transaction regarded as a merger under theTXBOC. Entergy Arkansas, Inc. remained in existence and held the membership interests in Entergy Arkansas Power.•Entergy Arkansas, Inc. contributed the membership interests in Entergy Arkansas Power to an affiliate (Entergy Utility HoldingCompany, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution,Entergy Arkansas Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC. In December 2018, Entergy Arkansas, Inc. changed its name to Entergy Utility Property, Inc., and Entergy Arkansas Power thenchanged its name to Entergy Arkansas, LLC. Entergy Arkansas, LLC holds substantially all of the assets, and assumed substantially allof the liabilities, of Entergy Arkansas, Inc. The transaction was accounted for as a transaction between entities under common control.Filings with the LPSC (Entergy Louisiana)Retail Rates - Electric2015 Formula Rate Plan FilingIn May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. Theevaluation report reflected an earned return on common equity of 9.07%. As such, no adjustment to base formula rate plan revenue wasrequired. The following other adjustments, however, were required under the formula rate plan: an increase in the legacy EntergyLouisiana additional capacity mechanism of $14.2 million; a separate increase in legacy Entergy Louisiana revenue of $10 millionprimarily to reflect the effects of the termination of the System Agreement; an increase in the legacy Entergy Gulf States Louisianaadditional capacity mechanism of81Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements$0.5 million; a decrease in legacy Entergy Gulf States Louisiana revenue of $58.7 million primarily to reflect the effects of thetermination of the System Agreement; and an increase of $11 million to the MISO cost recovery mechanism. Rates were implementedwith the first billing cycle of September 2016, subject to refund. Following implementation of the as-filed rates in September 2016,there were several interim updates to Entergy Louisiana’s formula rate plan, including the one submitted in December 2016, reflectingimplementation of the settlement of the Waterford 3 replacement steam generator project prudence review described below. In June2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizingthe results of the May 2016 evaluation report, interim updates, and corresponding proceedings with no changes to rates alreadyimplemented.2016 Formula Rate Plan FilingIn May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. Theevaluation report reflected an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue wasrequired. Adjustments, however, were required under the formula rate plan; the 2016 formula rate plan evaluation report showed adecrease in formula rate plan revenue of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana formularate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and adecrease in incremental formula rate plan revenue of $3.7 million. Additionally, the formula rate plan evaluation report called for adecrease of $40.5 million in the MISO cost recovery revenue requirement from $46.8 million to $6.3 million. Rates reflecting theseadjustments were implemented with the first billing cycle of September 2017, subject to refund. In September 2017 the LPSC issued itsreport indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report were required but reserved forseveral issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report. In July 2018, EntergyLouisiana and the LPSC staff filed an unopposed joint report setting forth a correction to the annualization calculation, the effect ofwhich was a net $3.5 million revenue requirement reduction and indicating that there are no outstanding issues with the 2016 formularate plan report, the supplemental report, or the interim updates. In September 2018 the LPSC approved the unopposed joint report.Formula Rate Plan Extension Through 2019 Test YearIn August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications of its terms. Those modifications include: a one-time resetting of base rates to the midpoint of theband at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidthfrom a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recovercertain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. In April 2018the LPSC approved an unopposed joint motion filed by Entergy Louisiana and the LPSC staff that settled the matter. The settlementextended the formula rate plan for three years, providing for rates through at least August 2021. In addition to retaining the majorfeatures of the traditional formula rate plan, substantive features of the extended formula rate plan include:•a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity for the 2017 test year and for theSt. Charles Power Station when it enters commercial operation;•a 9.8% target earned return on common equity for the 2018 and 2019 test years;•narrowing of the common equity bandwidth to plus or minus 60 basis points around the target earned return on common equity;•a cap on potential revenue increase of $35 million for the 2018 evaluation period, and $70 million for the cumulative 2018 and2019 evaluation periods, on formula rate plan cost of service rate increases (the cap excludes rate changes associated with thetransmission recovery mechanism described below and rate changes associated with additional capacity);•a framework for the flow back of certain tax benefits created by the Tax Act to customers, as described in “Regulatory activityregarding the Tax Cuts and Jobs Act” above; and82Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements•a transmission recovery mechanism providing for the opportunity to recover certain transmission-related expenditures in excessof $100 million annually for projects placed in service up to one month prior to rate change outside of sharing that is designedto operate in a fashion similar to the additional capacity mechanism. 2017 Formula Rate Plan FilingIn June 2018, Entergy Louisiana filed its formula rate plan evaluation report for its 2017 calendar year operations. The 2017 testyear evaluation report produced an earned return on equity of 8.16%, due in large part to revenue-neutral realignments to otherrecovery mechanisms. Without these realignments, the evaluation report produces an earned return on equity of 9.88% and a resultingbase rider formula rate plan revenue increase of $4.8 million. Excluding the Tax Act credits provided for by the tax reform adjustmentmechanisms, total formula rate plan revenues were further increased by a total of $98 million as a result of the evaluation report due toadjustments to the additional capacity and MISO cost recovery mechanisms of the formula rate plan, and implementation of thetransmission recovery mechanism. In August 2018, Entergy Louisiana filed a supplemental formula rate plan evaluation report to reflectchanges from the 2016 test year formula rate plan proceedings, a decrease to the transmission recovery mechanism to reflect loweractual capital additions, and a decrease to evaluation period expenses to reflect the terms of a new power sales agreement. Based on theAugust 2018 update, Entergy Louisiana recognized a total decrease in formula rate plan revenue of approximately $17.6 million.Results of the updated 2017 evaluation report filing were implemented with the September 2018 billing month subject to refund andreview by the LPSC staff and intervenors. In accordance with the terms of the formula rate plan, in September 2018 the LPSC staff andintervenors submitted their responses to Entergy Louisiana’s original formula rate plan evaluation report and supplemental complianceupdates. The LPSC staff asserted objections/reservations regarding 1) Entergy Louisiana’s proposed rate adjustments associated with thereturn of excess accumulated deferred income taxes pursuant to the Tax Act and the treatment of accumulated deferred income taxesrelated to reductions of rate base; 2) Entergy Louisiana’s reservation regarding treatment of a regulatory asset related to certain specialorders by the LPSC; and 3) test year expenses billed from Entergy Services to Entergy Louisiana. Intervenors also objected to EntergyLouisiana’s treatment of the regulatory asset related to certain special orders by the LPSC. A procedural schedule has not yet beenestablished to resolve these issues.Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy Entergy Louisiana andlegacy Entergy Gulf States Louisiana residential rates, which combination, if approved, would be accomplished on a revenue-neutralbasis intended not to affect the rates of other customer classes.Waterford 3 Replacement Steam Generator ProjectFollowing the completion of the Waterford 3 replacement steam generator project, the LPSC undertook a prudence review inconnection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1)project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) theoutage length and replacement power costs. In July 2014 the LPSC staff filed testimony recommending potential project andreplacement power cost disallowances of up to $71 million, citing a need for further explanation or documentation from EntergyLouisiana. An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steamgenerator fabricator was imprudent. Entergy Louisiana provided further documentation and explanation requested by the LPSC staff.An evidentiary hearing was held in December 2014. Entergy Louisiana believed that the replacement steam generator costs wereprudently incurred and applicable legal principles supported their recovery in rates. Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty at the time associated with the resolutionof the prudence review. In December 2015 the ALJ issued a proposed recommendation, which was subsequently finalized, concludingthat Entergy Louisiana prudently managed the Waterford 3 replacement steam generator project, including the selection, use, andoversight of contractors, and could not reasonably have anticipated the damage to the steam generators. Nevertheless, the ALJconcluded that Entergy Louisiana was liable for the conduct of its contractor and subcontractor and, therefore, recommended adisallowance of $67 million in capital costs. Additionally, the ALJ concluded that Entergy Louisiana did not sufficiently justify the83Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsincurrence of $2 million in replacement power costs during the replacement outage. Although the ALJ’s recommendation had not yetbeen considered by the LPSC, after considering the progress of the proceeding in light of the ALJ recommendation, Entergy Louisianarecorded in the fourth quarter 2015 approximately $77 million in charges, including a $45 million asset write-off and a $32 millionregulatory charge, to reflect that a portion of the assets associated with the Waterford 3 replacement steam generator project was nolonger probable of recovery. Entergy Louisiana maintained that the ALJ’s recommendation contained significant factual and legalerrors.In October 2016 the parties reached a settlement in this matter. The settlement was approved by the LPSC in December 2016.The settlement effectively provided for an agreed-upon disallowance of $67 million of plant, which had been previously written off byEntergy Louisiana, as discussed above. The refund to customers of approximately $71 million as a result of the settlement approved bythe LPSC was made to customers in January 2017. Of the $71 million of refunds, $68 million was credited to customers throughEntergy Louisiana’s formula rate plan, outside of sharing, and $3 million through its fuel adjustment clause. Entergy Louisiana hadpreviously recorded a provision of $48 million for this refund. The previously-recorded provision included the cumulative revenuesrecorded through December 2016 related to the $67 million of disallowed plant. An additional regulatory charge of $23 million wasrecorded in fourth quarter 2016 to reflect the effects of the settlement. The settlement also provided that Entergy Louisiana could retainthe value associated with potential service credits agreed to by the project contractor, to the extent they are realized in the future.Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May2017 and the LPSC accepted the joint report of proceedings resolving the matter.Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana PlantsIn January 2015, Entergy Gulf States Louisiana filed its application with the LPSC for approval of the acquisition and costrecovery of two power blocks of the Union Power Station for an expected base purchase price of approximately $237 million per powerblock, subject to adjustments. In September 2015, Entergy Gulf States Louisiana agreed to settlement terms with all parties for EntergyGulf States Louisiana’s purchase of the two power blocks. In October 2015 the LPSC voted unanimously to approve the uncontestedsettlement which finds, among other things, that acquisition of Power Blocks 3 and 4 is in the public interest and, therefore, prudent.The business combination of Entergy Gulf States Louisiana and Entergy Louisiana received regulatory approval and closed in October2015 making Entergy Louisiana the named purchaser of Power Blocks 3 and 4 of the Union Power Station. In March 2016, EntergyLouisiana acquired Power Blocks 3 and 4 of Union Power Station for an aggregate purchase price of approximately $475 million andimplemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station,Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 andits decision to retire Little Gypsy 1. In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana,LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on itsdeactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-yearplanning horizon. Parties requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4. No partycontested the prudence of the decision to deactivate Willow Glen 2 and 4 or suggested reactivation of these units; however, issues wereraised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather thanplacing the units into suspended status for the three-year term permitted by MISO. In March 2018 the LPSC adopted the ALJ’srecommended order finding that Entergy Louisiana did not demonstrate that its decision to permanently surrender transmission rightsfor the mothballed (not retired) Willow Glen 2 and 4 units was reasonable and that Entergy Louisiana should hold customers harmlessfrom increased transmission expenses should those units be reactivated. Because no party or the LPSC suggested that Willow Glen 2and 4 should be reactivated and because the cost to return those units to service far exceeded the revenue the units were expected togenerate in MISO, Entergy Louisiana retired Willow Glen 2 and 4 in March 2018. Entergy Louisiana submitted a compliance filingregarding retirement of Willow Glen 2 and 4, and the LPSC closed the proceeding.84Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsRetail Rates - Gas 2016 Rate Stabilization Plan FilingIn January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30,2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37%. In April 2017 theLPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 millionannual increase in revenue with rates implemented with the first billing cycle of May 2017. 2017 Rate Stabilization Plan FilingIn January 2018, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30,2017. The filing of the evaluation report for the test year 2017 reflected an earned return on common equity of 9.06%. This earnedreturn is below the earnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million. Due to theenactment in late-December 2017 of the Tax Cuts and Jobs Act, Entergy Louisiana did not have adequate time to reflect the effects ofthis tax legislation in the rate stabilization plan. In April 2018, Entergy Louisiana filed a supplemental evaluation report for the test yearended September 2017, reflecting the effects of the Tax Act, including a proposal to use the unprotected excess accumulated deferredincome taxes to offset approximately $1.4 million of storm restoration deferred operation and maintenance costs incurred by EntergyLouisiana in connection with the August 2016 flooding disaster in its gas service area. The supplemental filing reflects an earned returnon common equity of 10.79%. As-filed rates from the supplemental filing were implemented, subject to refund, with customersreceiving a cost reduction of approximately $0.7 million effective with bills rendered on and after the first billing cycle of May 2018, aswell as a $0.2 million reduction in the gas infrastructure rider effective with bills rendered on and after the first billing cycle of July2018. The proceeding is currently in its discovery phase. A procedural schedule has not been established.2018 Rate Stabilization Plan FilingIn January 2019, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30,2018. The filing of the evaluation report for the test year 2018 reflected an earned return on common equity of 2.69%. This earnedreturn is below the earning sharing band of the gas rate stabilization plan and results in a rate increase of $2.8 million. EntergyLouisiana will make a compliance filing in April 2019 and rates will be implemented during the first billing cycle of May 2019.Filings with the MPSC (Entergy Mississippi)Formula Rate Plan FilingsIn March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showing Entergy Mississippi’s projectedearned return for the 2016 calendar year to be below the formula rate plan bandwidth. The filing showed a $32.6 million rate increasewas necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96%, within theformula rate plan bandwidth. In June 2016 the MPSC approved Entergy Mississippi’s joint stipulation with the Mississippi PublicUtilities Staff. The joint stipulation provided for a total revenue increase of $23.7 million. The revenue increase included a $19.4 millionincrease through the formula rate plan, resulting in a return on common equity point of adjustment of 10.07%. The revenue increasealso included $4.3 million in incremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider.The revenue increase and ad valorem tax adjustment rider were effective with the July 2016 bills.In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showingEntergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return85Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsfor the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, EntergyMississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returnsfor both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSCapproved the stipulation, which resulted in no change in rates.In March 2018, Entergy Mississippi submitted its formula rate plan 2018 test year filing and 2017 look-back filing showingEntergy Mississippi’s earned return for the historical 2017 calendar year and projected earned return for the 2018 calendar year, in largepart as a result of the lower federal corporate income tax rate effective in 2018, to be within the formula rate plan bandwidth, resultingin no change in rates. In June 2018, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation thatconfirmed that Entergy Mississippi’s earned returns for both the 2017 look-back filing and 2018 test year were within the respectiveformula rate plan bandwidths. In June 2018 the MPSC approved the stipulation, which resulted in no change in rates. See “Regulatoryactivity regarding the Tax Cuts and Jobs Act” above for additional discussion regarding the treatment of the effects of the lower federalcorporate income tax rate.Entergy Mississippi’s formula rate plan includes a look-back evaluation report filing in March 2019 that will compare actual2018 results to the performance-adjusted allowed return on rate base. In fourth quarter 2018, Entergy Mississippi recorded a provisionof $9.3 million that reflects the estimate of the difference between the 2018 earned rate of return on rate base and an establishedperformance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism.In October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, theinterim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacityacquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allowsimilar cost recovery treatment for other future capacity additions, such as the Sunflower Solar Facility, that are approved by the MPSC.Internal RestructuringIn March 2018, Entergy Mississippi filed an application with the MPSC seeking authorization to undertake a restructuring thatwould result in the transfer of substantially all of the assets and operations of Entergy Mississippi to a new entity, which wouldultimately be held by an existing Entergy subsidiary holding company. In September 2018, Entergy Mississippi and the MississippiPublic Utilities Staff entered into and filed a joint stipulation regarding the restructuring filing. In September 2018 the MPSC issued anorder accepting the stipulation in its entirety and approving the restructuring and credits of $27 million to retail customers over sixyears, consisting of annual payments of $4.5 million for the years 2019-2024. Entergy Mississippi also received the required FERCapproval.In November 2018, Entergy Mississippi undertook a multi-step restructuring, including the following:•Entergy Mississippi, Inc. redeemed its outstanding preferred stock, at the aggregate redemption price of approximately $21.2million.•Entergy Mississippi, Inc. converted from a Mississippi corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy Mississippi, Inc. allocated substantially all of its assets to anew subsidiary, Entergy Mississippi Power and Light, LLC, a Texas limited liability company (Entergy Mississippi Power andLight), and Entergy Mississippi Power and Light assumed substantially all of the liabilities of Entergy Mississippi, Inc., in atransaction regarded as a merger under the TXBOC. Entergy Mississippi, Inc. remained in existence and held the membershipinterests in Entergy Mississippi Power and Light.•Entergy Mississippi, Inc. contributed the membership interests in Entergy Mississippi Power and Light to an affiliate (EntergyUtility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of thecontribution, Entergy Mississippi Power and Light is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.86Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsIn December 2018, Entergy Mississippi, Inc. changed its name to Entergy Utility Enterprises, Inc., and Entergy Mississippi Power andLight then changed its name to Entergy Mississippi, LLC. Entergy Mississippi, LLC holds substantially all of the assets, and assumedsubstantially all of the liabilities, of Entergy Mississippi, Inc. The restructuring was accounted for as a transaction between entities undercommon control.In December 2018, Entergy Mississippi filed its notice of intent to implement the restructuring credit rider to allow EntergyMississippi to return credits of $27 million to retail customers over six years. In January 2019 the MPSC approved the proposedrestructuring credit adjustment factor, which is effective for bills rendered beginning February 2019.Filings with the City Council (Entergy New Orleans)Retail RatesAs a provision of the settlement agreement approved by the City Council in May 2015 providing for the transfer from EntergyLouisiana to Entergy New Orleans of certain assets that supported the provision of service to Entergy Louisiana’s customers in Algiers,it was agreed that, with limited exceptions, no action may be taken with respect to Entergy New Orleans’s base rates until rates areimplemented from a base rate case that must be filed for its electric and gas operations in 2018. This provision eliminated the formularate plan applicable to Algiers operations. The limited exceptions included continued implementation of the then-remaining two yearsof the four-year phased-in rate increase for the Algiers area and certain exceptional cost increases or decreases in the base revenuerequirement. An additional provision of the settlement agreement allowed for continued recovery of the revenue requirement associatedwith the capacity and energy from Ninemile 6 received by Entergy New Orleans under a power purchase agreement with EntergyLouisiana (Algiers PPA). The settlement authorized Entergy New Orleans to recover the remaining revenue requirement related to theAlgiers PPA through base rates charged to Algiers customers. The settlement also provided for continued implementation of the AlgiersMISO recovery rider.In addition to the Algiers PPA, Entergy New Orleans has a separate power purchase agreement with Entergy Louisiana for 20%of the capacity and energy from Ninemile 6 (Ninemile PPA), which commenced operation in December 2014. Initially, recovery of thenon-fuel costs associated with the Ninemile PPA was authorized through a special Ninemile 6 rider billed only to Entergy New Orleanscustomers outside of Algiers.In August 2015, Entergy New Orleans filed an application with the City Council seeking authorization to proceed with thepurchase of Union Power Block 1, with an expected base purchase price of approximately $237 million, subject to adjustments, andseeking approval of the recovery of the associated costs. In November 2015 the City Council issued written resolutions and an orderapproving an agreement in principle between Entergy New Orleans and City Council advisors providing that the purchase of UnionPower Block 1 and related assets by Entergy New Orleans is prudent and in the public interest. The City Council authorized expansionof the terms of the purchased power and capacity acquisition cost recovery rider to recover the non-fuel purchased power expense fromNinemile 6, the revenue requirement associated with the purchase of Power Block 1 of the Union Power Station, and a credit tocustomers of $400 thousand monthly beginning June 2016 in recognition of the decrease in other operation and maintenance expensesthat would result with the deactivation of Michoud Units 2 and 3. In March 2016, Entergy New Orleans purchased Power Block 1 of theUnion Power Station for approximately $237 million and initiated recovery of these costs with March 2016 bills. In July 2016, EntergyNew Orleans and the City Council Utility Committee agreed to a temporary increase in the Michoud credit to customers to a total of$1.4 million monthly for August 2016 through December 2016.A 2008 rate case settlement included $3.1 million per year in electric rates to fund the Energy Smart energy efficiencyprograms. The rate settlement provided an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the CityCouncil and provided a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energysavings generated from the energy efficiency programs. In January 2015 the87Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsCity Council approved funding for the Energy Smart program from April 2015 through March 2017 using the remainder of theapproximately $12.8 million of 2014 rough production cost equalization funds, with any remaining costs being recovered through thefuel adjustment clause. This funding methodology was modified in November 2015 when the City Council directed Entergy NewOrleans to use a combination of guaranteed customer savings related to a prior agreement with the City Council and rough productioncost equalization funds to cover program costs prior to recovering any costs through the fuel adjustment clause. In April 2017 the CityCouncil approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Councildirected that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy NewOrleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustmentclause, until additional customer funding is required for the legacy customers. In September 2017, Entergy New Orleans filed asupplemental plan and proposed several options for an interim cost recovery mechanism necessary to recover program costs during theperiod between when existing funds directed to Energy Smart programs are depleted and when new rates from the 2018 combined ratecase, which includes a cost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). In December2017 the City Council approved an energy efficiency cost recovery rider as an interim funding mechanism for Energy Smart, subject toverification that no additional funding sources exist. In June 2018 the City Council also approved a resolution recommending thatEntergy New Orleans allocate approximately $13.5 million of benefits resulting from the Tax Act to Energy Smart. Entergy NewOrleans is seeking approval of a permanent and stable source of funding for Energy Smart as part of its base rate case filed inSeptember 2018.In September 2018, Entergy New Orleans filed an electric and gas base rate case with the City Council. The filing requests a10.5% return on equity for electric operations with opportunity to earn a 10.75% return on equity through a performance adderprovision of the electric formula rate plan in subsequent years under a formula rate plan, and requests a 10.75% return on equity for gasoperations. The proposed electric rates in the revised filing reflect a net reduction of $20.3 million. The reduction in electric ratesincludes a base rate increase of $135.2 million, of which $131.5 million is associated with moving costs currently collected through fueland other riders into base rates, plus a request for an advanced metering surcharge to recover $7.1 million associated with advancedmetering infrastructure, offset by a net decrease of $31.1 million related to fuel and other riders. The filing also includes a proposed gasrate decrease of $142 thousand. Entergy New Orleans’s rates reflect the inclusion of federal income tax reductions due to the Tax Actand the provisions of a previously-approved agreement in principle determining how the benefits of the Tax Act would flow. EntergyNew Orleans included cost of service studies for electric and gas operations for the twelve months ending December 31, 2017 and theprojected twelve months ending December 31, 2018. In addition, Entergy New Orleans included capital additions expected to be placedinto service for the period through December 31, 2019. Entergy New Orleans’s request for a change in rates is based on the projectedtwelve months ending December 31, 2018.The filing’s major provisions include: (1) a new electric rate structure, which realigns the revenue requirement associated withcapacity and long-term service agreement expense from certain existing riders to base revenue, provides for the recovery of the cost ofadvanced metering infrastructure, and partially blends rates for Entergy New Orleans’s customers residing in Algiers with customersresiding in the remainder of Orleans Parish through a three-year phase-in; (2) contemporaneous cost recovery riders for investments inenergy efficiency/demand response, incremental changes in capacity/long-term service agreement costs, grid modernization investment,and gas infrastructure replacement investment; and (3) formula rate plans for both electric and gas operations. In February 2019 theCity Council’s advisors and several intervenors filed testimony in response to Entergy New Orleans’s application. The City Council’sadvisors have recommended, among other things, overall rate reductions of approximately $33 million in electric rates and $3.8 millionin gas rates. Certain intervenors have recommended overall rate reductions of up to approximately $49 million in electric rates and $5million in gas rates. The procedural schedule calls for an evidentiary hearing to be held in June 2019.88Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsInternal RestructuringIn July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuringthat would result in the transfer of substantially all of the assets and operations of Entergy New Orleans, Inc. to a new entity, whichwould ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolutionapproving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certainintervenors. Pursuant to the agreement in principle, Entergy New Orleans would credit retail customers $10 million in 2017, $1.4million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transactioncloses until such time as new base rates go into effect as a result of the then-anticipated 2018 base rate case (which has subsequentlybeen filed). Entergy New Orleans began crediting retail customers in June 2017. In June 2017 the FERC approved the transaction and,pursuant to the agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each ofthe years 2018, 2019, and 2020.In November 2017, Entergy New Orleans undertook a multi-step restructuring, including the following:•Entergy New Orleans, Inc. redeemed its outstanding preferred stock at a price of approximately $21 million, which included acall premium of approximately $819,000, plus any accumulated and unpaid dividends.•Entergy New Orleans, Inc. converted from a Louisiana corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans, Inc. allocated substantially all of its assets to anew subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), andEntergy New Orleans Power assumed substantially all of the liabilities of Entergy New Orleans, Inc., in a transaction regarded asa merger under the TXBOC. Entergy New Orleans, Inc. remained in existence and held the membership interests in EntergyNew Orleans Power.•Entergy New Orleans, Inc. contributed the membership interests in Entergy New Orleans Power to an affiliate (Entergy UtilityHolding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of thecontribution, Entergy New Orleans Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.In December 2017, Entergy New Orleans, Inc. changed its name to Entergy Utility Group, Inc., and Entergy New Orleans Power thenchanged its name to Entergy New Orleans, LLC. Entergy New Orleans, LLC holds substantially all of the assets, and has assumedsubstantially all of the liabilities, of Entergy New Orleans, Inc. The restructuring was accounted for as a transaction between entitiesunder common control.Filings with the PUCT and Texas Cities (Entergy Texas)Retail Rates2018 Base Rate CaseIn May 2018, Entergy Texas filed a base rate case with the PUCT seeking an increase in base rates and rider rates ofapproximately $166 million, of which $48 million is associated with moving costs currently being collected through riders into baserates such that the total incremental revenue requirement increase is approximately $118 million. The base rate case was based on a 12-month test year ending December 31, 2017. In addition, Entergy Texas included capital additions placed into service for the period ofApril 1, 2013 through December 31, 2017, as well as a post-test year adjustment to include capital additions placed in service by June30, 2018.In October 2018 the parties filed an unopposed settlement resolving all issues in the proceeding and a motion for interim rateseffective for electricity usage on and after October 17, 2018. The unopposed settlement reflects the following terms: a base rate increaseof $53.2 million (net of costs realigned from riders), a $25 million refund to reflect the lower federal income tax rate applicable toEntergy Texas from January 25, 2018 through the date new rates are implemented, $6 million of capitalized skylining tree hazard costswill not be recovered from customers, $242.5 million89Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsof protected excess accumulated deferred income taxes, which includes a tax gross-up, will be returned to customers through base ratesunder the average rate assumption method over the lives of the associated assets, and $185.2 million of unprotected excessaccumulated deferred income taxes, which includes a tax gross-up, will be returned to customers through a rider. The unprotectedexcess accumulated deferred income taxes rider will include carrying charges and will be in effect over a period of 12 months for largecustomers and over a period of four years for other customers. The settlement also provides for the deferral of $24.5 million of costsassociated with the remaining book value of the Neches and Sabine 2 plants, previously taken out of service, to be recovered over aten-year period and the deferral of $20.5 million of costs associated with Hurricane Harvey to be recovered over a 12-year period, eachbeginning in October 2018. The settlement provides final resolution of all issues in the matter, including those related to the Tax Act. InOctober 2018, the ALJ granted the unopposed motion for interim rates to be effective for service rendered on or after October 17, 2018.In December 2018 the PUCT issued an order approving the unopposed settlement.Distribution Cost Recovery Factor (DCRF) RiderIn June 2017, Entergy Texas filed an application to amend its DCRF rider by increasing the total collection from $8.65 millionto approximately $19 million. In July 2017, Entergy Texas, the PUCT staff, and the two other parties in the proceeding entered into anunopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million. InSeptember 2017 the PUCT issued its final order approving the unopposed stipulation and settlement agreement. The amended DCRFrider rates became effective for usage on and after September 1, 2017. DCRF rates were set to zero upon implementation of new baserates on October 17, 2018, as described above in the discussion of the 2018 base rate case. Transmission Cost Recovery Factor (TCRF) RiderIn September 2015, Entergy Texas filed for a TCRF rider requesting a $13 million increase, incremental to base rates.Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among otherthings, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately$2 million. In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request bereduced by an additional $3.4 million to account for load growth since base rates were last set. In February 2016 a State Office ofAdministrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 million fromEntergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In June 2016 the PUCTindicated that it would take up in a future rulemaking project the issue of whether a load growth adjustment should apply to a TCRF. InJuly 2016 the PUCT issued an order generally accepting the proposal for decision but declining to adjust the TCRF baseline in twoinstances as recommended by the ALJ, which resulted in a total annual allowance of approximately $10.5 million. The PUCT alsoordered its staff and Entergy Texas to track all spare autotransformer transfers going forward so that it could address the appropriateaccounting treatment and prudence of such transfers in Entergy Texas’s next base rate case. Entergy Texas implemented the TCRF riderbeginning with September 2016 bills.In September 2016, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed amended TCRF riderwas designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount included theapproximately $10.5 million annually that Entergy Texas was previously authorized to collect through the TCRF rider, as discussedabove. In December 2016, concurrent with the 2016 fuel reconciliation stipulation and settlement agreement discussed above, EntergyTexas and the PUCT staff reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million. Asdiscussed above, the terms of the two settlements are interdependent. The PUCT approved the settlement and issued a final order inMarch 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.TCRF rates were set to zero upon implementation of new base rates on October 17, 2018, as described above in the 2018 base rate casediscussion.90Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsIn December 2018, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The proposed new TCRF rider isdesigned to collect approximately $2.7 million annually from Entergy Texas’s retail customers. The proceeding is currently ongoing atthe PUCT.Advanced Metering Infrastructure (AMI) FilingsEntergy ArkansasIn September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’sdeployment of AMI is in the public interest. Entergy Arkansas proposed to replace existing meters with advanced meters that enabletwo-way data communication; design and build a secure and reliable network to support such communications; and implement supportsystems. AMI is intended to serve as the foundation of Entergy Arkansas’s modernized power grid. The filing included an estimate ofimplementation costs for AMI of $208 million. The filing identified a number of quantified and unquantified benefits, and EntergyArkansas provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominal net benefit to customersof $406 million. Entergy Arkansas also sought to continue to include in rate base the remaining book value of existing meters, whichwas approximately $57 million at December 31, 2015, that will be retired as part of the AMI deployment and also to depreciate thoseassets using current depreciation rates. Entergy Arkansas proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Deployment of the communications network began in 2018. Entergy Arkansasproposed to include the AMI deployment costs and the quantified benefits in future formula rate plan filings, and the 2018 costs wereapproved in the 2017 formula rate plan filing. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motionto approve a unanimous settlement agreement. In October 2017 the APSC issued an order finding that Entergy Arkansas’s AMIdeployment is in the public interest and approving the settlement agreement subject to a minor modification. Entergy Arkansas expectsto recover the undepreciated balance of its existing meters through a regulatory asset to be amortized over 15 years.Entergy LouisianaIn November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’sdeployment of advanced electric and gas metering infrastructure is in the public interest. Entergy Louisiana proposed to deployadvanced meters that enable two-way data communication; design and build a secure and reliable network to support suchcommunications; and implement support systems. AMI is intended to serve as the foundation of Entergy Louisiana’s modernized powergrid. The filing included an estimate of implementation costs for AMI of $330 million. The filing identified a number of quantified andunquantified benefits, and Entergy Louisiana provided a cost/benefit analysis showing that its combined electric and gas AMIdeployment is expected to produce a nominal net benefit to customers of $607 million. Entergy Louisiana also sought to continue toinclude in rate base the remaining book value, approximately $92 million at December 31, 2015, of the existing electric meters and alsoto depreciate those assets using current depreciation rates. Entergy Louisiana proposed a 15-year useful life for the new advancedmeters, the three-year deployment of which began in 2019. Deployment of the communications network began in 2018. EntergyLouisiana proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in overthe period 2019 through 2022. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’sproposed AMI system, with modifications to the proposed customer charge. In July 2017 the LPSC approved the stipulation. EntergyLouisiana expects to recover the undepreciated balance of its existing meters through a regulatory asset to be amortized at currentdepreciation rates.Entergy MississippiIn November 2016, Entergy Mississippi filed an application seeking an order from the MPSC granting a certificate of publicconvenience and necessity and finding that Entergy Mississippi’s deployment of AMI is in the public interest. Entergy Mississippiproposed to replace existing meters with advanced meters that enable two-way data communication; to design and build a secure andreliable network to support such communications; and to91Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsimplement support systems. AMI is intended to serve as the foundation of Entergy Mississippi’s modernized power grid. The filingincluded an estimate of implementation costs for AMI of $132 million. The filing identified a number of quantified and unquantifiedbenefits, and Entergy Mississippi provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominalbenefit to customers of $496 million over a 15-year period, which when netted against the costs of AMI results in $183 million of netcustomer benefits. Entergy Mississippi also sought to continue to include in rate base the remaining book value, approximately $56million at December 31, 2015, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assetsusing current depreciation rates. Entergy Mississippi proposed a 15-year depreciable life for the new advanced meters, the three-yeardeployment of which is expected to begin in 2019, subject to approval by the MPSC. Deployment of the communications networkbegan in 2018. Entergy Mississippi proposed to include the AMI deployment costs and the quantified benefits in existing ratemechanisms, primarily through future formula rate plan filings and/or future energy cost recovery rider schedule re-determinations, asapplicable. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supportingEntergy Mississippi’s filing, and the MPSC issued an order approving the filing without material changes, finding that EntergyMississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSCorder also confirmed that Entergy Mississippi shall continue to include in rate base the remaining book value of existing meters that willbe retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. In June 2018, as part ofthe order approving the joint stipulation between the Mississippi Public Utilities Staff and Entergy Mississippi addressing EntergyMississippi’s 2018 formula rate plan evaluation report and the ratemaking effects of the Tax Act, the MPSC approved the accelerationof the recovery of substantially all of Entergy Mississippi’s existing customer meters in anticipation of AMI deployment. Entergy New OrleansIn October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’sdeployment of advanced electric and gas metering infrastructure is in the public interest. Entergy New Orleans proposed to deployadvanced meters that enable two-way data communication; design and build a secure and reliable network to support suchcommunications; and implement support systems. AMI is intended to serve as the foundation of Entergy New Orleans’s modernizedpower grid. The filing included an estimate of implementation costs for AMI of $75 million. The filing identified a number ofquantified and unquantified benefits, and Entergy New Orleans provided a cost/benefit analysis showing that its combined electric andgas AMI deployment is expected to produce a nominal net benefit to customers of $101 million. Entergy New Orleans also sought tocontinue to include in rate base the remaining book value, approximately $21 million at December 31, 2015, of the existing electricmeters and also to depreciate those assets using current depreciation rates. Entergy New Orleans proposed a 15-year depreciable lifefor the new advanced meters, the three-year deployment of which began in 2019. Deployment of the information technologyinfrastructure began in 2017 and deployment of the communications network began in 2018. Entergy New Orleans proposed torecover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019through 2022. The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to certainmodifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In January2018 a settlement was reached between the City Council’s advisors and Entergy New Orleans. In February 2018 the City Councilapproved the settlement, which deferred cost recovery to the 2018 Entergy New Orleans rate case, but also stated that an adjustment for2018-2019 AMI costs can be filed in the rate case and that, for all subsequent AMI costs, the mechanism to be approved in the 2018rate case will allow for the timely recovery of such costs. In April 2018 the City Council adopted a resolution directing Entergy NewOrleans to explore the options for accelerating the deployment of AMI. In June 2018 the City Council approved a one-year accelerationof AMI in its service area for an incremental $4.4 million.Entergy TexasIn April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas anddirects that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed anapplication seeking an order from the PUCT approving Entergy Texas’s deployment of92Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsAMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design andbuild a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as thefoundation of Entergy Texas’s modernized power grid. The filing included an estimate of implementation costs for AMI of $132million. The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment isexpected to produce nominal net operational cost savings to customers of $33 million. Entergy Texas also sought to continue to includein rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part ofthe AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-yeardepreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas alsoproposed a surcharge tariff to recover the reasonable and necessary costs it has and will incur under the deployment plan for the fulldeployment of advanced meters. Further, Entergy Texas sought approval of fees that would be charged to customers who choose to optout of receiving service through an advanced meter and instead receive electric service with a non-standard meter. In October 2017,Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement, permitting deployment ofAMI with limited modifications. The PUCT approved the stipulation and settlement agreement in December 2017. Entergy Texasimplemented the AMI surcharge tariff beginning with January 2018 bills. As of December 31, 2018, Entergy Texas has a regulatoryliability related to the collection of the surcharge from customers. Consistent with the approval, deployment of the communicationsnetwork began in 2018 and deployment of the advanced meters will begin in March 2019. Entergy Texas expects to recover theremaining net book value of its existing meters through a regulatory asset to be amortized at current depreciation rates.System Agreement Cost Equalization ProceedingsPrior to its final termination in 2016, the Utility operating companies historically engaged in the coordinated planning,construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement. Entergy Arkansasterminated its participation in the System Agreement in December 2013. Entergy Mississippi terminated its participation in the SystemAgreement in November 2015. The System Agreement terminated with respect to its remaining participants in August 2016.Although the System Agreement has terminated, certain of the Utility operating companies’ retail regulators continue to pursuelitigation involving the System Agreement at the FERC and in federal courts. The proceedings include challenges to the allocation ofcosts as defined by the System Agreement and other matters.In June 2005 the FERC issued a decision in System Agreement litigation that had been commenced by the LPSC, andessentially affirmed its decision in a December 2005 order on rehearing. The decision included, among other things:•The FERC’s conclusion that the System Agreement no longer roughly equalized total production costs among the Utilityoperating companies.•In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s totalannual production costs would have to be within +/- 11% of Entergy System average total annual production costs.•In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plantwould not reflect the actual Vidalia price for the year but be priced at that year’s average price paid by Entergy Louisiana for theexchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidaliacosts reflected in the comparison of the Utility operating companies’ total production costs.•The remedy ordered by the FERC in 2005 required no refunds and became effective based on calendar year 2006 productioncosts with the first reallocation payments made in 2007.The FERC’s decision reallocated total production costs of the Utility operating companies whose relative total production costsexpressed as a percentage of Entergy System average production costs are outside an upper or lower93Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsbandwidth. This was accomplished by payments from Utility operating companies whose production costs were more than 11% belowEntergy System average production costs to Utility operating companies whose production costs were more than the Entergy Systemaverage production cost, with payments going first to those Utility operating companies whose total production costs were farthestabove the Entergy System average.The LPSC, APSC, MPSC, and the Arkansas Electric Energy Consumers appealed the FERC’s December 2005 decision to theUnited States Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C.Circuit issued its decision in April 2008. The D.C. Circuit concluded that the FERC’s orders had failed to adequately explain both itsconclusion that it was prohibited from ordering refunds for the 20-month period from September 13, 2001 - May 2, 2003 and itsdetermination to implement the bandwidth remedy commencing on January 1, 2006, rather than June 1, 2005. The D.C. Circuitremanded the case to the FERC for further proceedings on those two issues.In October 2011 the FERC issued an order addressing the D.C. Circuit remand on the two issues. On the first issue, the FERCconcluded that it did have the authority to order refunds, but decided that it would exercise its equitable discretion and not requirerefunds for the 20-month period from September 13, 2001 - May 2, 2003. Because the ruling on refunds relied on findings in theinterruptible load proceeding, which is discussed in a separate section below, the FERC concluded that this refund ruling will be held inabeyance pending the outcome of the rehearing requests in the interruptible load proceeding. On the second issue, the FERC reversedits prior decision and ordered that the prospective bandwidth remedy begin on June 1, 2005 (the date of its initial order in theproceeding) rather than January 1, 2006, as it had previously ordered. Pursuant to the October 2011 order, Entergy was required tocalculate bandwidth payments for the period June - December 2005 utilizing the bandwidth formula tariff prescribed by the FERC thatwas filed in a December 2006 compliance filing and accepted by the FERC in an April 2007 order. In March 2015, in light of a December 2014 decision by the D.C. Circuit in the interruptible load proceeding, Entergy filed withthe FERC a motion to establish a briefing schedule on refund issues and an initial brief addressing refund issues. The initial brief arguedthat the FERC, in response to the D.C. Circuit decision, should clarify its policy on refunds and find that refunds are not required in thisproceeding. In October 2015 the FERC issued three orders related to the commencement of the remedy on June 1, 2005 and theinclusion of interest for the period June 1, 2005 through December 31, 2005. Specifically, the FERC rejected Entergy’s request forrehearing of its decision to include interest for the seven-month period. The FERC also rejected Entergy’s request for rehearing of theorder rejecting the compliance filing with regard to the issue of interest. Finally, the FERC set for hearing and settlement procedures the2014 compliance filing that included the bandwidth calculation for the seven months June 1, 2005 through December 31, 2005. Insetting the compliance filing for hearing, the FERC rejected the APSC’s protest that Entergy Arkansas should not be subject to the filingbecause Entergy Arkansas would be making the payments during a period following its exit from the System Agreement. In January2018 the D.C. Circuit affirmed the FERC decision that Entergy Arkansas was subject to the filing.In December 2011, Entergy filed with the FERC its compliance filing that provided the payments and receipts among the Utilityoperating companies pursuant to the FERC’s October 2011 order. The APSC, the LPSC, the PUCT, and other parties intervened in theDecember 2011 compliance filing proceeding, and the APSC and the LPSC also filed protests. The filing showed the followingpayments/receipts among the Utility operating companies: Payments(Receipts) (In Millions)Entergy Arkansas$156Entergy Louisiana($75)Entergy Mississippi($33)Entergy New Orleans($5)Entergy Texas($43)94Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Arkansas made its payment in January 2012. In February 2012, Entergy Arkansas filed for an interim adjustment to itsproduction cost allocation rider requesting that the $156 million be collected from customers over the 22-month period from March2012 through December 2013. In March 2012 the APSC issued an order stating that the payment can be recovered from retailcustomers through the production cost allocation rider, subject to refund. The LPSC and the APSC requested rehearing of the FERC’sOctober 2011 order. In February 2014 the FERC issued a rehearing order addressing its October 2011 order. The FERC denied the LPSC’s requestfor rehearing on the issues of whether the bandwidth remedy should be made effective earlier than June 1, 2005, and whether refundsshould be ordered for the 20-month refund effective period. The FERC granted the LPSC’s rehearing request on the issue of interest onthe bandwidth payments/receipts for the June - December 2005 period, requiring that interest be accrued from June 1, 2006 until thedate those bandwidth payments/receipts are made. Also in February 2014 the FERC issued an order rejecting the December 2011compliance filing that calculated the bandwidth payments/receipts for the June - December 2005 period. The FERC order required anew compliance filing that calculates the bandwidth payments/receipts for the June - December 2005 period based on monthly data forthe seven individual months including interest pursuant to the February 2014 rehearing order. Entergy sought rehearing of the February2014 order with respect to the FERC’s determinations regarding interest. In April 2014 the LPSC filed a petition for review of theFERC’s October 2011 and February 2014 orders with the U.S. Court of Appeals for the D.C. Circuit. In August 2017 the D.C. Circuitissued a decision denying the LPSC’s appeal of the FERC’s October 2011 and February 2014 orders. On the issue of the FERC’simplementation of the prospective remedy as of June 2005 and whether the bandwidth remedy should be extended for an additional 17months in years 2004-2005, the D.C. Circuit affirmed the FERC’s implementation of the remedy and denied the LPSC’s appeal. On theissue of whether the operating companies should be required to issue refunds for the 20-month period from September 2001 to May2003, the D.C. Circuit granted the FERC’s request for agency reconsideration and remanded that issue back to the FERC for furtherproceedings as requested by all parties to the appeal. In response to the D.C. Circuit’s remand, various parties filed briefs with the FERCaddressing whether the FERC should require the Utility operating companies to issue refunds for the 20-month refund period fromSeptember 2001 to May 2003. The LPSC has argued in favor of such remands and Entergy has opposed the LPSC’s request. Thebriefing was completed in September 2018 and the matter is pending before the FERC.In April and May 2014, Entergy filed with the FERC an updated compliance filing that provided the payments and receiptsamong the Utility operating companies pursuant to the FERC’s February 2014 orders. The filing showed the following net paymentsand receipts, including interest, among the Utility operating companies: Payments(Receipts) (In Millions)Entergy Arkansas$68Entergy Louisiana($10)Entergy Mississippi($11)Entergy New Orleans$2Entergy Texas($49)These payments were made in May 2014. The LPSC, City Council, and APSC filed protests.The hearing on the bandwidth calculation for the seven months June 1, 2005 through December 31, 2005 occurred in July2016. The presiding judge issued an initial decision in November 2016. In the initial decision, the presiding judge agreed with theUtility operating companies’ position that: (1) interest on the bandwidth payments for the 2005 test period should be accrued from June1, 2006 until the date that the bandwidth payments for that calculation are paid, which is consistent with how the Utility operatingcompanies performed the calculation; and (2) a portion of Entergy Louisiana’s 2001-vintage Louisiana state net operating lossaccumulated deferred income tax that results from95Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsthe Vidalia tax deduction should be excluded from the 2005 test period bandwidth calculation. Various participants filed briefs onexceptions and/or briefs opposing exceptions related to the initial decision, including the LPSC, the APSC, the FERC trial staff, andEntergy Services. In May 2018 the FERC issued an order affirming the initial decision and ordered a comprehensive recalculation of thebandwidth payments/receipts for the seven months June 1, 2005 through December 31, 2005 and a recalculation of the 2006 and 2007test years as a result of limited revisions. Entergy filed the comprehensive recalculation of the bandwidth payments/receipts for theseven months June 1, 2005 through December 31, 2005 and the 2006 and 2007 test years in July 2018. The filing shows the additionalfollowing payments and receipts among the Utility operating companies: Payments(Receipts) (In Millions)Entergy Arkansas($4)Entergy Louisiana($23)Entergy Mississippi$16Entergy New Orleans$5Entergy Texas$6These payments were made in July 2018. In January 2019 the FERC denied the LPSC’s request for rehearing of the May 2018 order.Rough Production Cost Equalization RatesEach May from 2007 through 2016 Entergy filed with the FERC the rates to implement the FERC’s orders in the SystemAgreement proceeding. These filings showed the following payments/receipts among the Utility operating companies were necessaryto achieve rough production cost equalization as defined by the FERC’s orders: Payments (Receipts) 2007 2008 2009 2010 2011 2012 2013 2014 (In Millions)Entergy Arkansas$252 $252 $390 $41 $77 $41 $— $—Entergy Louisiana($211) ($160) ($247) ($22) ($12) ($41) $— $—Entergy Mississippi($41) ($20) ($24) ($19) ($40) $— $— $—Entergy New Orleans$— ($7) $— $— ($25) $— ($15) ($15)Entergy Texas($30) ($65) ($119) $— $— $— $15 $15The Utility operating companies recorded accounts payable or accounts receivable to reflect the rough production cost equalizationpayments and receipts required to implement the FERC’s remedy. When accounts payable were recorded, a corresponding regulatoryasset was recorded for the right to collect the payments from customers. When accounts receivable were recorded, a correspondingregulatory liability was recorded for the obligations to pass the receipts on to customers. No payments were required in 2016 or 2015to implement the FERC’s remedy based on calendar year 2015 production costs and 2014 production costs, respectively. The SystemAgreement terminated in August 2016.The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated toEntergy Arkansas. Entergy Texas recovered its 2013 rough production cost equalization payment over three years beginning April2014. Entergy Texas included its 2014 rough production cost equalization payment as a component of an interim fuel refund made in2014. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retailproceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs.96Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe following rough production cost equalization rate proceedings are still ongoing or were ongoing during the period 2016-2018.2010 Rate Filing Based on Calendar Year 2009 Production CostsIn May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC’s orders in the System Agreementproceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including theLPSC and the City Council, which also filed protests. In July 2010 the FERC accepted Entergy’s proposed rates for filing, effectiveJune 1, 2010, subject to refund. After an abeyance of the proceeding schedule, a hearing was held in March 2014 and in December2015 the FERC issued an order. Among other things, the December 2015 order directed Entergy to submit a compliance filing. InJanuary 2016 the LPSC, the APSC, and Entergy filed requests for rehearing of the FERC’s December 2015 order. In February 2016,Entergy submitted the compliance filing ordered in the December 2015 order. The result of the true-up payments and receipts for therecalculation of production costs resulted in the following payments/receipts among the Utility operating companies: Payments(Receipts) (In Millions)Entergy Arkansas$2Entergy Louisiana$6Entergy Mississippi($4)Entergy New Orleans($1)Entergy Texas($3) In September 2016 the FERC accepted the February 2016 compliance filing subject to a further compliance filing made inNovember 2016. The further compliance filing was required as a result of an order issued in September 2016 ruling on the January2016 rehearing requests filed by the LPSC, the APSC, and Entergy. In the order addressing the rehearing requests, the FERC grantedthe LPSC’s rehearing request and directed that interest be calculated on the payment/receipt amounts. The FERC also granted theAPSC’s and Entergy’s rehearing request and ordered the removal of both securitized asset accumulated deferred income taxes andcontra-securitization accumulated deferred income taxes from the calculation. In November 2016, Entergy submitted its compliancefiling in response to the FERC’s order on rehearing. The compliance filing included a revised calculation of the bandwidth true-uppayments and receipts based on 2009 test year data and interest calculations. The LPSC protested the interest calculations. In November2017 the FERC issued an order rejecting the November 2016 compliance filing. The FERC determined that the payments detailed in theNovember 2016 compliance filing did not include adequate interest for the payments from Entergy Arkansas to Entergy Louisianabecause it did not include interest on the principal portion of the payment that was made in February 2016. In December 2017, Entergyrecalculated the interest pursuant to the November 2017 order. As a result of the recalculations, Entergy Arkansas owed very minorpayments to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.97Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2011 Rate Filing Based on Calendar Year 2010 Production CostsIn May 2011, Entergy filed with the FERC the 2011 rates in accordance with the FERC’s orders in the System Agreementproceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. In July 2011 theFERC accepted Entergy’s proposed rates for filing, effective June 1, 2011, subject to refund. After an abeyance of the proceedingschedule, in December 2014 the FERC consolidated the 2011 rate filing with the 2012, 2013, and 2014 rate filings for settlement andhearing procedures. See discussion below regarding the consolidated settlement and hearing procedures in connection with thisproceeding.2012 Rate Filing Based on Calendar Year 2011 Production CostsIn May 2012, Entergy filed with the FERC the 2012 rates in accordance with the FERC’s orders in the System Agreementproceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. In August 2012the FERC accepted Entergy’s proposed rates for filing, effective June 2012, subject to refund. After an abeyance of the proceedingschedule, in December 2014 the FERC consolidated the 2012 rate filing with the 2011, 2013, and 2014 rate filings for settlement andhearing procedures. See discussion below regarding the consolidated settlement and hearing procedures in connection with thisproceeding.2013 Rate Filing Based on Calendar Year 2012 Production CostsIn May 2013, Entergy filed with the FERC the 2013 rates in accordance with the FERC’s orders in the System Agreementproceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. The City Councilintervened and filed comments related to including the outcome of a related FERC proceeding in the 2013 cost equalization calculation.In August 2013 the FERC issued an order accepting the 2013 rates, effective June 1, 2013, subject to refund. After an abeyance of theproceeding schedule, in December 2014 the FERC consolidated the 2013 rate filing with the 2011, 2012, and 2014 rate filings forsettlement and hearing procedures. See discussion below regarding the consolidated settlement and hearing procedures in connectionwith this proceeding.2014 Rate Filing Based on Calendar Year 2013 Production CostsIn May 2014, Entergy filed with the FERC the 2014 rates in accordance with the FERC’s orders in the System Agreementproceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. The City Councilintervened and filed comments. In December 2014 the FERC issued an order accepting the 2014 rates, effective June 1, 2014, subjectto refund, set the proceeding for hearing procedures, and consolidated the 2014 rate filing with the 2011, 2012, and 2013 rate filingsfor settlement and hearing procedures. See discussion below regarding the consolidated settlement and hearing procedures inconnection with this proceeding.Consolidated 2011, 2012, 2013, and 2014 Rate Filing ProceedingsAs discussed above, in December 2014 the FERC consolidated the 2011, 2012, 2013, and 2014 rate filings for settlement andhearing procedures. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimonyconcerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidthcalculations for prior years. Hearings occurred in November 2015, and the ALJ issued an initial decision in July 2016. In the initialdecision, the ALJ generally agreed with Entergy’s bandwidth calculations with one exception on the accounting related to theWaterford 3 sale/leaseback. In March 2018 the FERC issued an order affirming the initial decision. In April 2018 the LPSC requestedrehearing of the FERC’s March 2018 order affirming the ALJ’s initial decision. Entergy filed in May 2018 the bandwidth true-uppayments and receipts for the 2011-2014 rate filings (table does not net to zero due to rounding):98Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements Payments(Receipts) (In Millions)Entergy Arkansas$3Entergy Louisiana$3Entergy Mississippi($1)Entergy New Orleans$1Entergy Texas($5)These payments were made in May 2018. The LPSC request for rehearing is pending.Utility Operating Company Termination of System Agreement ParticipationEntergy Arkansas and Entergy Mississippi ceased participating in the System Agreement effective December 18, 2013 andNovember 7, 2015, respectively. Entergy Louisiana, Entergy New Orleans, and Entergy Texas terminated participation in the SystemAgreement on August 31, 2016, which resulted in the termination of the System Agreement in its entirety pursuant to a settlementagreement approved by the FERC in December 2015.In December 2013 the FERC set one issue for hearing involving whether and how the benefits associated with settlement withUnion Pacific regarding certain coal delivery issues should be allocated among Entergy Arkansas and the other Utility operatingcompanies post-termination of the System Agreement. In December 2014 a FERC ALJ issued an initial decision finding that EntergyArkansas would realize benefits after December 18, 2013 from the 2008 settlement agreement between Entergy Services, EntergyArkansas, and Union Pacific, related to certain coal delivery issues. In March 2016 the FERC issued an opinion affirming the December2014 initial decision with regard to the determination that there were benefits related to the Union Pacific settlement, which wererealized post-Entergy Arkansas’s December 2013 withdrawal from the System Agreement, that should be shared with the other Utilityoperating companies utilizing the methodology proposed by the MPSC and trued-up to actual coal volumes purchased. In May 2016,Entergy made a compliance filing that provided the calculation of Union Pacific settlement benefits utilizing the methodology adoptedby the initial decision, trued-up for the actual volumes of coal purchased. The payments were made in May 2016. In August 2016 theFERC issued an order accepting Entergy’s compliance filing. Also in August 2016 the APSC filed a petition for review of the FERC’sMarch 2016 and August 2016 orders with the U.S. Court of Appeals for the D.C. Circuit. In June 2018 the D.C. Circuit denied theAPSC’s petition.Interruptible Load ProceedingIn April 2007 the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC’s appeal of the FERC’s March 2004and April 2005 orders related to the treatment under the System Agreement of the Utility operating companies’ interruptible loads. Inits opinion the D.C. Circuit concluded that the FERC: (1) acted arbitrarily and capriciously by allowing the Utility operating companiesto phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain whyrefunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to deferaddressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the matter to the FERC for a moreconsidered determination on the issue of refunds. The FERC issued its order on remand in September 2007, in which it directedEntergy to make a compliance filing removing all interruptible load from the computation of peak load responsibility commencingApril 1, 2004 and to issue any necessary refunds to reflect this change. In addition, the order directed the Utility operating companiesto make refunds for the period May 1995 through July 1996. In November 2007 the Utility operating companies filed a refund reportdescribing the refunds to be issued pursuant to the FERC’s orders. The LPSC filed a protest to the refund report in December2007. The refunds were made in October 2008 by the Utility operating companies that owed refunds to the Utility operating companiesthat were due refunds under the decision. The APSC and the Utility operating companies appealed the FERC decisions to the D.C.Circuit.99Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsFollowing the filing of petitioners’ initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of theFERC’s decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC. The D.C.Circuit granted the FERC’s unopposed motion in June 2009. In December 2009 the FERC established a paper hearing to determinewhether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatmentof interruptible load in the allocation of capacity costs by the Utility operating companies. In August 2010 the FERC issued an orderstating that it has the authority and refunds are appropriate. The APSC, the MPSC, and Entergy requested rehearing of the FERC’sdecision. In June 2011 the FERC issued an order granting rehearing in part and denying rehearing in part, in which the FERCdetermined to invoke its discretion to deny refunds. The FERC held that in this case where “the Entergy system as a whole collectedthe proper level of revenue, but, as was later established, incorrectly allocated peak load responsibility among the various Entergyoperating companies….the Commission will apply here our usual practice in such cases, invoking our equitable discretion to not orderrefunds, notwithstanding our authority to do so.” The LPSC requested rehearing of the FERC’s June 2011 decision. In July 2011 therefunds made in the fourth quarter 2008 described above were reversed. In October 2011 the FERC issued an “Order Establishing PaperHearing” inviting parties that oppose refunds to file briefs within 30 days addressing the LPSC’s argument that FERC precedentsupports refunds under the circumstances present in this proceeding. Parties that favor refunds were then invited to file reply briefswithin 21 days of the date that the initial briefs were due. In March 2013 the FERC issued an order denying the LPSC’s request for rehearing of the FERC’s June 2011 order wherein theFERC concluded it would exercise its discretion and not order refunds in the interruptible load proceeding. Based on its review of theLPSC’s request for rehearing and the briefs filed as part of the paper hearing established in October 2011, the FERC affirmed its earlierruling and declined to order refunds under the circumstances of the case. In May 2013 the LPSC filed a petition for review with the U.S.Court of Appeals for the D.C. Circuit seeking review of FERC orders in the interruptible load proceeding that concluded that the FERCwould exercise its discretion and not order refunds in the proceeding. Oral argument was held on the appeal in the D.C. Circuit inSeptember 2014. In December 2014 the D.C. Circuit issued an order on the LPSC’s appeal and remanded the case back to the FERC.The D.C. Circuit rejected the LPSC’s argument that there is a presumption in favor of refunds, but it held that the FERC had notadequately explained its decision to deny refunds and directed the FERC “to consider the relevant factors and weigh them against oneanother.” In March 2015, Entergy filed with the FERC an initial brief on remand to address the December 2014 decision by the D.C.Circuit. The initial brief on remand argued that the FERC, in response to the D.C. Circuit decision, should clarify its policy on refundsand find that refunds are not required in the interruptible load proceeding.In April 2016 the FERC issued an order on remand that addressed the December 2014 decision by the D.C. Circuit in theinterruptible load proceeding. The order on remand affirmed the FERC’s denial of refunds for the 15-month refund effective period.The FERC explained and clarified its policies regarding refunds and concluded that the evidence in the record demonstrated that therelevant equitable factors favored not requiring refunds in this case. The FERC also noted that, under Section 206(c) of the FederalPower Act, in a Section 206 proceeding involving two or more electric utility companies of a registered holding company system, theFERC may order refunds only if it determines the refunds would not cause the registered holding company to experience any reductionin revenues resulting from an inability of an electric utility company in the system to recover the resulting increase in costs. The FERCstated it was not able to find that the Entergy system would not experience a reduction in revenues if refunds were awarded in thisproceeding, which further supported the denial of refunds. In May 2016 the LPSC filed a request for rehearing of the FERC’s April2016 order. In September 2016 the FERC issued an order denying the LPSC’s request for rehearing and reaffirming its denial of refundsfor the 15-month refund effective period. The LPSC appealed the April and September 2016 orders to the U.S. Court of Appeals for theD.C. Circuit. In March 2018 the D.C. Circuit issued an order denying the LPSC’s appeal and affirming the FERC’s decision that itwould be inequitable to award refunds in the proceeding. In April 2018 the LPSC sought rehearing en banc of the D.C. Circuit’s orderdenying the LPSC’s appeal. In May 2018 the D.C. Circuit denied the LPSC’s rehearing request. In August 2018 the LPSC filed with theSupreme Court of the United States a petition for a writ of certiorari to review the judgment of the D.C. Circuit. In November 2018 theSupreme Court of the United States denied the LPSC’s petition for a writ of certiorari to review the judgment of the D.C. Circuit,effectively terminating the interruptible load proceeding.100Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Arkansas Opportunity Sales ProceedingIn June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electricenergy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy Systemresources; (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generatingcapacity; and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent anoffer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenged sales made beginning in 2002and requested refunds. In July 2009 the Utility operating companies filed a response to the complaint arguing among other things thatthe System Agreement contemplates that the Utility operating companies may make sales to third parties for their own account, subjectto the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The FERCsubsequently ordered a hearing in the proceeding.After a hearing, the ALJ issued an initial decision in December 2010. The ALJ found that the System Agreement allowed forEntergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as jointaccount sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, alongwith interest. Entergy disagreed with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptionsto the decision.The FERC issued a decision in June 2012 and held that, while the System Agreement is ambiguous, it does provide authority forindividual Utility operating companies to make opportunity sales for their own account and Entergy Arkansas made and priced thesesales in good faith. The FERC found, however, that the System Agreement does not provide authority for an individual Utilityoperating company to allocate the energy associated with such opportunity sales as part of its load but provides a different allocationauthority. The FERC further found that the after-the-fact accounting methodology used to allocate the energy used to supply the saleswas inconsistent with the System Agreement. The FERC in its decision established further hearing procedures to quantify the effect ofrepricing the opportunity sales in accordance with the FERC’s June 2012 decision. The hearing was held in May 2013 and the ALJissued an initial decision in August 2013. The LPSC, the APSC, the City Council, and FERC staff filed briefs on exceptions and/orbriefs opposing exceptions. Entergy filed a brief on exceptions requesting that the FERC reverse the initial decision and a briefopposing certain exceptions taken by the LPSC and FERC staff.In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and the ALJ’s August 2013 initialdecision. The first order denied Entergy’s request for rehearing and affirmed the FERC’s earlier rulings that Entergy’s originalmethodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make paymentsto the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation.The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, therulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments EntergyArkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system billsshould be performed but required that methodology be modified so that the sales have the same priority for purposes of energyallocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidthpayments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that suchadjustments and excess bandwidth payments should be taken into account but ordered further proceedings before an ALJ to addresswhether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculationmethodology.In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that payments made byEntergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. Entergy Services also filed arequest for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSCand the LPSC also filed requests for rehearing of the101Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsFERC’s April 2016 order. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether anypayments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval ofEntergy Arkansas’s wholesale baseload contract with Entergy Louisiana. In November 2017 the FERC issued an order denying all ofthe remaining requests for rehearing of the April 2016 order. In November 2017, Entergy Services filed a petition for review in the D.C.Circuit of the FERC’s orders in the first two phases of the opportunity sales case. In December 2017 the D.C. Circuit granted EntergyServices’s request to hold the appeal in abeyance pending final resolution of the related proceeding before the FERC. In January 2018the APSC and the LPSC filed separate petitions for review in the D.C. Circuit, and the D.C. Circuit consolidated the appeals withEntergy Services’s appeal and held all of the appeals in abeyance pending final resolution of the related proceeding before the FERC.The hearing required by the FERC’s April 2016 order was held in May 2017. In July 2017 the ALJ issued an initial decisionaddressing whether a cap on any reduction due to bandwidth payments was necessary and whether to implement the other adjustmentsto the calculation methodology. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individualbriefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC,the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties.Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016,Entergy Arkansas recorded a liability of $87 million, which included interest, for its estimated increased costs and payment to the otherUtility operating companies, and a deferred fuel regulatory asset of $75 million. Following its assessment of the course of theproceedings, including the FERC’s denial of rehearing in November 2017 described above, in the fourth quarter 2017, EntergyArkansas recorded an additional liability of $35 million and a regulatory asset of $31 million.In October 2018 the FERC issued an order addressing the ALJ’s July 2017 initial decision. The FERC reversed the ALJ’sdecision to cap the reduction in Entergy Arkansas’s payment to account for the increased bandwidth payments that Entergy Arkansasmade to the other operating companies. The FERC also reversed the ALJ’s decision that Grand Gulf sales from January throughSeptember 2000 should be included in the calculation of Entergy Arkansas’s payment. The FERC affirmed on other grounds the ALJ’srejection of the LPSC’s claim that certain joint account sales should be accounted for as part of the calculation of Entergy Arkansas’spayment. In December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order. The compliance filingprovided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. Refunds andinterest in the following amounts were paid by Entergy Arkansas to the other operating companies in December 2018: Total refunds including interest Payment/(Receipt) (In Millions) PrincipalInterestTotalEntergy Arkansas$68$67$135Entergy Louisiana($30)($29)($59)Entergy Mississippi($18)($18)($36)Entergy New Orleans($3)($4)($7)Entergy Texas($17)($16)($33)Entergy Arkansas previously recognized a regulatory asset with a balance of $116 million as of December 31, 2018 for a portion of thepayments due as a result of this proceeding. 102Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsComplaints Against System EnergyReturn on Equity ComplaintsIn January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reductionin the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacityand energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells someof its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements.The current return on equity under the Unit Power Sales Agreement is 10.94%, which was established in a rate proceeding that becamefinal in July 2001.The APSC and MPSC complaint alleges that the return on equity is unjust and unreasonable because capital market and otherconsiderations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equityand establish a lower return on equity, and also requests that the FERC establish January 23, 2017 as a refund effective date. Thecomplaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy isbetween 8.37% and 8.67%. System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint.System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERCestablished a refund effective date of January 23, 2017, consolidated the return on equity complaint with the proceeding described inUnit Power Sales Agreement below, and directed the parties to engage in settlement proceedings before an ALJ. The parties have beenunable to settle the return on equity issue and a FERC hearing judge was assigned in July 2018. The 15-month refund effective date inconnection with the APSC/MPSC complaint expired on April 23, 2018.In April 2018 the LPSC filed a complaint with the FERC against System Energy seeking an additional 15-month refund period. The LPSC complaint requests similar relief from the FERC with respect to System Energy’s return on equity and also requests the FERCto investigate System Energy’s capital structure. The APSC, MPSC, and City Council intervened in the proceeding, filed an answerexpressing support for the complaint, and asked the FERC to consolidate this proceeding with the proceeding initiated by the complaintof the APSC and MPSC in January 2017. System Energy answered the LPSC complaint in May 2018 and also filed a motion to dismissthe complaint.In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure andsetting for hearing System Energy’s return on equity, with a refund effective date of April 2018. The portion of the LPSC’s complaintdealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearinghas been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding involvingNew England transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. InSeptember 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of theFERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capitalstructure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended complaint, and System Energysubmitted a response to the amended complaint in October 2018. In January 2019 the FERC set the amended complaint for settlementand hearing proceedings.Grand Gulf Sale-leaseback Renewal ComplaintIn May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of asale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. Thecomplaint alleges that System Energy violated the filed rate and the FERC’s ratemaking and accounting requirements when it includedin Unit Power Sales Agreement billings the cost of capital additions associated with the sale-leaseback interest, and that System Energyis double-recovering costs by including both the lease payments and the capital additions in Unit Power Sales Agreement billings. Thecomplaint also claims103Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsthat System Energy was imprudent in entering into the sale-leaseback renewal because the Utility operating companies that purchaseGrand Gulf’s output from System Energy could have obtained cheaper capacity and energy in the MISO markets. The complaint furtheralleges that System Energy violated various other reporting and accounting requirements and should have sought prior FERC approvalof the lease renewal. The complaint seeks various forms of relief from the FERC. The complaint seeks refunds for capital addition costsfor all years in which they were recorded in allegedly non-formula accounts or, alternatively, the disallowance of the return on equityfor the capital additions in those years plus interest. The complaint also asks that the FERC disallow and refund the lease costs of thesale-leaseback renewal on grounds of imprudence, investigate System Energy’s treatment of a DOE litigation payment, and imposecertain forward-looking procedural protections, including audit rights for retail regulators of the Unit Power Sales Agreement formularates. The APSC, MPSC, and City Council intervened in the proceeding.In June 2018, System Energy and Entergy Services filed a motion to dismiss and an answer to the LPSC complaint denying thatSystem Energy’s treatment of the sale-leaseback renewal and capital additions violated the terms of the filed rate or any other FERCratemaking, accounting, or legal requirements or otherwise constituted double recovery. The response also argued that the complaint isinconsistent with a FERC-approved settlement to which the LPSC is a party and that explicitly authorizes System Energy to recover itslease payments. Finally, the response argued that both the capital additions and the sale-leaseback renewal were prudent investmentsand the LPSC complaint fails to justify any disallowance or refunds. The response also offered to submit formula rate protocols for theUnit Power Sales Agreement similar to the procedures used for reviewing transmission rates under the MISO tariff. In September 2018the FERC issued an order setting the complaint for hearing and settlement proceedings. The FERC established a refund effective date ofMay 2018. The hearing has been scheduled for November 2019.Unit Power Sales AgreementIn August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant towhich System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, andEntergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use incalculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenuerequirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments wouldresult in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power SalesAgreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account therenewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept theamendments effective October 1, 2017.In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to furtherproceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, theFERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower thanproposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of thefurther settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the ratedecrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding described in“Return on Equity Complaints” above, and directed the parties to engage in settlement proceedings before an ALJ. In June 2018,System Energy filed with the FERC an uncontested settlement relating to the updated depreciation rates and nuclear decommissioningcost annual revenue requirements. In August 2018 the FERC issued an order accepting the settlement. In the third quarter 2018, SystemEnergy recorded a reduction in depreciation expense of approximately $26 million, representing the cumulative difference indepreciation expense resulting from the depreciation rates used from October 11, 2017 through September 30, 2018 and thedepreciation rates included in the settlement filing accepted by the FERC. 104Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsStorm Cost Recovery Filings with Retail RegulatorsEntergy LouisianaHurricane IsaacIn August 2012, Hurricane Isaac caused extensive damage to Entergy Louisiana’s service area. The storm resulted inwidespread power outages, significant damage primarily to distribution infrastructure, and the loss of sales during the poweroutages. In June 2014 the LPSC authorized Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac systemrestoration costs. Entergy Louisiana committed to pass on to customers a minimum of $30.8 million of customer benefits throughannual customer credits of approximately $6.2 million for five years. Approvals for the Act 55 financings were obtained from theLouisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA)issued $314.85 million in bonds under Louisiana Act 55. From the $309 million of bond proceeds loaned by the LCDA to the LURC,the LURC deposited $16 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $293million directly to Entergy Louisiana. Entergy Louisiana used the $293 million received from the LURC to acquire 2,935,152.69 ClassC preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated byEntergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and themembership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of EntergyHoldings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certainfinancial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least$1.75 billion.Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are theobligation of the LCDA and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default. To service thebonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenturetrustee. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as thebilling and collection agent for the state.Hurricane Gustav and Hurricane IkeIn September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy Louisiana’s service territory. In December 2009, Entergy Louisiana entered into a stipulation agreement with the LPSC staff regarding its storm costs. In March andApril 2010, Entergy Louisiana and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includedEntergy Louisiana’s proposal to utilize Act 55 financing, which included a commitment to pass on to customers a minimum of $43.3million of customer benefits through a prospective annual rate reduction of $8.7 million for five years. In April 2010 the LPSCapproved the settlement and subsequently issued financing orders and a ratemaking order intended to facilitate the implementation ofthe Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financing. The settlement agreementallowed for an adjustment to the credits if there was a change in the applicable federal or state income tax rate. As a result of theenactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the federal corporate income tax rate from 35% to21%, the Louisiana Act 55 financing savings obligation regulatory liability related to Hurricane Gustav and Hurricane Ike was reducedby $2.7 million, with a corresponding increase to Other regulatory credits on the income statement. The effects of the Tax Cuts andJobs Act are discussed further in Note 3 to the financial statements.In July 2010, the LCDA issued two series of bonds totaling $713.0 million under Act 55. From the $702.7 million of bondproceeds loaned by the LCDA to the LURC, the LURC deposited $290 million in a restricted escrow account as a storm damage reservefor Entergy Louisiana and transferred $412.7 million directly to Entergy105Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsLouisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $412.7 million to acquire4,126,940.15 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-ownedand consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at theoption of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membershipinterests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintaina net worth of at least $1 billion.Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are theobligation of the LCDA, and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default. To service thebonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenturetrustee. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as thebilling and collection agent for the state.Hurricane Katrina and Hurricane RitaIn August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to Entergy Louisiana’s serviceterritory. In March 2008, Entergy Louisiana and the LURC filed at the LPSC an application requesting that the LPSC grant a financingorder authorizing the financing of Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Louisiana Act55. Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow chargesand savings to customers via a storm cost offset rider. In April 2008 the Louisiana Public Facilities Authority (LPFA), which is theissuer of the bonds pursuant to the Act 55 financing, approved requests for the Act 55 financing. Also in April 2008, EntergyLouisiana and the LPSC staff filed with the LPSC an uncontested stipulated settlement that included Entergy Louisiana’s proposal underthe Act 55 financing, which included a commitment to pass on to customers a minimum of $40 million of customer benefits through aprospective annual rate reduction of $8 million for five years. The LPSC subsequently approved the settlement and issued twofinancing orders and one ratemaking order intended to facilitate implementation of the Act 55 financing. In May 2008 the LouisianaState Bond Commission granted final approval of the Act 55 financing. The settlement agreement allowed for an adjustment to thecredits if there was a change in the applicable federal or state income tax rate. As a result of the enactment of the Tax Cuts and JobsAct, in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21%, the Louisiana Act 55 financingsavings obligation regulatory liability related to Hurricanes Katrina and Rita was reduced by $22.3 million, with a correspondingincrease to Other regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 tothe financial statements.In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bondproceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reservefor Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by EntergyLouisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restrictedescrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting,membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a10% annual distribution rate. In August 2008, the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the$274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as astorm damage reserve for Entergy Louisiana and transferred $187.7 million directly to Entergy Louisiana. From the bond proceedsreceived by Entergy Louisiana from the LURC, Entergy Louisiana invested $189.4 million, including $1.7 million that was withdrawnfrom the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred,non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions arepayable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membershipinterests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The termsof the membership106Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsinterests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintaina net worth of at least $1 billion. In February 2012, Entergy Louisiana sold 500,000 of its Class A preferred membership units inEntergy Holdings Company LLC, a wholly-owned Entergy subsidiary, to a third party in exchange for $51 million plus accrued butunpaid distributions on the units. The 500,000 preferred membership units are mandatorily redeemable in January 2112.The bonds were repaid in 2018. Entergy and Entergy Louisiana did not report the bonds issued by the LPFA on their balancesheets because the bonds are the obligation of the LPFA, and there was no recourse against Entergy or Entergy Louisiana in the eventof a bond default. To service the bonds, Entergy Louisiana collected a system restoration charge on behalf of the LURC, and remittedthe collections to the bond indenture trustee. Entergy and Entergy Louisiana did not report the collections as revenue because EntergyLouisiana was merely acting as the billing and collection agent for the state.Entergy MississippiEntergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If EntergyMississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceasesuntil such time that the accumulated storm damage provision becomes less than $10 million. As of April 30, 2016, EntergyMississippi’s storm damage provision balance was less than $10 million, therefore Entergy Mississippi resumed billing the monthlystorm damage provision effective with June 2016 bills. As of September 30, 2016, however, Entergy Mississippi’s storm damageprovision balance exceeded $15 million. Accordingly the storm damage provision was reset to zero beginning with November 2016bills. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was again less than $10 million,therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with September 2017 bills. As of June 30,2018, Entergy Mississippi’s storm damage provision balance exceeded $15 million. Accordingly the storm damage provision was resetto zero beginning with August 2018 bills. Entergy New OrleansIn August 2012, Hurricane Isaac caused extensive damage to Entergy New Orleans’s service area. In January 2015 the CityCouncil issued a resolution approving the terms of a joint agreement in principle filed by Entergy New Orleans, Entergy Louisiana, andthe City Council Advisors determining, among other things, that Entergy New Orleans’s prudently-incurred storm recovery costs were$49.3 million, of which $31.7 million, net of reimbursements from the storm reserve escrow account, remained recoverable fromEntergy New Orleans’s electric customers. The resolution also directed Entergy New Orleans to file an application to securitize theunrecovered City Council-approved storm recovery costs of $31.7 million pursuant to the Louisiana Electric Utility Storm RecoverySecuritization Act (Louisiana Act 64). In addition, the resolution found that it was reasonable for Entergy New Orleans to include in theprincipal amount of its potential securitization the costs to fund and replenish Entergy New Orleans’s storm reserve in an amount thatachieved the City Council-approved funding level of $75 million. In January 2015, in compliance with that directive, Entergy NewOrleans filed with the City Council an application requesting that the City Council grant a financing order authorizing the financing ofEntergy New Orleans’s storm costs, storm reserves, and issuance costs pursuant to Louisiana Act 64. In May 2015 the parties enteredinto an agreement in principle and the City Council issued a financing order authorizing Entergy New Orleans to issue storm recoverybonds in the aggregate amount of $98.7 million, including $31.8 million for recovery of Entergy New Orleans’s Hurricane Isaac stormrecovery costs, including carrying costs, $63.9 million to fund and replenish Entergy New Orleans’s storm reserve, and approximately$3 million for estimated up-front financing costs associated with the securitization. See Note 5 to the financial statements for discussionof the issuance of the securitization bonds in July 2015.107Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNew Nuclear Generation Development CostsEntergy LouisianaEntergy Louisiana and Entergy Gulf States Louisiana were developing a project option for new nuclear generation at RiverBend. In March 2010, Entergy Louisiana and Entergy Gulf States Louisiana filed with the LPSC seeking approval to continue thelimited development activities necessary to preserve an option to construct a new unit at River Bend. At its June 2012 meeting theLPSC voted to uphold an ALJ recommendation that the request of Entergy Louisiana and Entergy Gulf States Louisiana be declined onthe basis that the LPSC’s rule on new nuclear development does not apply to activities to preserve an option to develop and on thefurther grounds that the companies improperly engaged in advanced preparation activities prior to certification. The LPSC directed thatEntergy Louisiana and Entergy Gulf States Louisiana be permitted to seek recovery of these costs in their upcoming rate case filingsthat were subsequently filed in February 2013. In the resolution of the rate case proceeding the LPSC provided for an eight-yearamortization of costs incurred in connection with the potential development of new nuclear generation at River Bend, without carryingcosts, beginning in December 2014, provided, however, that amortization of these costs shall not result in a future rate increase. As ofDecember 31, 2018, Entergy Louisiana has a regulatory asset of $28.5 million on its balance sheet related to these new nucleargeneration development costs.NOTE 3. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, Entergy Texas, and System Energy)Income taxes for 2018, 2017, and 2016 for Entergy Corporation and Subsidiaries consist of the following: 2018 2017 2016 (In Thousands)Current: Federal$36,848 $29,595 $45,249Foreign— — 68State7,274 15,478 (14,960)Total44,122 45,073 30,357Deferred and non-current - net(1,074,416) 505,010 (840,465)Investment tax credit adjustments - net(6,532) (7,513) (7,151)Income taxes($1,036,826) $542,570 ($817,259) Income taxes for 2018, 2017, and 2016 for Entergy’s Registrant Subsidiaries consist of the following:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Current: Federal ($23,638) ($15,841) ($11,275) ($10,813) $16,190 ($9,786)State (1,617) (1,122) (1,066) 545 3,205 (1,821)Total (25,255) (16,963) (12,341) (10,268) 19,395 (11,607)Deferred and non-current - net (270,586) (32,725) (114,738) 7,943 (44,817) (35,329)Investment tax credit adjustments - net (1,226) (4,923) 1,306 (111) (821) (739)Income taxes ($297,067) ($54,611) ($125,773) ($2,436) ($26,243) ($47,675)108Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Current: Federal $16,086 ($84,250) ($8,845) ($30,635) $6,034 $47,674State 9,191 1,480 (924) (728) 310 5,314Total 25,277 (82,770) (9,769) (31,363) 6,344 52,988Deferred and non-current - net 69,753 572,988 83,501 62,946 43,102 19,243Investment tax credit adjustments - net (1,226) (4,920) 187 1,695 (965) (2,262)Income taxes $93,804 $485,298 $73,919 $33,278 $48,481 $69,9692016 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Current: Federal ($14,748) ($124,113) $10,603 ($91,067) $19,656 $29,628State 2,805 10,757 2,257 566 1,374 (25,825)Total (11,943) (113,356) 12,860 (90,501) 21,030 3,803Deferred and non-current - net 120,942 208,157 46,984 119,345 42,982 71,051Investment tax credit adjustments - net (1,226) (5,067) 4,010 (139) (915) (3,793)Income taxes $107,773 $89,734 $63,854 $28,705 $63,097 $71,061109Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsTotal income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutoryincome tax rate to income before income taxes. The reasons for the differences for the years 2018, 2017, and 2016 are: 2018 2017 2016 (In Thousands)Net income (loss) attributable to Entergy Corporation$848,661 $411,612 ($583,618)Preferred dividend requirements of subsidiaries13,894 13,741 19,115Consolidated net income (loss)862,555 425,353 (564,503)Income taxes(1,036,826) 542,570 (817,259)Income (loss) before income taxes($174,271) $967,923 ($1,381,762)Computed at statutory rate (21% for 2018) (35% for 2017 and2016)($36,597) $338,773 ($483,617)Increases (reductions) in tax resulting from: State income taxes net of federal income tax effect21,398 44,179 40,581Regulatory differences - utility plant items(37,507) 39,825 33,581Equity component of AFUDC(27,216) (33,282) (23,647)Amortization of investment tax credits(8,304) (10,204) (10,889)Flow-through / permanent differences439 8,727 (19,307)Tax legislation enactment (a)— 560,410 —Amortization of excess ADIT (a)(577,082) — —Revisions of the 2017 tax legislation enactment regulatoryliability accrual, including the effect of the Entergy Texas2018 base rate proceeding(40,494) — —Utility restructuring (b)(169,918) — —Settlement on treatment of regulatory obligations (c)(52,320) — —State income tax audit conclusion(23,425) — —IRS audit adjustment(8,404) — —Entergy Wholesale Commodities nuclear decommissioningtrust restructuring (d)(106,833) — —Entergy Wholesale Commodities restructuring (d)— (373,277) (237,760)Act 55 financing settlement (e)— — (63,477)FitzPatrick disposition— (44,344) —Provision for uncertain tax positions (e)24,569 8,756 (67,119)Valuation allowance2,211 — 11,411Other - net2,657 3,007 2,984Total income taxes as reported($1,036,826) $542,570 ($817,259)Effective Income Tax Rate595.0% 56.1% 59.1%(a)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and thetax legislation enactment in 2017.(b)See “Other Tax Matters - Entergy Arkansas and Entergy Mississippi Internal Restructuring” below for discussion of theUtility restructuring.(c)See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement.(d)See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy WholesaleCommodities nuclear decommissioning trust restructuring in 2018 and the Entergy Wholesale Commodities restructuring in2016 and 2017.(e)See “Income Tax Audits - 2010-2011 IRS Audit” below for discussion of the settlement and the most significant items for2016.110Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsTotal income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rateto income before taxes. The reasons for the differences for the years 2018, 2017, and 2016 are:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Net income $252,707 $675,614 $126,078 $53,152 $162,235 $94,109Income taxes (297,067) (54,611) (125,773) (2,436) (26,243) (47,675)Pretax income ($44,360) $621,003 $305 $50,716 $135,992 $46,434Computed at statutory rate (21%) ($9,316) $130,411 $64 $10,650 $28,558 $9,751Increases (reductions) in tax resultingfrom: State income taxes net of federalincome tax effect (794) 26,031 (1,747) 2,322 2,576 2,812Regulatory differences - utility plantitems (14,916) (12,604) (4,103) (1,502) (1,872) (2,510)Equity component of AFUDC (3,477) (16,784) (1,829) (1,248) (2,042) (1,837)Amortization of investment tax credits (1,201) (4,871) (160) (109) (808) (1,155)Flow-through / permanent differences 570 3,203 1,893 (4,222) 1,038 2,815Revisions of the 2017 tax legislationenactment regulatory liabilityaccrual, including the effect of theEntergy Texas 2018 base rateproceeding 933 (2,810) (556) 884 (43,799) (3,565)Amortization of excess ADIT (b) (271,570) (104,313) (120,831) (9,878) (11,519) (58,971)Settlement on treatment of regulatoryobligations (c) — (52,320) — — — —IRS audit adjustment 1,290 1,097 1,018 (96) 524 (12)Non-taxable dividend income — (26,795) — — — —Provision for uncertain tax positions 724 3,949 240 613 839 4,876Other - net 690 1,195 238 150 262 121Total income taxes as reported ($297,067) ($54,611) ($125,773) ($2,436) ($26,243) ($47,675)Effective Income Tax Rate 669.7% (8.8)% (41,237.0)% (4.8)% (19.3)% (102.7)%111Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Net income $139,844 $316,347 $110,032 $44,553 $76,173 $78,596Income taxes 93,804 485,298 73,919 33,278 48,481 69,969Pretax income $233,648 $801,645 $183,951 $77,831 $124,654 $148,565Computed at statutory rate (35%) $81,777 $280,576 $64,383 $27,241 $43,629 $51,998Increases (reductions) in tax resulting from: State income taxes net of federal income taxeffect 11,586 31,927 6,202 2,842 527 5,635Regulatory differences - utility plant items 7,220 12,168 1,356 619 5,581 12,880Equity component of AFUDC (6,458) (18,020) (3,383) (847) (2,353) (2,221)Amortization of investment tax credits (1,201) (4,871) (160) (124) (951) (2,896)Flow-through / permanent differences 3,098 3,774 1,567 (3,352) 1,428 (276)Tax legislation enactment (b) (3,090) 217,258 3,492 6,153 2,981 (69)Non-taxable dividend income — (44,658) — — — —Provision for uncertain tax positions 200 5,700 228 600 (2,617) 4,800Other - net 672 1,444 234 146 256 118Total income taxes as reported $93,804 $485,298 $73,919 $33,278 $48,481 $69,969Effective Income Tax Rate 40.1% 60.5% 40.2% 42.8% 38.9% 47.1%2016 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Net income $167,212 $622,047 $109,184 $48,849 $107,538 $96,744Income taxes 107,773 89,734 63,854 28,705 63,097 71,061Pretax income $274,985 $711,781 $173,038 $77,554 $170,635 $167,805Computed at statutory rate (35%) $96,245 $249,123 $60,563 $27,144 $59,722 $58,732Increases (reductions) in tax resulting from: State income taxes net of federal income taxeffect 11,652 29,014 5,592 3,543 449 7,001Regulatory differences - utility plant items 10,971 8,094 (1,154) 2,329 4,140 9,201Equity component of AFUDC (5,985) (9,774) (2,030) (412) (2,666) (2,780)Amortization of investment tax credits (1,201) (5,019) (160) (132) (900) (3,476)Flow-through / permanent differences (3,848) (980) 764 (3,609) 634 (883)Act 55 financing settlement (d) — (61,620) — — (454) —Non-taxable dividend income — (44,658) — — — —Provision for uncertain tax positions (d) (717) (75,871) 50 (300) 1,926 3,151Other - net 656 1,425 229 142 246 115Total income taxes as reported $107,773 $89,734 $63,854 $28,705 $63,097 $71,061Effective Income Tax Rate 39.2% 12.6% 36.9% 37.0% 37.0% 42.3%(a)See Note 2 to the financial statements for discussion of the Entergy Texas rate case settlement.(b)See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess ADIT in 2018 and thetax legislation enactment in 2017.(c)See “Income Tax Audits - 2012-2013 IRS Audit” below for discussion of the settlement for Entergy Louisiana.112Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements(d)See “Income Tax Audits - 2010-2011 IRS Audit” below for discussion of the most significant items for Entergy Louisiana.Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as ofDecember 31, 2018 and 2017 are as follows: 2018 2017 (In Thousands)Deferred tax liabilities: Plant basis differences - net($3,835,211) ($3,963,798)Regulatory assets(370,484) —Nuclear decommissioning trusts/receivables(1,128,140) (1,657,808)Pension, net funding(307,626) (350,743)Combined unitary state taxes(9,440) (24,645)Power purchase agreements(73,335) (19,621)Deferred fuel(29,953) —Other(248,997) (249,327)Total(6,003,186) (6,265,942)Deferred tax assets: Nuclear decommissioning liabilities1,070,583 964,945Regulatory liabilities895,756 841,370Pension and other post-employment benefits305,736 343,817Sale and leaseback121,473 122,397Compensation86,461 75,217Accumulated deferred investment tax credit57,643 59,285Provision for allowances and contingencies135,631 126,391Unbilled/deferred revenues43,762 —Net operating loss carryforwards628,165 467,255Capital losses and miscellaneous tax credits20,549 16,738Valuation allowance(243,726) (137,283)Other125,522 54,058Total3,247,555 2,934,190Non-current accrued taxes (including unrecognized tax benefits)(1,296,928) (956,547)Accumulated deferred income taxes and taxes accrued($4,052,559) ($4,288,299)Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are as follows:Carryover Description Carryover Amount Year(s) of expiration Federal net operating losses before 1/1/2018 $11.1 billion 2023-2037Federal net operating losses - 1/1/2018 forward $6.4 billion N/AState net operating losses $20.4 billion 2019-2038Miscellaneous federal and state credits $115.6 million 2019-2037113Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsAs a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financialstatements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and othertax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss andcredit carryovers will not be utilized, valuation allowances of $179 million as of December 31, 2018 and $106 million as ofDecember 31, 2017 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers.Additionally, valuation allowances totaling $64 million as of December 31, 2018 and $31 million as of December 31, 2017 have beenprovided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilizeseparate company tax return losses, preventing realization of such deferred tax assets.Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as ofDecember 31, 2018 and 2017 are as follows:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Deferred tax liabilities: Plant basis differences - net ($966,791) ($1,893,831) ($579,319) ($135,143) ($544,282) ($403,809)Regulatory assets (169,482) (74,917) (1,732) (20,009) (57,777) (46,627)Nuclear decommissioningtrusts/receivables (77,664) (71,470) — — — (86,882)Pension, net funding (91,962) (92,693) (24,398) (11,885) (20,331) (18,898)Deferred fuel (5,801) (6,974) (11,819) (1,701) (2,835) (312)Other (41,025) (34,700) (13,443) (7,640) (6,085) (4,544)Total (1,352,725) (2,174,585) (630,711) (176,378) (631,310) (561,072)Deferred tax assets: Regulatory liabilities 247,964 339,126 72,570 40,181 86,032 110,370Nuclear decommissioning liabilities 99,479 48,738 — — — 46,643Pension and other post-employmentbenefits (19,068) 80,102 (5,405) (11,371) (14,215) (632)Sale and leaseback — 18,999 — — 102,481Accumulated deferred investment taxcredit 8,599 33,928 2,541 579 2,347 9,649Provision for allowances andcontingencies 9,877 81,108 13,412 23,962 5,579 —Power purchase agreements (17,223) 19,385 1,140 12,155 (18) —Unbilled/deferred revenues 7,471 (17,345) 5,527 636 7,016 —Compensation 1,708 1,959 1,265 512 995 (260)Net operating loss carryforwards 6,338 20,118 4,896 480 261 —Other 7,977 23,412 1,610 12,181 2,127 4Total 353,122 649,530 97,556 79,315 90,124 268,255Non-current accrued taxes (includingunrecognized tax benefits) (85,942) (701,666) (18,714) (226,532) (11,349) (512,479)Accumulated deferred income taxesand taxes accrued ($1,085,545) ($2,226,721) ($551,869) ($323,595) ($552,535) ($805,296)114Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Deferred tax liabilities: Plant basis differences - net ($1,289,827) ($1,583,100) ($571,682) ($85,515) ($526,596) ($359,931)Nuclear decommissioningtrusts/receivables (181,911) (164,395) — — — (119,184)Pension, net funding (99,971) (102,138) (26,413) (13,040) (20,700) (21,871)Deferred fuel (16,530) (1,329) (19,005) (1,894) — (272)Other (23,079) (98,307) (11,306) (23,610) (8,236) (5,955)Total (1,611,318) (1,949,269) (628,406) (124,059) (555,532) (507,213)Deferred tax assets: Regulatory liabilities 227,489 368,156 102,676 23,526 25,428 91,271Nuclear decommissioning liabilities 132,464 58,891 — — — 63,180Pension and other post-employmentbenefits (16,252) 98,596 (4,865) (9,618) (12,044) (516)Sale and leaseback — 19,915 — — — 102,482Accumulated deferred investment taxcredit 8,913 35,323 2,212 488 2,516 9,832Provision for allowances andcontingencies 4,367 80,516 11,898 24,234 4,383 —Power purchase agreements — (6,924) 1,129 — — —Unbilled/deferred revenues 6,195 (18,263) 4,847 1,811 7,736 —Compensation 2,566 4,387 1,466 723 1,224 332Net operating loss carryforwards 16,172 44 10,255 — 1,690 —Capital losses and miscellaneous taxcredits 2,678 — 5,736 — — —Other 473 21,922 1,307 388 1,133 —Total 385,065 662,563 136,661 41,552 32,066 266,581Non-current accrued taxes (includingunrecognized tax benefits) 35,584 (763,665) 2,939 (200,795) (21,176) (535,788)Accumulated deferred income taxesand taxes accrued ($1,190,669) ($2,050,371) ($488,806) ($283,302) ($544,642) ($776,420)115Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2018 are asfollows: EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy Federal net operating losses $4.2 billion $4.3 billion $1.8 billion $1 billion $— $96 millionYear(s) of expiration N/A 2035-2037 N/A 2037 N/A N/A State net operating losses $4.4 billion $5.1 billion $1.8 billion $1.1 billion $— $190 millionYear(s) of expiration 2023 2035-2037 2038 2037 N/A 2038 Misc. federal credits $— $3.3 million $— $— $1.4 million $2.9 millionYear(s) of expiration N/A 2035-2037 N/A N/A 2029-2037 2029-2037 State credits $— $— $— $— $2.9 million $9.6 millionYear(s) of expiration N/A N/A N/A N/A 2027 2019-2022As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financialstatements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.Unrecognized tax benefitsAccounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can berecognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-notrecognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Areconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows: 2018 2017 2016 (In Thousands)Gross balance at January 1$4,871,846 $3,909,855 $2,611,585Additions based on tax positions related to the current year2,276,614 1,120,687 1,532,782Additions for tax positions of prior years506,142 283,683 368,404Reductions for tax positions of prior years(274,600) (442,379) (265,653)Settlements(198,520) — (337,263)Gross balance at December 317,181,482 4,871,846 3,909,855Offsets to gross unrecognized tax benefits: Carryovers and refund claims(5,957,992) (3,945,524) (2,922,085)Cash paid to taxing authorities(10,000) (10,000) (10,000)Unrecognized tax benefits net of unused tax attributes, refund claims and payments(a)$1,213,490 $916,322 $977,770(a)Potential tax liability above what is payable on tax returnsThe balances of unrecognized tax benefits include $2,161 million, $1,462 million, and $1,240 million as of December 31,2018, 2017, and 2016, respectively, which, if recognized, would lower the effective income tax rates. Because of the effect of deferredtax accounting, the remaining balances of unrecognized tax benefits of $5,020116Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsmillion, $3,410 million, and $2,670 million as of December 31, 2018, 2017, and 2016, respectively, if disallowed, would not affect theannual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense. Entergy’s December 31,2018, 2017, and 2016 accrued balance for the possible payment of interest is approximately $44 million, $38 million, and $30 million,respectively. Interest (net-of-tax) of $7 million, $8 million, and $9 million was recorded in 2018, 2017, and 2016, respectively.A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2018, 2017, and2016 is as follows:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Gross balance at January 1, 2018 ($117,716) $2,518,457 $15,122 $679,544 $16,399 $445,511Additions based on tax positions related to thecurrent year (a) 1,430,828 30,577 493,039 2,261 1,978 18,271Additions for tax positions of prior years 31,612 77,372 3,878 12,972 1,722 7,255Reductions for tax positions of prior years (21,619) (158,510) (3,253) (8,081) (2,262) (3,253)Settlements (24,443) (67,725) (21) (9) (35) (297)Gross balance at December 31, 2018 1,298,662 2,400,171 508,765 686,687 17,802 467,487Offsets to gross unrecognized tax benefits: Loss carryovers (1,173,839) (1,597,826) (478,268) (420,813) (3,199) (42,228)Unrecognized tax benefits net of unused taxattributes and payments $124,823 $802,345 $30,497 $265,874 $14,603 $425,2592017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Gross balance at January 1, 2017 $2,503 $2,440,339 $12,206 $166,230 $15,946 $472,372Additions based on tax positions related to thecurrent year (a) 8,974 32,843 2,105 509,183 1,747 909Additions for tax positions of prior years 3,682 235,331 1,267 13,364 3,115 1,432Reductions for tax positions of prior years (132,875) (190,056) (456) (9,233) (4,409) (29,202)Gross balance at December 31, 2017 (117,716) 2,518,457 15,122 679,544 16,399 445,511Offsets to gross unrecognized tax benefits: Loss carryovers — (1,591,907) (15,122) (441,374) (638) (12,536)Unrecognized tax benefits net of unused taxattributes and payments ($117,716) $926,550 $— $238,170 $15,761 $432,975117Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2016 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Gross balance at January 1, 2016 $25,445 $1,690,661 $19,482 $53,897 $13,462 $478,318Additions based on tax positions related to thecurrent year (a) 16,868 931,720 2,662 33,912 2,002 5,318Additions for tax positions of prior years 2,463 157,586 336 129,784 2,888 601Reductions for tax positions of prior years (41,957) (144,068) (10,219) (29,821) (1,849) (10,266)Settlements (316) (195,560) (55) (21,542) (557) (1,599)Gross balance at December 31, 2016 2,503 2,440,339 12,206 166,230 15,946 472,372Offsets to gross unrecognized tax benefits: Loss carryovers — (1,783,093) (2,373) (27,320) (376) (90,028)Unrecognized tax benefits net of unused taxattributes and payments $2,503 $657,246 $9,833 $138,910 $15,570 $382,344(a)The primary additions for Entergy Mississippi in 2018, Entergy New Orleans in 2017 and Entergy Louisiana in 2016 are relatedto the mark-to-market treatment discussed in “Other Tax Matters - Tax Accounting Methods” below. The primary additionsfor Entergy Arkansas in 2018 are related to the nuclear decommissioning costs treatment and the mark-to-market treatmentdiscussed in “Other Tax Matters - Tax Accounting Methods” below.The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reducedincome tax expense as follows: December 31, 2018 2017 2016 (In Millions)Entergy Arkansas$85.4 $2.6 $3.6Entergy Louisiana$594.0 $575.8 $473.3Entergy Mississippi$1.5 $— $—Entergy New Orleans$246.2 $31.7 $33.6Entergy Texas$5.1 $4.4 $7.0System Energy$— $— $—Accrued balances for the possible payment of interest related to unrecognized tax benefits are as follows: December 31, 2018 2017 2016 (In Millions)Entergy Arkansas$1.7 $1.6 $1.4Entergy Louisiana$17.9 $14.1 $8.4Entergy Mississippi$1.2 $1.0 $0.8Entergy New Orleans$2.7 $2.1 $1.5Entergy Texas$0.9 $0.4 $1.2System Energy$13.2 $8.5 $3.7118Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe Registrant Subsidiaries record interest and penalties related to unrecognized tax benefits in income tax expense. Nopenalties were recorded in 2018, 2017, or 2016. Interest (net-of-tax) was recorded as follows: 2018 2017 2016 (In Millions)Entergy Arkansas$0.2 $0.2 $—Entergy Louisiana$3.8 $5.7 ($0.9)Entergy Mississippi$0.2 $0.2 $0.4Entergy New Orleans$0.6 $0.6 ($0.3)Entergy Texas$0.5 ($0.8) $0.7System Energy$4.7 $4.8 $5.2Income Tax AuditsEntergy and its subsidiaries file U.S. federal and various state and foreign income tax returns. IRS examinations are completefor years before 2014. All state taxing authorities’ examinations are complete for years before 2012. Entergy regularly negotiates withthe IRS to achieve settlements. The resolution of audit issues could result in significant changes to the amounts of unrecognized taxbenefits in the next twelve months.2010-2011 IRS AuditThe IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) inJune 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisianawas able to recognize previously unrecognized tax benefits as follows:•Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the LouisianaUtilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustavand Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were nottaxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling$63.5 million, of which Entergy Louisiana recorded $61.6 million. In accordance with the terms of a previous settlementagreement approved by the LPSC, Entergy Louisiana has a regulatory liability of $13.5 million ($10 million net-of-tax) forEntergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.•Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidaliapurchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5million.2012-2013 IRS AuditThe IRS completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 RAR in June 2018. Entergy agreedto all proposed adjustments contained in the RAR. Entergy and the Registrant Subsidiaries recorded the effects of these adjustments inJune 2018.As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits of $52million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55financing.119Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsOther Tax MattersTax Cuts and Jobs ActDeferred tax liabilities and assets have been adjusted for the effect of the enactment of the Tax Cuts and Jobs Act (the Act),signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries isthe change in the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Other significant provisions and theireffect on Entergy and the Registrant Subsidiaries are summarized below.The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply tointerest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam througha local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by agovernment entity or instrumentality or by a public utility commission. The IRS issued proposed regulations relating to this limitation inNovember 2018. The regulations are generally proposed to be effective for taxable years ending after the date the Treasury decisionadopting the regulations as final is published in the Federal Register. Taxpayers may apply the rules of the proposed regulations to ataxable year beginning after December 31, 2017, so long as taxpayers consistently apply the rules of the proposed regulations. Theregulations contain guidance on the application of the interest expense limitation, including methodologies for allocating the interestexpense limitation. As a result of this provision of the Act, Entergy recorded limitations in 2018 which did not have a material effect onthe financial position, results of operations, or cash flows of Entergy and the Registrant Subsidiaries.The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). Conversely, the Actexcludes from bonus-eligible qualified property any property used in a trade or business that furnishes or sells electrical energy, gas, orsteam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services aresubject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonusdepreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries for property acquired and placed inservice after 2017.The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to lossesarising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80%limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act does not allow a carrybackperiod but does provide for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017. Because of theindefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the RegistrantSubsidiaries.The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect tocertain covered employees to no more than $1 million per year. The Act includes performance-based compensation in the annualcomputation of the section 162 limitation. The changes are expected to result in an increase in disallowed compensation expense, butthis limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:•repeal of the corporate alternative minimum tax (AMT),•modification to the capital contribution rules under Internal Revenue Code section 118,•repeal of domestic production activities deduction, and•fundamental changes to the taxation of multinational entities.With respect to the federal corporate income tax rate change from 35% to 21%, Entergy and the Registrant Subsidiariesrecorded a regulatory liability associated with the decrease in the net accumulated deferred income tax120Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsliability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to customers in 2018 in the form oflower rates. Entergy’s December 31, 2018 balance sheet reflects a regulatory liability of $2.1 billion as a result of the re-measurementof deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT, and payments to customers during2018. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excessADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferredtax liability resulting in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous netregulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2018 balance sheets reflect netregulatory liabilities for income taxes as follows: Entergy Arkansas, $605 million; Entergy Louisiana, $612 million; Entergy Mississippi,$246 million; Entergy New Orleans, $86 million; Entergy Texas, $352 million; and System Energy, $163 million.Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of theAct, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Actprovides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utilityproperty. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the returnof excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset.Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer.Entergy will amortize the protected portion of the excess ADIT in conformity with the normalization requirements. The RegistrantSubsidiaries’ net regulatory liability for income taxes as of December 31, 2018, includes protected excess ADIT as follows: EntergyArkansas, $521 million; Entergy Louisiana, $812 million; Entergy Mississippi, $271 million; Entergy New Orleans, $59 million;Entergy Texas, $237 million; and System Energy, $202 million. The Registrant Subsidiaries’ net regulatory liability for income taxes asof December 31, 2017, includes protected excess ADIT as follows: Entergy Arkansas, $554 million; Entergy Louisiana, $782 million;Entergy Mississippi, $274 million; Entergy New Orleans, $71 million; Entergy Texas, $276 million; and System Energy, $217 million.During 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy beganpaying unprotected excess accumulated deferred income taxes, associated with the effects of the Act, to their customers through rateriders and other means approved by their respective regulatory commissions. Payment of the unprotected excess accumulated deferredincome taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense.This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ netregulatory liability for income taxes as of December 31, 2018, includes unprotected excess ADIT as follows: Entergy Arkansas, $117million; Entergy Louisiana, $295 million; Entergy Mississippi, $0; Entergy New Orleans, $25 million; Entergy Texas, $171 million; andSystem Energy, $4 million. Entergy Texas’s unprotected excess ADIT balance reflects the effect of the settlement of Entergy Texas’s2018 base rate case, which established the amount of unprotected excess ADIT that will be returned to customers. The RegistrantSubsidiaries’ net regulatory liability for income taxes as of December 31, 2017, includes unprotected excess ADIT as follows: EntergyArkansas, $467 million; Entergy Louisiana, $410 million; Entergy Mississippi, $162 million; Entergy New Orleans, $37 million;Entergy Texas, $198 million; and System Energy, $76 million.In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes otherregulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to thefinancial statements.Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred taxassets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. Thecorresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries121Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementswas as follows: Entergy Arkansas, ($3 million); Entergy Louisiana, $217 million; Entergy Mississippi, $3 million; Entergy New Orleans,$6 million; Entergy Texas, $3 million; and System Energy, $0.Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold andmeasurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized taxbenefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizableunder GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of suchamounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatoryliability for income taxes in future periods.Entergy anticipates that the Act, including the federal corporate income tax rate change may continue to have ramifications thatrequire adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’sjurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) IRS audit adjustments to or amendments of federal andstate income tax returns that include modifications to the computation of taxable income resulting from the Act; and 3) additionalguidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events toresult in future tax expense adjustments because of the difference in the federal corporate income tax rate between past and futureperiods and the effect of the tax rate change on ratemaking. In turn, these items also could potentially affect the regulatory liability forincome taxes.Entergy Wholesale Commodities RestructuringThe tax classification of the entity that owned FitzPatrick changed in the second quarter 2016. The change in tax classificationrequired Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accountingpermanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million. The accrual of the nucleardecommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted inan increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accountingtemporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant andthe receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44million income tax benefit in the first quarter 2017.In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commoditiesnuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities forincome tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized taxbenefits, by $373 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for incometax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis ofthe assets represents a tax accounting temporary difference.In the third quarter 2018, Entergy completed a restructuring of the investment holdings in one of the Entergy WholesaleCommodities nuclear plant decommissioning trusts that resulted in an adjustment to tax basis for the trust. The accounting standardsprovide that a taxable temporary difference does not exist if the tax law provides a means by which an amount can be recoveredwithout incurrence of tax. The restructuring allows Entergy to recover assets from the trust without incurring tax. As such, the tax basisrecognized resulted in the reversal of a deferred tax liability and reduction of income tax expense of approximately $107 million.122Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Wholesale Commodities Tax AuditA state income tax audit involving Entergy Wholesale Commodities was concluded during the third quarter 2018. Uponconclusion of the audit, subsidiaries within Entergy Wholesale Commodities reversed a portion of the provision for uncertain taxpositions totaling approximately $23 million, net of tax and interest paid.Tax Accounting MethodsIn the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax returnpurposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost ofgoods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for EntergyLouisiana. In the fourth quarter 2018, Entergy Arkansas adopted the same tax method of accounting for its nuclear decommissioningcosts which resulted in a $2.2 billion reduction in taxable income.In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and saleagreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from SystemEnergy under the Unit Power Sales Agreement. The election resulted in a $2.2 billion deductible temporary difference. In 2017, EntergyNew Orleans also elected mark-to-market income tax treatment for wholesale electric contracts which resulted in a $1.1 billiondeductible temporary difference. In 2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences relatedto mark-to-market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively.Entergy Arkansas and Entergy Mississippi Internal RestructuringIn the fourth quarter 2018, Entergy Arkansas and Entergy Mississippi became wholly-owned subsidiaries of Entergy UtilityHolding Company, LLC. The change in ownership required Entergy to recognize Entergy Arkansas’s nuclear decommissioningliabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net ofunrecognized tax benefits, by $165 million. The accrual of the nuclear decommissioning liabilities also required Entergy to recognize again for income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the gain and theincrease in the tax basis of the assets represents a tax accounting temporary difference. Additionally, Entergy recorded a $5 millionreduction of income tax expense associated with state income tax effects resulting in a total reduction of income tax expense of $170million from the restructuring. Entergy recorded a regulatory liability of $40 million ($30 million net-of-tax) which partially offsets thereduction of income tax expense. Entergy Arkansas’s member’s equity increased by $94 million as a result of the restructuring. SeeNote 2 to the financial statements for further discussion of the internal restructuring.NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, AND SHORT-TERM BORROWINGS (EntergyCorporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and SystemEnergy)Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in September2023. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the total borrowing capacityof the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interestrates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. Theweighted average interest rate for the year ended December 31, 2018 was 3.60% on the drawn portion of the facility. Following is asummary of the borrowings outstanding and capacity available under the facility as of December 31, 2018.123Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsCapacity Borrowings Letters of Credit Capacity Available(In Millions)$3,500 $220 $6 $3,274Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its totalcapitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of theUtility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvencyproceedings, an acceleration of the facility maturity date may occur.Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As ofDecember 31, 2018, Entergy Corporation had $1.942 billion of commercial paper outstanding. The weighted-average interest rate forthe year ended December 31, 2018 was 2.50%.Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilitiesavailable as of December 31, 2018 as follows:Company Expiration Date Amount of Facility InterestRate (a) Amount Drawn asof December 31,2018 Letters of CreditOutstanding as ofDecember 31, 2018Entergy Arkansas April 2019 $20 million (b) 3.77% — —Entergy Arkansas September 2023 $150 million (c) 3.77% — —Entergy Louisiana September 2023 $350 million (c) 3.77% — —Entergy Mississippi May 2019 $10 million (d) 4.02% — —Entergy Mississippi May 2019 $35 million (d) 4.02% — —Entergy Mississippi May 2019 $37.5 million (d) 4.02% — —Entergy New Orleans November 2021 $25 million (c) 3.80% — $0.8 millionEntergy Texas September 2023 $150 million (c) 4.02% — $1.3 million(a)The interest rate is the estimated interest rate as of December 31, 2018 that would have been applied to outstanding borrowingsunder the facility.(b)Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable atEntergy Arkansas’s option.(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacityof the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy NewOrleans; and $30 million for Entergy Texas. (d)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable atEntergy Mississippi’s option. The commitment fees on the credit facilities range from 0.075% to 0.225% of the undrawn commitment amount. Each of the creditfacilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. EachRegistrant Subsidiary is in compliance with this covenant.In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each enteredinto one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO.Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2018:124Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsCompany Amount ofUncommitted Facility Letter of CreditFee Letters of Credit Issued asof December 31, 2018 (a)Entergy Arkansas $25 million 0.70% $1.0 millionEntergy Louisiana $125 million 0.70% $25.9 millionEntergy Mississippi $40 million 0.70% $16.7 millionEntergy New Orleans $15 million 1.00% $2.0 millionEntergy Texas $50 million 0.70% $20.9 million(a)As of December 31, 2018, letters of credit posted with MISO covered financial transmission right exposure of $0.2 million forEntergy Mississippi and $4.1 million for Entergy Texas. See Note 15 to the financial statements for discussion of financialtransmission rights. The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits for Entergy New Orleans are effective through October 31, 2019. The current FERC-authorized limits for EntergyArkansas, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy are effective through November 8, 2020. Inaddition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool and from otherinternal short-term borrowing arrangements. The money pool and the other internal borrowing arrangements are inter-companyborrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings frominternal and external short-term borrowings combined may not exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of December 31, 2018 (aggregating bothinternal and external short-term borrowings) for the Registrant Subsidiaries: Authorized Borrowings (In Millions)Entergy Arkansas$250 $183Entergy Louisiana$450 —Entergy Mississippi$175 —Entergy New Orleans$150 —Entergy Texas$200 $22System Energy$200 —Entergy Nuclear Vermont Yankee Credit FacilitiesAs of December 31, 2018, Entergy Nuclear Vermont Yankee had a credit facility guaranteed by Entergy Corporation with aborrowing capacity of $145 million that expires in November 2020. Entergy Nuclear Vermont Yankee did not have the ability to issueletters of credit against the credit facility. The facility provided working capital to Entergy Nuclear Vermont Yankee for generalbusiness purposes including, without limitation, the decommissioning of Vermont Yankee. As of December 31, 2018, $139 million incash borrowings were outstanding under the credit facility. The weighted average interest rate for the year ended December 31, 2018was 3.50% on the drawn portion of the facility. In anticipation of the transfer of Entergy Nuclear Vermont Yankee to NorthStar, inJanuary 2019 the credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear VermontYankee’s parent company that remains an Entergy subsidiary after the transfer, and the borrowing capacity was reduced to $139million. The commitment fee is currently 0.20% of the undrawn commitment amount. See Note 14 to the financial statements fordiscussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.125Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsVariable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)See Note 17 to the financial statements for a discussion of the consolidation of the nuclear fuel company variable interestentities (VIE). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and threeof the four VIEs also issue commercial paper, details of which follow as of December 31, 2018:Company Expiration Date Amount ofFacility Weighted AverageInterest Rate onBorrowings (a) Amount Outstandingas of December 31,2018 (Dollars in Millions)Entergy Arkansas VIE September 2021 $80 3.48% $59.6Entergy Louisiana River Bend VIE September 2021 $105 3.44% $38.6Entergy Louisiana Waterford VIE September 2021 $105 3.35% $82.0System Energy VIE September 2021 $120 3.44% $113.9(a)Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variableinterest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company variable interest entityfor Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Arkansas, EntergyLouisiana, and System Energy VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, EntergyLouisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less ofits total capitalization.The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheetsas of December 31, 2018 as follows:Company Description AmountEntergy Arkansas VIE 3.65% Series L due July 2021 $90 millionEntergy Arkansas VIE 3.17% Series M due December 2023 $40 millionEntergy Louisiana River Bend VIE 3.38% Series R due August 2020 $70 millionEntergy Louisiana Waterford VIE 3.92% Series H due February 2021 $40 millionEntergy Louisiana Waterford VIE 3.22% Series I due December 2023 $20 millionSystem Energy VIE 3.42% Series J due April 2021 $100 millionIn accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities,commercial paper, and long-term notes payable is reported in fuel expense.Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained financing authorizations from the FERC thatextend through November 2020 for issuances by its nuclear fuel company variable interest entities.126Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 5. LONG - TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, Entergy Texas, and System Energy)Long-term debt for Entergy Corporation and subsidiaries as of December 31, 2018 and 2017 consisted of:Type of Debt and Maturity WeightedAverageInterest RateDecember 31,2018 Interest Rate Ranges at December 31, Outstanding at December 31,2018 2017 2018 2017 (In Thousands)Mortgage Bonds 2018-2022 3.86% 2.55%-7.125% 2.55%-7.125% $1,875,000 $2,550,0002023-2027 3.71% 2.40%-5.59% 2.40%-5.59% 4,735,000 4,735,0002028-2038 3.63% 2.85%-4.52% 2.85%-3.25% 2,240,000 1,125,0002044-2066 4.88% 4.20%-5.625% 4.70%-5.625% 3,560,000 2,960,000Governmental Bonds (a) 2021-2022 5.28% 2.375%-5.875% 2.375%-5.875% 179,000 179,0002028-2030 3.45% 3.375%-3.50% 3.375%-3.50% 198,680 198,680Securitization Bonds 2019-2027 3.79% 2.04%-5.93% 2.04%-5.93% 429,118 551,499Variable Interest Entities Notes Payable(Note 4) 2018-2023 3.44% 3.17%-3.92% 3.17%-3.92% 360,000 345,000Entergy Corporation Notes due September 2020 n/a 5.125% 5.125% 450,000 450,000due July 2022 n/a 4.00% 4.00% 650,000 650,000due September 2026 n/a 2.95% 2.95% 750,000 750,0005 Year Credit Facility (Note 4) n/a 3.60% 2.55% 220,000 210,000Vermont Yankee Credit Facility (Note 4) n/a 3.50% 2.64% 139,000 103,500Entergy Arkansas VIE Credit Facility(Note 4) n/a 3.48% 2.87% 59,600 24,900Entergy Louisiana River Bend VIE CreditFacility (Note 4) n/a 3.44% 2.38% 38,600 65,650Entergy Louisiana Waterford VIE CreditFacility (Note 4) n/a 3.35% 2.64% 82,000 36,360System Energy VIE Credit Facility (Note4) n/a 3.44% 2.52% 113,900 50,000Long-term DOE Obligation (b) — — — 186,864 183,435Grand Gulf Lease Obligation (c) n/a (d) (d) 34,352 34,356Unamortized Premium and Discount - Net (14,784) (13,911)Unamortized Debt Issuance Costs (130,612) (126,033)Other 12,594 12,830Total Long-Term Debt 16,168,312 15,075,266Less Amount Due Within One Year 650,009 760,007Long-Term Debt Excluding AmountDue Within One Year $15,518,303 $14,315,259Fair Value of Long-Term Debt (c) $15,880,239 $15,367,453(a)Consists of pollution control revenue bonds and environmental revenue bonds, some of which are secured by collateralmortgage bonds.127Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements(b)Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOEfor spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. EntergyArkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt.(c)The fair value excludes lease obligations of $34 million at System Energy and long-term DOE obligations of $187 million atEntergy Arkansas, and includes debt due within one year. Fair values are classified as Level 2 in the fair value hierarchydiscussed in Note 15 to the financial statements and are based on prices derived from inputs such as benchmark yields andreported trades.(d)See Note 10 to the financial statements for detail of payments under the Grand Gulf lease obligation.The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as ofDecember 31, 2018, for the next five years are as follows: Amount (In Thousands)2019$650,0002020$934,0002021$1,340,7922022$1,065,2372023$1,715,523Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-termfinancing authorizations from the FERC that extend through November 2020. Entergy New Orleans has obtained long-term financingauthorization from the FERC and the City Council that extends through October 2019. Entergy Arkansas has also obtained firstmortgage bond/secured financing authorization from the APSC that extends through December 2020.Capital Funds AgreementPursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capitalto:•maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt);•permit the continued commercial operation of Grand Gulf;•pay in full all System Energy indebtedness for borrowed money when due; and•enable System Energy to make payments on specific System Energy debt, under a supplement to the agreement assigningSystem Energy’s rights in the agreement as security for the specific debt.128Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsLong-term debt for the Registrant Subsidiaries as of December 31, 2018 and 2017 consisted of: 2018 2017 (In Thousands)Entergy Arkansas Mortgage Bonds: 3.75% Series due February 2021 $350,000 $350,0003.05% Series due June 2023 250,000 250,0003.7% Series due June 2024 375,000 375,0003.5% Series due April 2026 600,000 600,0004.0% Series due June 2028 250,000 —4.95% Series due December 2044 250,000 250,0004.90% Series due December 2052 200,000 200,0004.75% Series due June 2063 125,000 125,0004.875% Series due September 2066 410,000 410,000Total mortgage bonds 2,810,000 2,560,000Governmental Bonds (a): 2.375% Series due 2021, Independence County (d) 45,000 45,000Total governmental bonds 45,000 45,000Variable Interest Entity Notes Payable and Credit Facility (Note 4): 3.65% Series L due July 2021 90,000 90,0003.17% Series M due December 2023 40,000 40,000Credit Facility due September 2021, weighted avg rate 3.48% 59,600 24,900Total variable interest entity notes payable and credit facility 189,600 154,900Securitization Bonds: 2.30% Series Senior Secured due August 2021 21,692 35,764Total securitization bonds 21,692 35,764Other: Long-term DOE Obligation (b) 186,864 183,435Unamortized Premium and Discount – Net 4,408 5,307Unamortized Debt Issuance Costs (33,831) (34,049)Other 2,026 2,042Total Long-Term Debt 3,225,759 2,952,399Less Amount Due Within One Year — —Long-Term Debt Excluding Amount Due Within One Year $3,225,759 $2,952,399Fair Value of Long-Term Debt (c) $3,002,627 $2,865,844129Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements 2018 2017 (In Thousands)Entergy Louisiana Mortgage Bonds: 6.0% Series due May 2018 $— $375,0006.50% Series due September 2018 — 300,0003.95% Series due October 2020 250,000 250,0004.8% Series due May 2021 200,000 200,0003.3% Series due December 2022 200,000 200,0004.05% Series due September 2023 325,000 325,0005.59% Series due October 2024 300,000 300,0005.40% Series due November 2024 400,000 400,0003.78% Series due April 2025 110,000 110,0003.78% Series due April 2025 190,000 190,0004.44% Series due January 2026 250,000 250,0002.40% Series due October 2026 400,000 400,0003.12% Series due September 2027 450,000 450,0003.25% Series due April 2028 425,000 425,0003.05% Series due June 2031 325,000 325,0004.0% Series due March 2033 750,000 —5.0% Series due July 2044 170,000 170,0004.95% Series due January 2045 450,000 450,0004.20% Series due September 2048 600,000 —5.25% Series due July 2052 200,000 200,0004.70% Series due June 2063 100,000 100,0004.875% Series due September 2066 270,000 270,000Total mortgage bonds 6,365,000 5,690,000Governmental Bonds (a): 3.375 % Series due 2028, Louisiana Public Facilities Authority (d) 83,680 83,6803.50% Series due 2030, Louisiana Public Facilities Authority (d) 115,000 115,000Total governmental bonds 198,680 198,680Variable Interest Entity Notes Payable and Credit Facilities (Note 4): 3.38% Series R due August 2020 70,000 70,0003.92% Series H due February 2021 40,000 40,0003.22% Series I due December 2023 20,000 20,000Credit Facility due September 2021, weighted avg rate 3.44% 38,600 65,650Credit Facility due September 2021, weighted avg rate 3.35% 82,000 36,360Total variable interest entity notes payable and credit facilities 250,600 232,010Securitization Bonds: 2.04% Series Senior Secured due September 2023 56,910 79,228Total securitization bonds 56,910 79,228Other: Unamortized Premium and Discount - Net (14,955) (13,877)Unamortized Debt Issuance Costs (57,011) (48,540)Other 6,544 6,570Total Long-Term Debt 6,805,768 6,144,071Less Amount Due Within One Year 2 675,002Long-Term Debt Excluding Amount Due Within One Year $6,805,766 $5,469,069Fair Value of Long-Term Debt (c) $6,834,134 $6,389,774130Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements 2018 2017 (In Thousands)Entergy Mississippi Mortgage Bonds: 6.64% Series due July 2019 $150,000 $150,0003.1% Series due July 2023 250,000 250,0003.75% Series due July 2024 100,000 100,0003.25% Series due December 2027 150,000 150,0002.85% Series due June 2028 375,000 375,0004.52% Series due December 2038 55,000 —4.90% Series due October 2066 260,000 260,000Total mortgage bonds 1,340,000 1,285,000Other: Unamortized Premium and Discount – Net (989) (1,155)Unamortized Debt Issuance Costs (13,261) (13,723)Total Long-Term Debt 1,325,750 1,270,122Less Amount Due Within One Year 150,000 —Long-Term Debt Excluding Amount Due Within One Year $1,175,750 $1,270,122Fair Value of Long-Term Debt (c) $1,276,452 $1,285,741 2018 2017 (In Thousands)Entergy New Orleans Mortgage Bonds: 5.10% Series due December 2020 $25,000 $25,0003.9% Series due July 2023 100,000 100,0004.0% Series due June 2026 85,000 85,0004.51% Series due September 2033 60,000 —5.0% Series due December 2052 30,000 30,0005.50% Series due April 2066 110,000 110,000Total mortgage bonds 410,000 350,000Securitization Bonds: 2.67% Series Senior Secured due June 2027 65,666 76,707Total securitization bonds 65,66676,707Other: Payable to associated company due November 2035 16,346 18,423Unamortized Premium and Discount – Net (168) (206)Unamortized Debt Issuance Costs (8,140) (8,054)Total Long-Term Debt 483,704 436,870Less Amount Due Within One Year 1,979 2,077Long-Term Debt Excluding Amount Due Within One Year $481,725 $434,793Fair Value of Long-Term Debt (c) $491,569 $455,968131Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements 2018 2017 (In Thousands)Entergy Texas Mortgage Bonds: 7.125% Series due February 2019 $500,000 $500,0002.55% Series due June 2021 125,000 125,0004.1% Series due September 2021 75,000 75,0003.45% Series due December 2027 150,000 150,0005.15% Series due June 2045 250,000 250,0005.625% Series due June 2064 135,000 135,000Total mortgage bonds 1,235,000 1,235,000Securitization Bonds: 3.65% Series Senior Secured, Series A due August 2019 — 30,7695.93% Series Senior Secured, Series A due June 2022 81,237 110,4314.38% Series Senior Secured, Series A due November 2023 203,613 218,600Total securitization bonds 284,850 359,800Other: Unamortized Premium and Discount - Net (992) (1,498)Unamortized Debt Issuance Costs (9,145) (10,366)Other 4,022 4,214Total Long-Term Debt 1,513,735 1,587,150Less Amount Due Within One Year 500,000 —Long-Term Debt Excluding Amount Due Within One Year $1,013,735 $1,587,150Fair Value of Long-Term Debt (c) $1,528,828 $1,661,902 2018 2017 (In Thousands)System Energy Mortgage Bonds: 4.1% Series due April 2023 $250,000 $250,000Total mortgage bonds 250,000 250,000Governmental Bonds (a): 5.875% Series due 2022, Mississippi Business Finance Corp. 134,000 134,000Total governmental bonds 134,000 134,000Variable Interest Entity Notes Payable and Credit Facility (Note 4): 3.78% Series I due October 2018 — 85,0003.42% Series J due April 2021 100,000 —Credit Facility due September 2021, weighted avg rate 3.44% 113,900 50,000Total variable interest entity notes payable and credit facility 213,900 135,000Other: Grand Gulf Lease Obligation (e) 34,352 34,356Unamortized Premium and Discount – Net (328) (415)Unamortized Debt Issuance Costs (1,176) (1,455)Other 2 2Total Long-Term Debt 630,750 551,488Less Amount Due Within One Year 6 85,004Long-Term Debt Excluding Amount Due Within One Year $630,744 $466,484Fair Value of Long-Term Debt (c) $596,123 $529,119132Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements(a)Consists of pollution control revenue bonds and environmental revenue bonds.(b)Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOEfor spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. EntergyArkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt.(c)The fair value excludes lease obligations of $34 million at System Energy and long-term DOE obligations of $187 million atEntergy Arkansas, and includes debt due within one year. Fair values are classified as Level 2 in the fair value hierarchydiscussed in Note 15 to the financial statements and are based on prices derived from inputs such as benchmark yields andreported trades.(d)The bonds are secured by a series of collateral mortgage bonds.(e)See Note 10 to the financial statements for detail of payments under the Grand Gulf lease obligation.The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as ofDecember 31, 2018, for the next five years are as follows: EntergyArkansas EntergyLouisiana EntergyMississippi EntergyNew Orleans EntergyTexas SystemEnergy (In Thousands)2019$— $— $150,000 $— $500,000 $—2020$— $320,000 $— $25,000 $— $—2021$566,292 $360,600 $— $— $200,000 $213,9002022$— $200,000 $— $— $81,237 $134,0002023$290,000 $401,910 $250,000 $100,000 $203,613 $250,000Entergy Texas Debt IssuanceIn January 2019, Entergy Texas issued $300 million of 4.00% Series first mortgage bonds due March 2029 and $400 million of4.50% Series first mortgage bonds due March 2039. Entergy Texas used the proceeds to repay at maturity its $500 million of 7.125%Series first mortgage bonds due February 2019 and for general corporate purposes.Entergy Arkansas Securitization BondsIn June 2010 the APSC issued a financing order authorizing the issuance of bonds to recover Entergy Arkansas’s January 2009ice storm damage restoration costs, including carrying costs of $11.5 million and $4.6 million of up-front financing costs. In August2010, Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, issued $124.1million of storm cost recovery bonds. The bonds have a coupon of 2.30%. Although the principal amount is not due until August2021, Entergy Arkansas Restoration Funding expects to make principal payments on the bonds over the next two years in the amountof $14.4 million for 2019 and $7.3 million for 2020. With the proceeds, Entergy Arkansas Restoration Funding purchased from EntergyArkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficientto service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansasbalance sheet. The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Entergy Arkansas RestorationFunding, including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to theassets or revenues of Entergy Arkansas. Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Fundingexcept to remit storm recovery charge collections.Entergy Louisiana Securitization Bonds – Little GypsyIn August 2011 the LPSC issued a financing order authorizing the issuance of bonds to recover Entergy Louisiana’s investmentrecovery costs associated with the canceled Little Gypsy repowering project. In September 2011, Entergy Louisiana InvestmentRecovery Funding I, L.L.C., a company wholly-owned and consolidated by133Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Louisiana, issued $207.2 million of senior secured investment recovery bonds. The bonds have an interest rate of 2.04%. Although the principal amount is not due until September 2023, Entergy Louisiana Investment Recovery Funding expects to makeprincipal payments on the bonds over the next three years in the amounts of $22.7 million for 2019, $23.2 million for 2020, and $11million for 2021. With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana theinvestment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficientto service the bonds. In accordance with the financing order, Entergy Louisiana will apply the proceeds it received from the sale of theinvestment recovery property as a reimbursement for previously-incurred investment recovery costs. The investment recovery propertyis reflected as a regulatory asset on the consolidated Entergy Louisiana balance sheet. The creditors of Entergy Louisiana do not haverecourse to the assets or revenues of Entergy Louisiana Investment Recovery Funding, including the investment recovery property, andthe creditors of Entergy Louisiana Investment Recovery Funding do not have recourse to the assets or revenues of Entergy Louisiana. Entergy Louisiana has no payment obligations to Entergy Louisiana Investment Recovery Funding except to remit investment recoverycharge collections.Entergy New Orleans Securitization Bonds - Hurricane IsaacIn May 2015 the City Council issued a financing order authorizing the issuance of securitization bonds to recover Entergy NewOrleans’s Hurricane Isaac storm restoration costs of $31.8 million, including carrying costs, the costs of funding and replenishing thestorm recovery reserve in the amount of $63.9 million, and approximately $3 million of up-front financing costs associated with thesecuritization. In July 2015, Entergy New Orleans Storm Recovery Funding I, L.L.C., a company wholly owned and consolidated byEntergy New Orleans, issued $98.7 million of storm cost recovery bonds. The bonds have a coupon of 2.67%. Although the principalamount is not due until June 2027, Entergy New Orleans Storm Recovery Funding expects to make principal payments on the bondsover the next five years in the amounts of $11.2 million for 2019, $11.6 million for 2020, $11.9 million for 2021, $12.2 million for2022, and $12.5 million for 2023. With the proceeds, Entergy New Orleans Storm Recovery Funding purchased from Entergy NewOrleans the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficientto service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy NewOrleans balance sheet. The creditors of Entergy New Orleans do not have recourse to the assets or revenues of Entergy New OrleansStorm Recovery Funding, including the storm recovery property, and the creditors of Entergy New Orleans Storm Recovery Funding donot have recourse to the assets or revenues of Entergy New Orleans. Entergy New Orleans has no payment obligations to Entergy NewOrleans Storm Recovery Funding except to remit storm recovery charge collections.Entergy Texas Securitization Bonds - Hurricane RitaIn April 2007 the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million ofEntergy Texas’s Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferredincome tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company that is now wholly-owned andconsolidated by Entergy Texas, issued $329.5 million of senior secured transition bonds (securitization bonds) as follows: Amount (In Thousands)Senior Secured Transition Bonds, Series A: Tranche A-1 (5.51%) due October 2013$93,500Tranche A-2 (5.79%) due October 2018121,600Tranche A-3 (5.93%) due June 2022 (a)114,400Total senior secured transition bonds$329,500(a) As of December 31, 2018 the remaining amount outstanding on Tranche A-3 was $81.2 million.134Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsAlthough the principal amount of each tranche is not due until the dates given above, Entergy Gulf States Reconstruction Fundingexpects to make principal payments on the bonds over the next three years in the amounts of $30.9 million for 2019, $32.8 million for2020, and $17.5 million for 2021. All of the scheduled principal payments for 2019-2021 are for Tranche A-3. Tranche A-1 andTranche A-2 have been paid.With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Texas the transition property, which isthe right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transitionproperty is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not haverecourse to the assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors ofEntergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has nopayment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.Entergy Texas Securitization Bonds - Hurricane Ike and Hurricane GustavIn September 2009 the PUCT authorized the issuance of securitization bonds to recover $566.4 million of Entergy Texas’sHurricane Ike and Hurricane Gustav restoration costs, plus carrying costs and transaction costs, offset by insurance proceeds. InNovember 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned andconsolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds), as follows: Amount (In Thousands)Senior Secured Transition Bonds: Tranche A-1 (2.12%) due February 2016$182,500Tranche A-2 (3.65%) due August 2019144,800Tranche A-3 (4.38%) due November 2023 (a)218,600Total senior secured transition bonds$545,900(a) As of December 31, 2018 the remaining amount outstanding on Tranche A-3 was $203.6 million.Although the principal amount of each tranche is not due until the dates given above, Entergy Texas Restoration Funding expects tomake principal payments on the bonds over the next four years in the amount of $47.6 million for 2019, $49.8 million for 2020, $52million for 2021, and $54.3 million for 2022. All of the scheduled principle payments for 2019-2022 are for Tranche A-3. Tranche A-1and Tranche A-2 have been paid.With the proceeds, Entergy Texas Restoration Funding purchased from Entergy Texas the transition property, which is the rightto recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property isreflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse tothe assets or revenues of Entergy Texas Restoration Funding, including the transition property, and the creditors of Entergy TexasRestoration Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations toEntergy Texas Restoration Funding except to remit transition charge collections.135Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 6. PREFERRED EQUITY (Entergy Corporation, Entergy Arkansas, and Entergy Mississippi)The number of shares and units authorized and outstanding and dollar value of preferred stock, preferred membership interests,and non-controlling interest for Entergy Corporation subsidiaries as of December 31, 2018 and 2017 are presented below. Shares/UnitsAuthorized Shares/UnitsOutstanding 2018 2017 2018 2017 2018 2017Entergy Corporation (Dollars in Thousands)Utility: Preferred Stock or PreferredMembership Interests without sinkingfund: Entergy Arkansas, 4.32%-4.72% Series — 313,500 — 313,500 $— $31,350Entergy Utility Holding Company, LLC,7.5% Series (a) 110,000 110,000 110,000 110,000 107,425 107,425Entergy Utility Holding Company, LLC,6.25% Series (b) 15,000 15,000 15,000 15,000 14,366 14,398Entergy Utility Holding Company, LLC,6.75% Series (c) 75,000 — 75,000 — 73,362 —Entergy Mississippi, 4.36%-4.92% Series — 203,807 — 203,807 — 20,381Total Utility Preferred Stock or PreferredMembership Interests without sinkingfund 200,000 642,307 200,000 642,307 195,153 173,554Entergy Wholesale Commodities: Preferred Stock without sinking fund: Entergy Finance Holding, Inc. 8.75% (d) 250,000 250,000 250,000 250,000 24,249 24,249Total Subsidiaries’ Preferred Stockwithout sinking fund 450,000 892,307 450,000 892,307 $219,402 $197,803(a)In October 2015, Entergy Utility Holding Company, LLC issued 110,000 units of $1,000 liquidation value 7.5% Series APreferred Membership Interests, all of which are outstanding as of December 31, 2018. The distributions are cumulative andpayable quarterly. These units are redeemable on or after January 1, 2036, at Entergy Utility Holding Company, LLC’s option,at the fixed redemption price of $1,000 per unit. Dollar amount outstanding is net of $2,575 thousand of preferred stockissuance costs.(b)In November 2017, Entergy Utility Holding Company, LLC issued 15,000 units of $1,000 liquidation value 6.25% Series BPreferred Membership Interests, all of which are outstanding as of December 31, 2018. The distributions are cumulative andpayable quarterly. These units are redeemable on or after February 28, 2038, at Entergy Utility Holding Company, LLC’soption, at the fixed redemption price of $1,000 per unit. Dollar amount outstanding is net of $634 thousand of preferred stockissuance costs.(c)In November 2018, Entergy Utility Holding Company, LLC issued 75,000 units of $1,000 liquidation value 6.75% Series CPreferred Membership Interests, all of which are outstanding as of December 31, 2018. The distributions are cumulative andpayable quarterly. These units are redeemable on or after February 28, 2039, at Entergy Utility Holding Company, LLC’soption, at the fixed redemption price of $1,000 per unit. Dollar amount outstanding is net of $1,638 thousand of preferred stockissuance costs.(d)In December 2013, Entergy Finance Holding, Inc. issued 250,000 shares of $100 par value 8.75% Series Preferred Stock, all ofwhich are outstanding as of December 31, 2017. The dividends are cumulative and payable quarterly. The preferred stock isredeemable on or after December 16, 2023, at Entergy Finance136Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsHolding, Inc.’s option, at the fixed redemption price of $100 per share. Dollar amount outstanding is net of $751 thousand ofpreferred stock issuance costs. The number of shares and units authorized and outstanding and dollar value of preferred stock for Entergy Arkansas andEntergy Mississippi as of December 31, 2018 and 2017 are presented below. Dividends and distributions paid on all of Entergy Corporation’s subsidiaries’ preferred stock and membership interests seriesmay be eligible for the dividends received deduction. SharesAuthorizedand Outstanding Call Price perShare as ofDecember 31, 2018 2017 2018 2017 2018Entergy Arkansas Preferred Stock (Dollars in Thousands) Without sinking fund: Cumulative, $100 par value: 4.32% Series (a) — 70,000 $— $7,000 $—4.72% Series (a) — 93,500 — 9,350 $—4.56% Series (a) — 75,000 — 7,500 $—4.56% 1965 Series (a) — 75,000 — 7,500 $—Total without sinking fund — 313,500 $— $31,350 (a)In November 2018, Entergy Arkansas redeemed all of its preferred membership interests as part of a multi-step internalrestructuring. See Note 2 to the financial statements for a discussion of Entergy Arkansas’s internal restructuring. SharesAuthorizedand Outstanding Call Price perShare as ofDecember 31, 2018 2017 2018 2017 2018Entergy Mississippi Preferred Stock (Dollars in Thousands) Without sinking fund: Cumulative, $100 par value: 4.36% Series (b) — 59,920 $— $5,992 $—4.56% Series (b) — 43,887 — 4,389 $—4.92% Series (b) — 100,000 — 10,000 $—Total without sinking fund — 203,807 $— $20,381 (b)In November 2018, Entergy Mississippi redeemed all of its preferred membership interests as part of a multi-step internalrestructuring. See Note 2 to the financial statements for a discussion of Entergy Mississippi’s internal restructuring.Presentation of Preferred Stock without Sinking FundAccounting standards regarding non-controlling interests and the classification and measurement of redeemable securitiesrequire the classification of preferred securities between liabilities and shareholders’ equity on the balance sheet if the holders of thosesecurities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights wouldhave the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of thesecircumstances is considered remote. Prior to December 1, 2018, Entergy Arkansas’s and Entergy Mississippi’s respective articles ofincorporation each provided, generally, that137Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsthe holders of each such company’s preferred securities could elect a majority of the respective company’s board of directors ifdividends were not paid for a year, until such time as the dividends in arrears were paid. Therefore, Entergy Arkansas and EntergyMississippi presented their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet. InNovember 2018, each of Entergy Arkansas and Entergy Mississippi redeemed its outstanding preferred securities as part of a multi-stepprocess to undertake an internal restructuring. See Note 2 to the financial statements for a discussion of Entergy Arkansas’s and EntergyMississippi’s internal restructuring.The outstanding preferred securities of Entergy Arkansas and Entergy Mississippi, and Entergy Utility Holding Company (aUtility subsidiary) and Entergy Finance Holding (an Entergy Wholesale Commodities subsidiary), whose preferred holders also haveprotective rights, are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets. The preferreddividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.NOTE 7. COMMON EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, Entergy Texas, and System Energy)Common StockCommon stock and treasury stock shares activity for Entergy for 2018, 2017, and 2016 is as follows: 2018 2017 2016 CommonSharesIssued TreasuryShares CommonSharesIssued TreasuryShares CommonSharesIssued TreasurySharesBeginning Balance,January 1254,752,788 74,235,135 254,752,788 75,623,363 254,752,788 76,363,763Issuances: Equity forwards settled6,834,221 — — — — —Employee Stock-BasedCompensation Plans— (1,683,174) — (1,377,363) — (729,073)Directors’ Plan— (21,095) — (10,865) — (11,327)Ending Balance,December 31261,587,009 72,530,866 254,752,788 74,235,135 254,752,788 75,623,363Entergy Corporation reissues treasury shares to meet the requirements of the Stock Plan for Outside Directors (Directors’ Plan),three Equity Ownership Plans of Entergy Corporation and Subsidiaries, and certain other stock benefit plans. The Directors’ Planawards to non-employee directors a portion of their compensation in the form of a fixed dollar value of shares of Entergy Corporationcommon stock.In October 2010 the Board granted authority for a $500 million share repurchase program. As of December 31, 2018, $350million of authority remains under the $500 million share repurchase program.Dividends declared per common share were $3.58 in 2018, $3.50 in 2017, and $3.42 in 2016.System Energy paid its parent, Entergy Corporation, distributions out of its common stock of $57 million in 2018 and $21million in 2017.138Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEquity Forward Sale AgreementsIn June 2018, Entergy marketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the timeof the offering, Entergy entered into forward sale agreements with various investment banks. The equity forwards require Entergy to, atits election prior to June 7, 2019, either (i) physically settle the transactions by issuing the total of 15.3 million shares of its commonstock to the investment banks in exchange for net proceeds at the then-applicable forward sale price specified by the agreements(initially $74.45 per share) or (ii) net settle the transactions in whole or in part through the delivery or receipt of cash or shares. Theforward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixedamounts specified in the agreements.On December 12, 2018, Entergy physically settled a portion of its obligations under the forward sale agreements by delivering6,834,221 shares of common stock in exchange for cash proceeds of approximately $500 million. The forward sale price used todetermine the cash proceeds received by Entergy was calculated based on the initial forward sale price of $74.45 per share as adjustedin accordance with the forward sale agreements. Entergy incurred approximately $728 thousand of common stock issuance costs withthe settlement. Entergy used the net proceeds for general corporate purposes, which included repayment of commercial paper,outstanding loans under Entergy’s revolving credit facility, and other debt.Entergy is required to settle its remaining obligations under the forward sale agreements with respect to the remaining 8,448,171shares of common stock on a settlement date or dates on or prior to June 7, 2019.Until settlement of the remaining equity forwards, earnings per share dilution resulting from the agreements, if any, will bedetermined under the treasury stock method. Share dilution occurs when the average market price of Entergy’s common stock is higherthan the average forward sales price. If Entergy had elected to net share settle the remaining forward sale agreements as of December31, 2018, Entergy would have been required to deliver 1.3 million shares.Retained Earnings and DividendsEntergy implemented ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities” effective January 1, 2018. The ASU requires investments in equity securities, excluding thoseaccounted for under the equity method or resulting in consolidation of the investee, to be measured at fair value with changesrecognized in net income. Entergy implemented this standard using a modified retrospective method, and recorded an adjustmentincreasing retained earnings and reducing accumulated other comprehensive income by $633 million as of January 1, 2018 for thecumulative effect of the unrealized gains and losses on investments in equity securities held by the decommissioning trust funds that donot meet the criteria for regulatory accounting treatment. See Note 16 to the financial statements herein for further discussion of effectsof the new standard.Entergy implemented ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory”effective January 1, 2018. The ASU requires entities to recognize the income tax consequences of intra-entity asset transfers, other thaninventory, at the time the transfer occurs. Entergy implemented this standard using a modified retrospective method, and recorded anadjustment decreasing retained earnings by $56 million as of January 1, 2018 for the cumulative effect of recording deferred tax assetson previously-recognized intra-entity asset transfers.Entergy adopted ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification ofCertain Tax Effects from Accumulated Other Comprehensive Income,” in the first quarter 2018. The ASU allows a one-timereclassification from accumulated other comprehensive income to retained earnings for certain tax effects resulting from the Tax Cutsand Jobs Act that would otherwise be stranded in accumulated other comprehensive income. Entergy’s policy for releasing income taxeffects from accumulated other comprehensive139Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsincome for available-for-sale securities is to use the portfolio approach. Entergy elected to reclassify the $15.5 million of stranded taxeffects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act to retained earnings ($32 milliondecrease) or the regulatory liability for income taxes ($16.5 million increase). Entergy’s reclassification only includes the effect of thechange in the federal corporate income tax rate on accumulated other comprehensive income.Entergy Corporation received dividend payments and distributions from subsidiaries totaling $27 million in 2018, $201 millionin 2017, and $165 million in 2016.Comprehensive IncomeAccumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and EntergyLouisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the year endedDecember 31, 2018 by component: Cash flowhedgesnetunrealizedgain (loss) Pensionandotherpostretirementliabilities Netunrealizedinvestmentgain (loss) Total AccumulatedOtherComprehensiveIncome (Loss) (In Thousands) Ending balance, December 31, 2017($37,477) ($531,099) $545,045 ($23,531)Implementation of accounting standards— — (632,617) (632,617)Beginning balance, January 1, 2018($37,477) ($531,099) ($87,572) ($656,148) Other comprehensive income (loss) beforereclassifications(31,933) 26,702 (46,574) (51,805)Amounts reclassified from accumulatedother comprehensive income (loss)54,031 63,441 17,803 135,275Net other comprehensive income (loss) forthe period22,098 90,143 (28,771) 83,470Reclassification pursuant to ASU 2018-02(7,756) (90,966) 114,227 15,505Ending balance, December 31, 2018($23,135) ($531,922) ($2,116) ($557,173)140Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe following table presents changes in accumulated other comprehensive income (loss) for Entergy for the year endedDecember 31, 2017 by component: Cash flowhedgesnetunrealizedgain (loss) Pensionandotherpostretirementliabilities Netunrealizedinvestmentgain (loss) Foreigncurrencytranslation Total AccumulatedOtherComprehensiveIncome (Loss) (In Thousands) Beginning balance, January 1, 2017$3,993($469,446)$429,734$748 ($34,971)Other comprehensive income (loss) beforereclassifications28,602 (104,029) 171,099 (748) 94,924Amounts reclassified from accumulated other comprehensiveincome (loss)(70,072) 42,376 (55,788) — (83,484)Net other comprehensive income (loss)for the period(41,470) (61,653) 115,311 (748) 11,440Ending balance, December 31, 2017($37,477) ($531,099) $545,045 $— ($23,531)The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the yearended December 31, 2018: Pension and OtherPostretirementLiabilities (In Thousands) Beginning balance, January 1, 2018 ($46,400)Other comprehensive income (loss) before reclassifications 52,299Amounts reclassified from accumulated other comprehensiveincome (loss) (2,003)Net other comprehensive income (loss) for the period 50,296 Reclassification pursuant to ASU 2018-02 ($10,049) Ending balance, December 31, 2018 ($6,153)141Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the yearended December 31, 2017: Pension and Other PostretirementLiabilities (In Thousands)Beginning balance, January 1, 2017 ($48,442)Other comprehensive income (loss) before reclassifications 3,462Amounts reclassified from accumulated other comprehensiveincome (loss) (1,420)Net other comprehensive income (loss) for the period 2,042Ending balance, December 31, 2017 ($46,400)Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the years endedDecember 31, 2018 and 2017 are as follows: Amounts reclassified fromAOCI Income Statement Location 2018 2017 (In Thousands) Cash flow hedges net unrealized gain (loss) Power contracts ($68,067) $108,606 Competitive businessoperating revenuesInterest rate swaps (327) (803) Miscellaneous - netTotal realized gain (loss) on cash flow hedges (68,394) 107,803 14,363 (37,731) Income taxesTotal realized gain (loss) on cash flow hedges (net of tax) ($54,031) $70,072 Pension and other postretirement liabilities Amortization of prior-service costs $21,700 $26,251 (a)Amortization of loss (99,186) (86,002) (a)Settlement loss (3,207) (7,544) (a)Total amortization (80,693) (67,295) 17,252 24,919 Income taxesTotal amortization (net of tax) ($63,441) ($42,376) Net unrealized investment gain (loss) Realized gain (loss) ($28,170) $109,388 Interest and investmentincome 10,367 (53,600) Income taxesTotal realized investment gain (loss) (net of tax) ($17,803) $55,788 Total reclassifications for the period (net of tax) ($135,275) $83,484 (a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pensionand other postretirement cost. See Note 11 to the financial statements for additional details. 142Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsTotal reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the years endedDecember 31, 2018 and 2017 are as follows: Amounts reclassified fromAOCI Income Statement Location 2018 2017 (In Thousands) Pension and other postretirement liabilities Amortization of prior-service costs $7,735 $7,734 (a)Amortization of loss (5,025) (5,327) (a)Total amortization 2,710 2,407 (707) (987) Income taxesTotal amortization (net of tax) 2,003 1,420 Total reclassifications for the period (net of tax) $2,003 $1,420 (a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pensionand other postretirement cost. See Note 11 to the financial statements for additional details. NOTE 8. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, 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 variouscourts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predictwith certainty the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have amaterial adverse effect on Entergy’s results of operations, cash flows, or financial condition. Entergy discusses regulatory proceedingsin Note 2 to the financial statements and discusses tax proceedings in Note 3 to the financial statements.Vidalia Purchased Power AgreementEntergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a hydroelectric facilityknown as the Vidalia project. Entergy Louisiana made payments under the contract of approximately $137.6 million in 2018, $122.9million in 2017, and $158.7 million in 2016. If the maximum percentage (94%) of the energy is made available to Entergy Louisiana,current production projections would require estimated payments of approximately $130 million in 2019, and a total of $1.57 billion forthe years 2020 through 2031. Entergy Louisiana currently recovers the costs of the purchased energy through its fuel adjustmentclause.In an LPSC-approved settlement related to tax benefits from the tax treatment of the Vidalia contract, Entergy Louisiana agreedto credit rates by $11 million each year for up to 10 years, beginning in October 2002. In October 2011 the LPSC approved asettlement under which Entergy Louisiana agreed to provide credits to customers by crediting billings an additional $20.235 million peryear for 15 years beginning January 2012. Entergy Louisiana recorded a regulatory charge and a corresponding regulatory liability toreflect this obligation. The settlement agreement allowed for an adjustment to the credits if, among other things, there was a change inthe applicable federal or state income tax rate. As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and thelowering of the federal corporate income tax rate from 35% to 21%, the Vidalia purchased power regulatory liability was reduced by$30.5 million, with a corresponding increase to Other regulatory credits on the income statement. The effects of the Tax Cuts and JobsAct are discussed further in Note 3 to the financial statements.143Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsANO Damage, Outage, and NRC ReviewsIn March 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatuscollapsed while moving the generator stator out of the turbine building. The collapse resulted in the death of an ironworker and injuriesto several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building. The total cost of assessment,restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately$95 million. Entergy Arkansas has pursued its options for recovering damages that resulted from the stator drop, including itsinsurance coverage and legal action. Entergy Arkansas collected $50 million in 2014 from Nuclear Electric Insurance Limited (NEIL), amutual insurance company that provides property damage coverage to the members’ nuclear generating plants. Entergy Arkansas alsocollected a total of $21 million in 2018 as a result of stator-related settlements.In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incrementalreplacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refuelingoutage. In February 2014 the APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recoveryto be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available.In March 2015, after several NRC inspections and regulatory conferences, arising from the stator incident, the NRC placedANO into the “multiple/repetitive degraded cornerstone column,” or Column 4, of the NRC’s Reactor Oversight Process Action Matrix.Entergy Arkansas incurred incremental costs of approximately $53 million in 2015 to prepare for the NRC inspections that began inearly 2016 in order to address the issues required to move ANO back to “licensee response” or Column 1 of the NRC’s ReactorOversight Process Action Matrix. Excluding remediation and response costs that resulted from the additional NRC inspection activities,Entergy Arkansas incurred approximately $44 million in 2016 and $7 million in 2017 in support of NRC inspection activities and toimplement Entergy Arkansas’s performance improvement initiatives developed in 2015. In June 2018 the NRC moved ANO 1 andANO 2 into the “licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix.In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In that proceeding, the APSCapproved a settlement agreement agreed upon by the parties, including a provision that requires Entergy Arkansas to initiate aregulatory proceeding for the purpose of recovering funds currently withheld from rates and related to the stator incident, including the$65.9 million of deferred fuel and purchased energy costs and costs related to the incremental oversight previously noted, subject tocertain timelines and conditions set forth in the settlement agreement. Pilgrim NRC Oversight and Planned ShutdownIn September 2015 the NRC placed Pilgrim in its “multiple/repetitive degraded cornerstone column,” or Column 4, of itsReactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program thatcontributed to repeated unscheduled shutdowns and equipment failures. Entergy incurred costs of approximately $59 million through2018 in support of Pilgrim’s response to the enhanced NRC inspection. In January 2019 the NRC found that Pilgrim had completed thecorrective actions required to address the concerns that led to its placement in Column 4 and had demonstrated sustained improvement.Entergy determined in October 2015 that it would close Pilgrim no later than June 1, 2019 because of poor market conditionsthat led to reduced revenues, a poor market design that failed to properly compensate nuclear generators for the benefits they provide,and increased operational costs. The decision came after management’s extensive analysis of the economics and operating life of theplant following the NRC’s decision to place the plant in Column 4. Entergy determined in April 2016 that it intended to refuel Pilgrim in2017 and then cease operations May 31, 2019. Pilgrim currently has approximately 677 MW of Capacity Supply Obligations in ISONew England through May 2019.144Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsSee Note 14 to the financial statements for discussion of the impairment of the Pilgrim plant and related long-lived assets.Spent Nuclear Fuel LitigationUnder the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage facilities for, and todispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors. Entergy’snuclear owner/licensee subsidiaries have been charged fees for the estimated future disposal costs of spent nuclear fuel in accordancewith the Nuclear Waste Policy Act of 1982. The affected Entergy companies entered into contracts with the DOE, whereby the DOE isto furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generationprior to that date. Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be propercomponents of nuclear fuel expense. Provisions to recover such costs have been or will be made in applications to regulatoryauthorities for the Utility plants. Following the defunding of the Yucca Mountain spent fuel repository program, the NationalAssociation of Regulatory Utility Commissioners and others sued the government seeking cessation of collection of the one mill per netkWh generated and sold after April 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit aproposal to Congress to reset the fee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts analternative waste disposal plan. In January 2014 the DOE submitted the proposal to Congress under protest, and also filed a petition forrehearing with the D.C. Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May2014. Management cannot predict the potential timing or magnitude of future spent fuel fee revisions that may occur.Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy Act of 1982 andhas breached its spent fuel disposal contracts. As a result of the DOE’s failure to begin disposal of spent nuclear fuel in 1998 pursuantto the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts, Entergy’s nuclear owner/licensee subsidiaries haveincurred and will continue to incur damages. Beginning in November 2003 these subsidiaries have pursued litigation to recover thedamages caused by the DOE’s delay in performance. Following are details of final judgments recorded by Entergy in 2016 and 2018related to Entergy’s nuclear owner licensee subsidiaries’ litigation with the DOE.In December 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $81 million in favor of Entergy NuclearIndian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case, and Entergy received thepayment from the U.S. Treasury in June 2016. The effect of recording the Indian Point 3 proceeds was a reduction to plant, otheroperation and maintenance expense, and depreciation expense. The Indian Point 3 damages awarded included $45 million related tocosts previously capitalized and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $45million, Entergy recorded $8 million as a reduction to previously-recorded depreciation expense. Entergy reduced its Indian Point 3plant asset balance by the remaining $37 million. The effect of recording the FitzPatrick proceeds was a reduction to plant and otheroperation and maintenance expense. The FitzPatrick damages awarded included $32 million related to costs previously capitalized and$2 million related to costs previously recorded as other operation and maintenance expense. Of the $32 million, Entergy recorded $1million as a reduction to previously-recorded depreciation expense, a $10 million reduction to bring its remaining FitzPatrick plant assetbalance to zero, and the excess was recorded as a reduction to other operations and maintenance expense. See Note 14 to the financialstatements for further discussion on the fair value analysis performed for FitzPatrick and the related impairment charge.In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of EntergyLouisiana and against the DOE in the first round River Bend damages case. Entergy Louisiana received payment from the U.S.Treasury in August 2016. The effects of recording the final judgment in the third quarter 2016 were reductions to plant, nuclear fuelexpense, other operation and maintenance expense, and depreciation expense. The River Bend damages awarded included $17 millionrelated to costs previously capitalized, $23 million related to costs previously recorded as nuclear fuel expense, and $2 million relatedto costs previously recorded as other operation145Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsand maintenance expense. Of the $17 million, Entergy Louisiana recorded $3 million as a reduction to previously-recordeddepreciation expense. Entergy Louisiana reduced its River Bend plant asset balance by the remaining $14 million. In September 2016the U.S. Court of Federal Claims issued a further judgment in the River Bend case in the amount of $5 million. Entergy Louisianarecorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017. The River Benddamages awarded included $2 million related to costs previously recorded as nuclear fuel expense and $3 million related to costspreviously recorded as other operation and maintenance expense. In May 2017 the U.S. Court of Federal Claims issued a finaljudgment in the first round River Bend damages case for $0.6 million, awarding certain cask loading costs that had not previously beenadjudicated by the court.In May 2016, Entergy Nuclear Vermont Yankee and the DOE entered into a stipulation agreement and the U.S. Court of FederalClaims issued a judgment in the amount of $19 million in favor of Entergy Nuclear Vermont Yankee and against the DOE in the secondround Vermont Yankee damages case. Entergy received payment from the U.S. Treasury in June 2016. The effect of recording theproceeds was a reduction to other operation and maintenance expense and depreciation expense. The damages awarded included $15million related to costs previously capitalized and $4 million related to costs previously recorded as other operation and maintenanceexpense. Of the $15 million, Entergy recorded $2 million as a reduction to previously-recorded depreciation expense. The remaining$13 million would have been recorded as a reduction to Vermont Yankee’s plant asset balance, but was recorded as a reduction to otheroperation and maintenance expense because Vermont Yankee’s plant asset balance is fully impaired.In June 2016 the U.S. Court of Federal Claims issued a final judgment in the amount of $49 million in favor of System Energyand against the DOE in the second round Grand Gulf damages case. System Energy received payment from the U.S. Treasury inAugust 2016. The effects of recording the judgment in the third quarter 2016 were reductions to plant, nuclear fuel expense, otheroperation and maintenance expense, and depreciation expense. The amounts of Grand Gulf damages awarded related to SystemEnergy’s 90% ownership of Grand Gulf included $16 million related to costs previously capitalized, $19 million related to costspreviously recorded as nuclear fuel expense, and $9 million related to costs previously recorded as other operation and maintenanceexpense. Of the $16 million, System Energy recorded $5 million as a reduction to previously-recorded depreciation expense. SystemEnergy reduced its Grand Gulf plant asset balance by the remaining $11 million.In July 2016 the U.S. Court of Federal Claims issued a final judgment in the amount of $31 million in favor of EntergyArkansas and against the DOE in the second round ANO damages case. Entergy Arkansas received payment from the U.S. Treasury inOctober 2016. The effects of recording the judgment were reductions to plant, nuclear fuel expense, and other operation andmaintenance expense. The ANO damages awarded included $6 million related to costs previously capitalized, $19 million related tocosts previously recorded as nuclear fuel expense, $5 million related to costs previously recorded as other operation and maintenanceexpense, and $1 million related to costs previously recorded as taxes other than income taxes.In August 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $53 million in favor of EntergyLouisiana and against the DOE in the first round Waterford 3 damages case. Entergy Louisiana received payment from the U.S.Treasury in November 2016. The effects of recording the judgment were reductions to plant, nuclear fuel expense, other operation andmaintenance expense, and depreciation expense. The Waterford 3 damages awarded included $41 million related to costs previouslycapitalized, $10 million related to costs previously recorded as nuclear fuel expense, and $2 million related to costs previously recordedas other operation and maintenance expense. Of the $41 million, Entergy Louisiana recorded $3 million as a reduction to previously-recorded depreciation expense.In September 2016 the U.S. Court of Federal Claims issued a judgment in the Entergy Nuclear Palisades case in the amount of$14 million. Entergy Nuclear Palisades recorded a receivable for that amount, and subsequently received payment from the U.S.Treasury in January 2017. The effects of recording the judgment were reductions to plant and other operation and maintenanceexpenses. The Palisades damages awarded included $11 million related to costs previously capitalized and $3 million related to costspreviously recorded as other operation and maintenance expense. Of the $11 million, Entergy recorded $1 million as a reduction topreviously-recorded depreciation expense.146Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy reduced its Palisades plant asset balance by the remaining $10 million. The Court previously issued a partial judgment in thecase in the amount of $21 million, which was paid by the U.S. Treasury in October 2015.In October 2016 the U.S. Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case inthe amount of $34 million. Entergy Nuclear Indian Point 2 recorded a receivable for that amount, and subsequently received paymentfrom the U.S. Treasury in January 2017. The effects of recording the judgment were reductions to plant and other operation andmaintenance expenses. The Indian Point 2 damages awarded included $14 million related to costs previously capitalized, $15 millionrelated to costs previously recorded as other operation and maintenance expense, $3 million related to previously recordeddecommissioning expense, and $2 million related to costs previously recorded as taxes other than income taxes. Of the $14 million,Entergy recorded $3 million as a reduction to previously-recorded depreciation expense. Entergy reduced its Indian Point 2 plant assetbalance by the remaining $11 million.In September 2018 the DOE submitted an offer of judgment to resolve claims in the second round Entergy Nuclear GenerationCompany case involving Pilgrim. The $62 million offer was accepted by Entergy Nuclear Generation Company, and the U.S. Court ofFederal Claims issued a judgment in that amount in favor of Entergy Nuclear Generation Company. Entergy received payment from theU.S. Treasury in October 2018. The effect of recording the proceeds was a reduction to plant and other operation and maintenanceexpenses. The Pilgrim damages awarded included $60 million related to costs previously capitalized and $2 million related to costspreviously recorded as other operation and maintenance expense. Of the $60 million, Entergy recorded $4 million as a reduction topreviously-recorded depreciation expense, a $10 million reduction to bring its remaining Pilgrim plant asset balance to zero, and theexcess $46 million as a reduction to other operation and maintenance expense because Pilgrim’s plant asset balance is fully impaired.Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, andcannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.Nuclear InsuranceThird Party Liability InsuranceThe Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary insurance pool thatprovides insurance coverage for the public in the event of a nuclear power plant accident. The costs of this insurance are borne by thenuclear power industry. Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025. The Price-Anderson Act requires nuclear power plants to show evidence of financial protection in the event of a nuclear accident. This protectionmust consist of two layers of coverage:1.The primary level is private insurance underwritten by American Nuclear Insurers (ANI) and provides public liability insurancecoverage of $450 million for each operating reactor (prior to January 1, 2017, the primary level of insurance was $375million). If this amount is not sufficient to cover claims arising from an accident, the second level, Secondary FinancialProtection, applies. In 2016 the NRC approved Vermont Yankee’s exemption request to lower their limits from $375 million to$100 million effective April 15, 2016.2.Within the Secondary Financial Protection level, each nuclear reactor has a contingent obligation to pay a retrospectivepremium, equal to its proportionate share of the loss in excess of the primary level, regardless of proximity to the incident orfault, up to a maximum of approximately $137.6 million per reactor per incident (Entergy’s maximum total contingentobligation per incident is $1.238 billion). This retrospective premium is payable at a rate currently set at approximately $21million per year per incident per nuclear power reactor.3.In the event that one or more acts of terrorism cause a nuclear power plant accident, which results in third-party damages – off-site property and environmental damage, off-site bodily injury, and on-site third-party bodily injury (i.e. contractors), theprimary level provided by ANI combined with the Secondary Financial Protection would provide approximately $14 billion incoverage. The Terrorism Risk Insurance147Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsReauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess ofexisting coverage for a terrorist event. Under current law, the Terrorism Risk Insurance Act extends through 2020.Currently, 99 nuclear reactors are participating in the Secondary Financial Protection program. Effective April 15, 2016 theNRC granted Vermont Yankee’s exemption request and it was allowed to withdraw from participation in this layer of financialprotection. The Secondary Financial Protection program provides approximately $14 billion in secondary layer insurance coverage tocompensate the public in the event of a nuclear power reactor accident. The Price-Anderson Act provides that all potential liability for anuclear accident is limited to the amounts of insurance coverage available under the primary and secondary layers.Entergy Arkansas and Entergy Louisiana each have two licensed reactors. System Energy has one licensed reactor (10% ofGrand Gulf is owned by a non-affiliated company (Cooperative Energy) that would share on a pro-rata basis in any retrospectivepremium assessment to System Energy under the Price-Anderson Act). The Entergy Wholesale Commodities segment includes theownership, operation, and decommissioning of five nuclear power reactors and the ownership of the shutdown Indian Point 1 reactorand Big Rock Point facility.Property InsuranceEntergy’s nuclear owner/licensee subsidiaries are members of NEIL, a mutual insurance company that provides propertydamage coverage, including decontamination and reactor stabilization, to the members’ nuclear generating plants. The propertydamage insurance limits procured by Entergy for its Utility plants and Entergy Wholesale Commodity plants are in compliance with thefinancial protection requirements of the NRC.The Utility plants’ (ANO 1 and 2, Grand Gulf, River Bend, and Waterford 3) property damage insurance limits are $1.5 billionper occurrence at each plant with an additional $100 million per occurrence that is shared among the plants. Property damage fromearthquake and volcanic eruption is excluded from the first $500 million in coverage for all Utility plants. Property damage from floodis excluded from the first $500 million in coverage at ANO 1 and 2 and Grand Gulf. Property damage from flood for Waterford 3 andRiver Bend includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to amaximum deductible of $50 million. Property damage from wind for all of the Utility nuclear plants includes a deductible of $10million plus an additional 10% of the amount of the loss in excess of $10 million, up to a total maximum deductible of $50 million.The Entergy Wholesale Commodities’ plants (Pilgrim, Palisades, Indian Point 2, Indian Point 3, Vermont Yankee, and Big RockPoint) have property damage insurance limits as follows: Vermont Yankee - $50 million per occurrence; Big Rock Point - $500 millionper occurrence; Pilgrim and Palisades - $1.115 billion per occurrence; and Indian Point - $1.6 billion per occurrence. For losses that areconsidered non-nuclear in nature, the property damage insurance limit at Pilgrim, Palisades, and Indian Point is $500 million and atVermont Yankee is $50 million. Property damage from wind and flood at Indian Point includes a deductible of $10 million plus anadditional 10% of the amount of the loss in excess of $10 million, up to a maximum deductible of $50 million, but property damagefrom earthquake and volcanic eruption at Indian Point is excluded from the first $500 million. Property damage from wind at Pilgrimincludes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximumdeductible of $50 million, but property damage from flood, earthquake, and volcanic eruption at Pilgrim is excluded from the first $500million. Property damage from wind, flood, earthquake, and volcanic eruption at Vermont Yankee, Palisades, and Big Rock Pointincludes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximumdeductible of $50 million.The value of the insured property at the time of an accident at Pilgrim, Palisades, and Vermont Yankee has been changed fromreplacement cost to actual cash value.In addition, Waterford 3 and Grand Gulf are also covered under NEIL’s Accidental Outage Coverage program. Due toEntergy’s gradual exit from the merchant/wholesale power business, Entergy no longer purchases148Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsAccidental Outage Coverage for its non-regulated, non-generation assets. Accidental outage coverage provides indemnification for theactual cost incurred in the event of an unplanned outage resulting from property damage covered under the NEIL Primary PropertyInsurance policy, subject to a deductible period. The indemnification for the actual cost incurred is based on market power prices at thetime of the loss. For non-nuclear events, the maximum indemnity, under this policy, is limited to $327.6 million per occurrence. Afterthe deductible period has passed, weekly indemnities for an unplanned outage, covered under NEIL’s Accidental Outage Coverageprogram, would be paid according to the amounts listed below:•100% of the weekly indemnity for each week for the first payment period of 52 weeks; then•80% of the weekly indemnity for each week for the second payment period of 52 weeks; and thereafter•80% of the weekly indemnity for an additional 58 weeks for the third and final payment period. Under the property damage and accidental outage insurance programs, all NEIL insured plants could be subject to assessmentsshould losses exceed the accumulated funds available from NEIL. Effective April 1, 2018, the maximum amounts of such possibleassessments per occurrence were as follows: Assessments (In Millions)Utility: Entergy Arkansas$42.3Entergy Louisiana$52.3Entergy Mississippi$0.12Entergy New Orleans$0.12Entergy TexasN/ASystem Energy$22.7 Entergy Wholesale Commodities$—Potential assessments for the Entergy Wholesale Commodities plants are covered by insurance obtained through NEIL’s reinsurers.NRC regulations provide that the proceeds of this insurance must be used, first, to render the reactor safe and stable, andsecond, to complete decontamination operations. Only after proceeds are dedicated for such use and regulatory approval is securedwould any remaining proceeds be made available for the benefit of plant owners or their creditors.In the event that one or more acts of terrorism causes property damage under one or more or all nuclear insurance policiesissued by NEIL (including, but not limited to, those described above) within 12 months from the date the first property damage occurs,the maximum recovery under all such nuclear insurance policies shall be an aggregate not exceeding $3.24 billion plus the additionalamounts recovered for such losses from reinsurance, indemnity, and any other sources applicable to such losses. Non-Nuclear Property InsuranceEntergy’s non-nuclear property insurance program provides coverage on a system-wide basis for Entergy’s non-nuclear assets.The insurance program provides coverage for property damage up to $400 million per occurrence in excess of a $20 million self-insured retention except for property damage caused by the following: earthquake shock, flood, and named windstorm, includingassociated storm surge. For earthquake shock and flood, the insurance program provides coverage up to $400 million on an annualaggregate basis in excess of a $40 million self-insured retention. For named windstorm and associated storm surge, the insuranceprogram provides coverage up to $125 million on an annual aggregate basis in excess of a $40 million self-insured retention. Thecoverage provided by the insurance149Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsprogram for the Entergy New Orleans gas distribution system is limited to $50 million per occurrence and is subject to the same annualaggregate limits and retentions listed above for earthquake shock, flood, and named windstorm, including associated storm surge.Covered property generally includes power plants, substations, facilities, inventories, and gas distribution-relatedproperties. Excluded property generally includes transmission and distribution lines, poles, and towers. For substations valued at $5million or less, coverage for named windstorm and associated storm surge is excluded. This coverage is in place for EntergyCorporation, the Registrant Subsidiaries, and certain other Entergy subsidiaries, including the Entergy Wholesale Commoditiessegment. Entergy also purchases $300 million in terrorism insurance coverage for its conventional property. The Terrorism RiskInsurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess ofexisting coverage for a terrorist event. Under current law, the Terrorism Risk Insurance Act extends through 2020.Employment and Labor-related ProceedingsThe Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courtsand to other labor-related proceedings filed by current and former employees, recognized bargaining representatives, and certain thirdparties. Generally, the amount of damages being sought is not specified in these proceedings. These actions include, but are notlimited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its statecounterparts; claims of race, gender, age, and disability discrimination; disputes arising under collective bargaining agreements; unfairlabor practice proceedings and other administrative proceedings before the National Labor Relations Board or concerning the NationalLabor Relations Act; claims of retaliation; claims of harassment and hostile work environment; and claims for or regarding benefitsunder various Entergy Corporation-sponsored plans. Entergy and the Registrant Subsidiaries are responding to these lawsuits andproceedings and deny liability to the claimants. Management believes that loss exposure has been and will continue to be handled sothat the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cashflows of Entergy or the Utility operating companies.Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)Numerous lawsuits have been filed in federal and state courts, primarily by contractor employees who worked in the 1940-1980s timeframe, primarily against Entergy Texas, and to a lesser extent the other Utility operating companies, as premises owners ofpower plants, for damages caused by alleged exposure to asbestos. Many other defendants are named in these lawsuits aswell. Currently, there are approximately 200 lawsuits involving approximately 400 claimants. Management believes that adequateprovisions have been established to cover any exposure. Additionally, negotiations continue with insurers to recoverreimbursements. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution ofthese matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of the Utility operatingcompanies.Grand Gulf - Related AgreementsCapital Funds Agreement (Entergy Corporation and System Energy)System Energy has entered into agreements with Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy NewOrleans whereby they are obligated to purchase their respective entitlements of capacity and energy from System Energy’s interest inGrand Gulf, and to make payments that, together with other available funds, are adequate to cover System Energy’s operatingexpenses. System Energy would have to secure funds from other sources, including Entergy Corporation’s obligations under theCapital Funds Agreement, to cover any shortfalls from payments received from Entergy Arkansas, Entergy Louisiana, EntergyMississippi, and Entergy New Orleans under these agreements.150Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsUnit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and SystemEnergy)System Energy has agreed to sell all of its share of capacity and energy from Grand Gulf to Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, and Entergy New Orleans in accordance with specified percentages (Entergy Arkansas-36%, EntergyLouisiana-14%, Entergy Mississippi-33%, and Entergy New Orleans-17%) as ordered by the FERC. Charges under this agreement arepaid in consideration for the purchasing companies’ respective entitlement to receive capacity and energy and are payable irrespectiveof the quantity of energy delivered. The agreement will remain in effect until terminated by the parties and the termination is approvedby the FERC, most likely upon Grand Gulf’s retirement from service. In December 2016 the NRC granted the extension of GrandGulf’s operating license to 2044. Monthly obligations are based on actual capacity and energy costs. The average monthly paymentsfor 2018 under the agreement are approximately $14.1 million for Entergy Arkansas, $5.6 million for Entergy Louisiana, $12.2 millionfor Entergy Mississippi, and $6.9 million for Entergy New Orleans. See Note 2 to the financial statements for discussion of thecomplaints filed with the FERC against System Energy seeking a reduction in the return on equity component of the Unit Power SalesAgreement.Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are individually obligated to makepayments or subordinated advances to System Energy in accordance with stated percentages (Entergy Arkansas-17.1%, EntergyLouisiana-26.9%, Entergy Mississippi-31.3%, and Entergy New Orleans-24.7%) in amounts that, when added to amounts receivedunder the Unit Power Sales Agreement or otherwise, are adequate to cover all of System Energy’s operating expenses as defined,including an amount sufficient to amortize the cost of Grand Gulf 2 over 27 years (See Reallocation Agreement terms below) andexpenses incurred in connection with a permanent shutdown of Grand Gulf. System Energy has assigned its rights to payments andadvances to certain creditors as security for certain obligations. Since commercial operation of Grand Gulf began, payments under theUnit Power Sales Agreement have exceeded the amounts payable under the Availability Agreement. Accordingly, no payments underthe Availability Agreement have ever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power SalesAgreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleanscould become subject to claims or demands by System Energy or its creditors for payments or advances under the AvailabilityAgreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and theirrequired Availability Agreement payments.Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans entered into theReallocation Agreement relating to the sale of capacity and energy from Grand Gulf and the related costs, in which Entergy Louisiana,Entergy Mississippi, and Entergy New Orleans agreed to assume all of Entergy Arkansas’s responsibilities and obligations with respectto Grand Gulf under the Availability Agreement. The FERC’s decision allocating a portion of Grand Gulf capacity and energy toEntergy Arkansas supersedes the Reallocation Agreement as it relates to Grand Gulf. Responsibility for any Grand Gulf 2 amortizationamounts has been individually allocated (Entergy Louisiana-26.23%, Entergy Mississippi-43.97%, and Entergy New Orleans-29.80%)under the terms of the Reallocation Agreement. However, the Reallocation Agreement does not affect Entergy Arkansas’s obligation toSystem Energy’s lenders under the assignments referred to in the preceding paragraph. Entergy Arkansas would be liable for its shareof such amounts if Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans were unable to meet their contractualobligations. No payments of any amortization amounts will be required so long as amounts paid to System Energy under the UnitPower Sales Agreement, including other funds available to System Energy, exceed amounts required under the Availability Agreement,which is expected to be the case for the foreseeable future.151Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 9. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy)Accounting standards require companies to record liabilities for all legal obligations associated with the retirement of long-livedassets that result from the normal operation of the assets. For Entergy, substantially all of its asset retirement obligations consist of itsliability for decommissioning its nuclear power plants. In addition, an insignificant amount of removal costs associated with non-nuclear power plants is also included in the decommissioning and asset retirement costs line item on the balance sheets. These liabilities are recorded at their fair values (which are the present values of the estimated future cash outflows) in theperiod in which they are incurred, with an accompanying addition to the recorded cost of the long-lived asset. The asset retirementobligation is accreted each year through a charge to expense, to reflect the time value of money for this present value obligation. Theaccretion will continue through the completion of the asset retirement activity. The amounts added to the carrying amounts of the long-lived assets will be depreciated over the useful lives of the assets. The application of accounting standards related to asset retirementobligations is earnings neutral to the rate-regulated business of the Registrant Subsidiaries.In accordance with ratemaking treatment and as required by regulatory accounting standards, the depreciation provisions for theRegistrant Subsidiaries include a component for removal costs that are not asset retirement obligations under accounting standards. Inaccordance with regulatory accounting principles, the Registrant Subsidiaries have recorded regulatory assets (liabilities) in thefollowing amounts to reflect their estimates of the difference between estimated incurred removal costs and estimated removal costsrecovered in rates: December 31, 2018 2017 (In Millions)Entergy Arkansas$138.3 $176.9Entergy Louisiana($18.8) ($32.4)Entergy Mississippi$63.5 $91.6Entergy New Orleans$49.3 $44.8Entergy Texas$50.9 $55.2System Energy$76.4 $67.9152Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe cumulative decommissioning and retirement cost liabilities and expenses recorded in 2018 and 2017 by Entergy were asfollows: Liabilities asof December 31,2017 Accretion Change inCash FlowEstimate Spending Liabilities asof December 31,2018 (In Millions) Utility: Entergy Arkansas$981.2 $60.4 $8.9 ($2.1) $1,048.4 Entergy Louisiana1,140.5 63.2 85.4 (8.8) 1,280.3 Entergy Mississippi9.2 0.5 0.5 (1.0) 9.2 Entergy New Orleans3.1 0.2 — — 3.3 Entergy Texas6.8 0.4 — — 7.2 System Energy861.7 34.3 — — 896.0 Total3,002.5 159.0 94.8 (11.9) 3,244.4 Entergy Wholesale Commodities: Big Rock Point38.9 3.2 — (2.4) 39.7 Indian Point 1217.6 18.6 — (8.3) 227.9 Indian Point 2708.7 60.6 — (1.3) 768.0 Indian Point 3694.5 58.0 — (1.9) 750.6 Palisades470.4 39.6 — (2.0) 508.0 Pilgrim651.4 58.6 117.5 (11.0) 816.5 Vermont Yankee401.5 25.9 293.0 (152.5) 567.9(b)Other (a)0.3 — 0.1 — 0.4 Total3,183.3 264.5 410.6 (179.4) 3,679.0 Entergy Total$6,185.8 $423.5 $505.4 ($191.3) $6,923.4 153Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements Liabilities asof December 31,2016 Accretion Change inCash FlowEstimate Spending Dispositions Liabilities asof December 31,2017 (In Millions)Utility: Entergy Arkansas$924.4 $56.8 $— $— $— $981.2Entergy Louisiana1,082.7 57.8 — — — 1,140.5Entergy Mississippi8.7 0.5 — — — 9.2Entergy New Orleans2.9 0.2 — — — 3.1Entergy Texas6.5 0.3 — — — 6.8System Energy854.2 43.4 (35.9) — — 861.7Total2,879.4 159.0 (35.9) — — 3,002.5 Entergy Wholesale Commodities: Big Rock Point37.9 3.1 — (2.1) — 38.9FitzPatrick714.3(c)13.9 — (0.9) (727.3)(d)—Indian Point 1207.6 17.7 — (7.7) — 217.6Indian Point 2653.1 55.8 — (0.2) — 708.7Indian Point 3641.1 53.5 — (0.1) — 694.5Palisades500.3 41.3 (68.7) (2.5) — 470.4Pilgrim602.3 52.8 — (3.7) — 651.4Vermont Yankee470.5 34.4 — (103.4) — 401.5Other (a)0.3 — — — — 0.3Total3,827.4 272.5 (68.7) (120.6) (727.3) 3,183.3 Entergy Total$6,706.8 $431.5 ($104.6) ($120.6) ($727.3) $6,185.8(a)See “Coal Combustion Residuals” below for additional discussion regarding the asset retirement obligations related to coalcombustion residuals management.(b)The Vermont Yankee asset retirement obligation was classified as held for sale within other non-current liabilities on theconsolidated balance sheet as of December 31, 2018. See Note 14 to the financial statements for discussion of the sale of theVermont Yankee plant to NorthStar in January 2019.(c)The FitzPatrick asset retirement obligation was classified as held for sale within other non-current liabilities on the consolidatedbalance sheet as of December 31, 2016. See Note 14 to the financial statements for discussion of the sale of the FitzPatrick plantto Exelon in March 2017.(d)See Note 14 to the financial statements for discussion of the sale of the FitzPatrick plant to Exelon in March 2017.Nuclear Plant DecommissioningEntergy periodically reviews and updates estimated decommissioning costs. The actual decommissioning costs may vary fromthe estimates because of the timing of plant decommissioning, regulatory requirements, changes in technology, and increased costs oflabor, materials, and equipment. As described below, during 2018, 2017, and 2016, Entergy updated decommissioning cost estimatesfor certain nuclear power plants.154Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsUtilityIn the second quarter 2017, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf asa result of a revised decommissioning cost study. The revised estimate resulted in a $35.9 million reduction in its decommissioning costliability, along with a corresponding reduction in the related asset retirement cost asset that will be depreciated over the remaining life ofthe unit.In the first quarter 2018, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend asa result of a revised decommissioning cost study. The revised estimate resulted in an $85.4 million increase in its decommissioning costliability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life ofthe unit.Entergy Wholesale CommoditiesIndian PointIn the fourth quarter 2016, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liabilitiesfor Indian Point 1, Indian Point 2, and Indian Point 3 as a result of revised decommissioning cost studies. The revised estimates resultedin a $392 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirementcost assets. The increase in the estimated decommissioning cost liabilities resulted from the change in expectation regarding the timingof decommissioning cash flows due to the decision to cease operations of the Indian Point 2 plant no later than April 2020 and theIndian Point 3 plant no later than April 2021. The asset retirement cost assets were included in the carrying value that was written downto fair value in the fourth quarter 2016. See Note 14 to the financial statements for discussion of the impairment of the value andplanned shutdown of Indian Point Energy Center.PalisadesIn the fourth quarter 2016, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liabilityfor Palisades as a result of a revised decommissioning cost study. The revised estimate resulted in a $129 million increase in thedecommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset. The increase in theestimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flowsdue to the decision to cease operations of the plant on October 1, 2018, subject to regulatory approval. The asset retirement cost assetwas included in the Palisades carrying value that was written down to fair value in the fourth quarter 2016. See Note 14 to the financialstatements for discussion of the impairment of the value and planned shutdown of the Palisades plant.In the third quarter 2017, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liabilityfor Palisades. The revised estimate resulted in a $68.7 million reduction in its decommissioning cost liability, along with acorresponding reduction in the plant asset. The reduction in its estimated decommissioning cost liability resulted from the change inexpectation regarding the timing of decommissioning cash flows due to the decision to continue to operate the plant until May 31,2022.PilgrimThe Pilgrim plant is expected to cease operations on May 31, 2019, at the end of its current fuel cycle. Entergy NuclearGeneration Company filed its Post-Shutdown Decommissioning Activities Report (PSDAR) with the NRC in the fourth quarter 2018 forthe Pilgrim plant. As part of the development of the PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter2018. The revised estimate resulted in a $117.5 million increase in the decommissioning cost liability and a corresponding impairmentcharge.155Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsVermont YankeeIn the fourth quarter 2018, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liabilityfor Vermont Yankee. The revised estimate resulted in a $293 million increase in the decommissioning cost liability, along with acorresponding increase in the related asset retirement cost asset. The revision was prompted by the progress of the Vermont Yankeesales transaction, which is described in Note 14 to the financial statements. Entergy accordingly evaluated the Vermont Yankee assetretirement obligation in light of the terms of the sale transaction, upon determining that Vermont Yankee was in held for sale status.Based on the terms of the sales agreement, which include Entergy receiving a note receivable from the purchaser, Entergy determinedthat $165 million of the asset retirement cost was impaired, and it was accordingly written down in the fourth quarter 2018.NRC Filings for Planned Shutdown ActivitiesAs the Entergy Wholesale Commodities nuclear plants individually approach and begin decommissioning, the EntergyWholesale Commodities plant owners will submit filings with the NRC for planned shutdown activities. These filings with the NRC willdetermine whether any other financial assurance may be required. The plants’ owners are required to provide the NRC with a biennialreport (annually for units that have shut down or will shut down within five years), based on values as of December 31, addressing theowners’ ability to meet the NRC minimum funding levels. Depending on the value of the trust funds, the Entergy WholesaleCommodities plant owners may be required to take steps, such as providing financial guarantees through letters of credit or parentcompany guarantees or making additional contributions to the trusts, which could be significant, to ensure that the trusts are adequatelyfunded and that NRC minimum funding requirements are met.Decommissioning Trust Funds and Regulatory AssetsEntergy maintains decommissioning trust funds that are committed to meeting its obligations for the costs of decommissioningthe nuclear power plants. The fair values of the decommissioning trust funds and the related asset retirement obligation regulatoryassets (liabilities) of Entergy as of December 31, 2018 and 2017 are as follows: 2018 2017 DecommissioningTrust Fair Values RegulatoryAsset (Liability) DecommissioningTrust Fair Values RegulatoryAsset (Liability) (In Millions) (In Millions)Utility: ANO 1 and ANO 2$912.0 $375.9 $944.9 $337.9River Bend$803.4 ($27.4) $818.2 ($30.6)Waterford 3$481.6 $204.9 $493.9 $188.9Grand Gulf$869.5 $186.9 $905.7 $169.1Entergy Wholesale Commodities$3,853.7 $— $4,049.3 $—156Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsCoal Combustion ResidualsIn June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contained two primary regulatoryoptions: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called“special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills orsurface impoundments as non-hazardous wastes under Subtitle D of RCRA. Under both options, CCRs that are beneficially reused incertain processes would remain excluded from hazardous waste regulation. In April 2015 the EPA published the final CCR rule with thematerial being regulated under the second scenario presented above - as non-hazardous wastes regulated under RCRA Subtitle D. Thefinal regulations create new compliance requirements including modified storage, new notification and reporting practices, productdisposal considerations, and CCR unit closure criteria. Entergy believes that on-site disposal options will be available at its facilities, tothe extent needed for CCR that cannot be transferred for beneficial reuse. In December 2016, the Water Infrastructure Improvements forthe Nation Act (WIIN Act) was signed into law, which authorizes states to regulate coal ash rather than leaving primary enforcement tocitizen suit actions. States may submit to the EPA proposals for permit programs. In September 2017 the EPA agreed to reconsidercertain provisions of the coal combustion residuals (CCR) rule in light of the WIIN Act. In March 2018 the EPA published its proposedrevisions to the CCR rule with comments due at the end of April 2018. In July 2018 the EPA released its initial revisions extendingcertain deadlines and incorporating some risk-based standards. The EPA is expected to release additional revisions in anotherrulemaking. In August 2018 the D.C. Circuit vacated several provisions of the CCR rule on the basis that they were inconsistent withthe Resource Conservation and Recovery Act and remanded the matter to the EPA to conduct further rulemaking.In 2018 revisions to the CCR asset retirement obligations were made as a result of revised closure and post-closure costestimates. The revised estimates resulted in increases of $8.9 million at Entergy Arkansas, $0.5 million at Entergy Mississippi, and $0.1million at Entergy Wholesale Commodities in decommissioning cost liabilities, along with corresponding increases in related assetretirement cost assets that will be depreciated over the remaining useful lives of the respective units.157Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 10. LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,Entergy Texas, and System Energy)GeneralAs of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles,and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuelleases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere): Year OperatingLeases CapitalLeases (In Thousands)2019 $94,043 $2,8872020 82,191 2,8872021 75,147 2,8872022 60,808 2,8872023 47,391 2,887Years thereafter 88,004 16,117Minimum lease payments 447,584 30,552Less: Amount representing interest — 8,555Present value of net minimum lease payments $447,584 $21,997Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the GrandGulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in2016.As of December 31, 2018 the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles,and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuelleases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):Operating Leases Year EntergyArkansas EntergyLouisiana EntergyMississippi EntergyNew Orleans EntergyTexas (In Thousands)2019 $20,421 $25,970 $9,344 $2,493 $5,7442020 13,918 21,681 8,763 2,349 4,4312021 11,931 19,514 7,186 1,901 3,6252022 9,458 15,756 5,675 1,314 2,2182023 7,782 12,092 2,946 1,043 1,561Years thereafter 23,297 22,003 4,417 2,323 2,726Minimum lease payments $86,807 $117,016 $38,331 $11,423 $20,305158Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsRental Expenses Year EntergyArkansas EntergyLouisiana EntergyMississippi EntergyNew Orleans EntergyTexas SystemEnergy (In Millions)2018 $6.2 $20.2 $4.6 $2.5 $3.1 $1.92017 $7.5 $23.0 $5.6 $2.5 $3.4 $2.22016 $8.0 $17.8 $4.0 $0.9 $2.8 $1.6In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuelexpense in accordance with regulatory treatment. Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and$3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for EntergyLouisiana. Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 millionin 2016.On January 1, 2019, Entergy implemented ASU No. 2016-02, “Leases (Topic 842)” along with the practical expedientsprovided by ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” and ASU No.2018-11, “Leases (Topic 842): Targeted Improvements.” See Note 1 to the financial statements for further discussion of ASU No.2016-02.Power Purchase AgreementsAs of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under theaccounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum leasepayments under the power purchase agreement are as follows:Year EntergyTexas (a) Entergy (In Thousands)2019 $31,159 $31,1592020 31,876 31,8762021 32,609 32,6092022 10,180 10,180Minimum lease payments $105,824 $105,824(a)Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisianapurchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in2018, $34.1 million in 2017, and $26.1 million in 2016.Sales and Leaseback TransactionsWaterford 3 Lease ObligationIn 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests inWaterford 3 for the aggregate sum of $353.6 million. The leases were scheduled to expire in July 2017. Entergy Louisiana wasrequired to report the sale-leaseback as a financing transaction in its financial statements.159Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsIn December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously beingleased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’sbeneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisianawhen the outstanding lessor debt is paid.In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’sbeneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to makepayments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaininglease payments due from the closing of the transaction through the end of the lease term in July 2017.Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use ofthe undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financingtransaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of thisliability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undividedinterests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit tointerest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum leasepayment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that was recordedas long-term debt.In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.Grand Gulf Lease ObligationsIn 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownershipinterests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases expired in July 2015. System Energyrenewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new leaserenewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair marketvalue. In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests andtheir associated entitlement of Grand Gulf’s capacity and energy.System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financialreporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operatingrevenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemakingpurposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatoryasset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continuesto record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset atthe end of the lease term. The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.160Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsAs of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had futureminimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal: Amount (In Thousands) 2019$17,188202017,188202117,188202217,188202317,188Years thereafter223,437Total309,377Less: Amount representing interest275,025Present value of net minimum lease payments$34,352NOTE 11. RETIREMENT, OTHER POSTRETIREMENT BENEFITS, AND DEFINED CONTRIBUTION PLANS (EntergyCorporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and SystemEnergy)Entergy implemented ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of NetPeriodic Pension Cost and Net Periodic Postretirement Benefit Cost” effective January 1, 2018. The ASU requires entities to report theservice cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as othercompensation costs arising from services rendered during the period. The other components of net benefit cost are required to bepresented in the income statement separately from the service cost component and outside a subtotal of income from operations and arepresented by Entergy in miscellaneous - net in other income. The amendment regarding the presentation of net benefit cost wasrequired to be applied retrospectively for all periods presented. In addition, the ASU allows only the service cost component of netbenefit cost to be eligible for capitalization on a prospective basis. In accordance with the regulatory treatment of net benefit cost of theRegistrant Subsidiaries, a regulatory asset/liability will be recorded in other regulatory assets/liabilities for the non-service costcomponents of net benefit cost that would have been capitalized.Qualified Pension PlansEntergy has eight qualified pension plans covering substantially all employees. The Entergy Corporation Retirement Plan forNon-Bargaining Employees (Non-Bargaining Plan I), the Entergy Corporation Retirement Plan for Bargaining Employees (BargainingPlan I), the Entergy Corporation Retirement Plan II for Non-Bargaining Employees (Non-Bargaining Plan II), the Entergy CorporationRetirement Plan II for Bargaining Employees, the Entergy Corporation Retirement Plan III, and the Entergy Corporation RetirementPlan IV for Bargaining Employees are non-contributory final average pay plans and provide pension benefits that are based onemployees’ credited service and compensation during employment. Effective as of the close of business on December 31, 2016, theEntergy Corporation Retirement Plan IV for Non-Bargaining Employees (Non-Bargaining Plan IV) was merged with and into Non-Bargaining Plan II. At the close of business on December 31, 2016, the liabilities for the accrued benefits and the assets attributable tosuch liabilities of all participants in Non-Bargaining Plan IV were assumed by and transferred to Non-Bargaining Plan II. There was noloss of vesting or benefit options or reduction of accrued benefits to affected participants as a result of this plan merger. Non-bargainingemployees whose most recent date of hire is after June 30, 2014 participate in the Entergy Corporation Cash Balance Plan for Non-Bargaining Employees (Non-Bargaining Cash Balance Plan). Certain bargaining employees hired or rehired after June 30, 2014, orsuch later date provided for in their applicable collective bargaining agreements, participate in the Entergy Corporation Cash BalancePlan for161Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsBargaining Employees (Bargaining Cash Balance Plan). The Registrant Subsidiaries participate in these four plans: Non-BargainingPlan I, Bargaining Plan I, Non-Bargaining Cash Balance Plan, and Bargaining Cash Balance Plan.The assets of the six final average pay qualified pension plans are held in a master trust established by Entergy, and the assets ofthe two cash balance pension plans are held in a second master trust established by Entergy. Each pension plan has an undividedbeneficial interest in each of the investment accounts in its respective master trust that is maintained by a trustee. Use of the mastertrusts permits the commingling of the trust assets of the pension plans of Entergy Corporation and its Registrant Subsidiaries forinvestment and administrative purposes. Although assets in the master trusts are commingled, the trustee maintains supporting recordsfor the purpose of allocating the trust level equity in net earnings (loss) and the administrative expenses of the investment accounts ineach trust to the various participating pension plans in that particular trust. The fair value of the trusts’ assets is determined by thetrustee and certain investment managers. For each trust, the trustee calculates a daily earnings factor, including realized and unrealizedgains or losses, collected and accrued income, and administrative expenses, and allocates earnings to each plan in the master trusts on apro rata basis.Within each pension plan, the record of each Registrant Subsidiary’s beneficial interest in the plan assets is maintained by theplan’s actuary and is updated quarterly. Assets for each Registrant Subsidiary are increased for investment net income andcontributions, and are decreased for benefit payments. A plan’s investment net income/loss (i.e. interest and dividends, realized andunrealized gains and losses and expenses) is allocated to the Registrant Subsidiaries participating in that plan based on the value ofassets for each Registrant Subsidiary at the beginning of the quarter adjusted for contributions and benefit payments made during thequarter.Entergy Corporation and its subsidiaries fund pension plans in an amount not less than the minimum required contributionunder the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended. Theassets of the plans include common and preferred stocks, fixed-income securities, interest in a money market fund, and insurancecontracts. The Registrant Subsidiaries’ pension costs are recovered from customers as a component of cost of service in each of theirrespective jurisdictions.162Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsComponents of Qualified Net Pension Cost and Other Amounts Recognized as a Regulatory Asset and/or Accumulated OtherComprehensive Income (AOCI)Entergy Corporation and its subsidiaries’ total 2018, 2017, and 2016 qualified pension costs and amounts recognized as aregulatory asset and/or other comprehensive income, including amounts capitalized, included the following components: 2018 2017 2016 (In Thousands)Net periodic pension cost: Service cost - benefits earned during the period$155,010 $133,641 $143,244Interest cost on projected benefit obligation267,415 260,824 261,613Expected return on assets(442,142) (408,225) (389,465)Amortization of prior service cost398 261 1,079Recognized net loss274,104 227,720 195,298Curtailment loss— — 3,084Settlement charges828 — —Net periodic pension costs$255,613 $214,221 $214,853Other changes in plan assets and benefit obligations recognized as aregulatory asset and/or AOCI (before tax) Arising this period: Net loss$394,951 $368,067 $203,229Amounts reclassified from regulatory asset and/or AOCI to net periodicpension cost in the current year: Amortization of prior service cost(398) (261) (1,079)Acceleration of prior service cost to curtailment— — (1,045)Amortization of net loss(274,932) (227,720) (195,298)Total$119,621 $140,086 $5,807Total recognized as net periodic pension cost, regulatory asset, and/orAOCI (before tax)$375,234 $354,307 $220,660Estimated amortization amounts from regulatory asset and/or AOCI to netperiodic cost in the following year: Prior service cost$— $398 $261Net loss$233,677 $274,104 $227,720163Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe Registrant Subsidiaries’ total 2018, 2017, and 2016 qualified pension costs and amounts recognized as a regulatory assetand/or other comprehensive income, including amounts capitalized, for their employees included the following components:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Net periodic pension cost: Service cost - benefits earned during theperiod $24,757 $33,783 $7,286 $2,693 $6,356 $7,102Interest cost on projected benefit obligation 52,017 59,761 15,075 7,253 13,390 12,907Expected return on assets (87,404) (99,236) (26,007) (11,973) (26,091) (19,963)Recognized net loss 53,650 57,800 14,438 7,816 10,503 14,859Net pension cost $43,020 $52,108 $10,792 $5,789 $4,158 $14,905Other changes in plan assets and benefitobligations recognized as a regulatoryasset and/or AOCI (before tax) Arising this period: Net (gain)/loss $74,570 $41,642 $19,244 $2,351 $24,121 ($2,359)Amounts reclassified from regulatory assetand/or AOCI to net periodic pension costin the current year: Amortization of net loss (53,650) (57,800) (14,438) (7,816) (10,503) (14,859)Total $20,920 ($16,158) $4,806 ($5,465) $13,618 ($17,218)Total recognized as net periodic pension(income)/cost, regulatory asset, and/orAOCI (before tax) $63,940 $35,950 $15,598 $324 $17,776 ($2,313)Estimated amortization amounts fromregulatory asset and/or AOCI to netperiodic cost in the following year Net loss $47,361 $46,571 $12,416 $6,117 $9,335 $11,400164Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Net periodic pension cost: Service cost - benefits earned during theperiod $20,358 $27,698 $5,890 $2,500 $5,455 $6,145Interest cost on projected benefit obligation 51,776 59,235 14,927 7,163 13,569 12,364Expected return on assets (81,707) (92,067) (24,526) (11,199) (24,722) (18,650)Recognized net loss 46,560 49,417 12,213 6,632 9,241 11,857Net pension cost $36,987 $44,283 $8,504 $5,096 $3,543 $11,716Other changes in plan assets and benefitobligations recognized as a regulatoryasset and/or AOCI (before tax) Arising this period: Net loss $51,569 $57,510 $14,681 $8,601 $1,109 $27,733Amounts reclassified from regulatory assetand/or AOCI to net periodic pension costin the current year: Amortization of net loss (46,560) (49,417) (12,213) (6,632) (9,241) (11,857)Total $5,009 $8,093 $2,468 $1,969 ($8,132) $15,876Total recognized as net periodic pension(income)/ cost, regulatory asset, and/orAOCI (before tax) $41,996 $52,376 $10,972 $7,065 ($4,589) $27,592Estimated amortization amounts fromregulatory asset and/or AOCI to netperiodic cost in the following year Net loss $53,650 $57,800 $14,438 $7,816 $10,503 $14,859165Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2016 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Net periodic pension cost: Service cost - benefits earned during theperiod $20,724 $28,194 $6,250 $2,625 $5,664 $6,263Interest cost on projected benefit obligation 52,219 59,478 15,245 7,256 14,228 11,966Expected return on assets (79,087) (88,383) (23,923) (10,748) (24,248) (17,836)Recognized net loss 43,745 47,783 11,938 6,460 9,358 10,415Net pension cost $37,601 $47,072 $9,510 $5,593 $5,002 $10,808Other changes in plan assets and benefitobligations recognized as a regulatoryasset and/or AOCI (before tax) Arising this period: Net loss $60,968 $46,742 $10,942 $5,463 $3,816 $20,805Amounts reclassified from regulatory assetand/or AOCI to net periodic pensioncost in the current year: Amortization of net loss (43,745) (47,783) (11,938) (6,460) (9,358) (10,415)Total $17,223 ($1,041) ($996) ($997) ($5,542) $10,390Total recognized as net periodic pension(income)/cost, regulatory asset, and/orAOCI (before tax) $54,824 $46,031 $8,514 $4,596 ($540) $21,198Estimated amortization amounts fromregulatory asset and/or AOCI to netperiodic cost in the following year Net loss $46,560 $49,417 $12,213 $6,632 $9,241 $11,857166Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsQualified Pension Obligations, Plan Assets, Funded Status, Amounts Recognized in the Balance SheetQualified pension obligations, plan assets, funded status, amounts recognized in the Consolidated Balance Sheets for EntergyCorporation and its Subsidiaries as of December 31, 2018 and 2017 are as follows: 2018 2017 (In Thousands)Change in Projected Benefit Obligation (PBO) Balance at January 1$7,987,087 $7,142,567Service cost155,010 133,641Interest cost267,415 260,824Settlement lump sum payments(1,794) —Actuarial (gain)/loss(395,242) 767,849Employee contributions— 40Benefits paid(607,559) (317,834)Balance at December 31$7,404,917 $7,987,087Change in Plan Assets Fair value of assets at January 1$6,071,316 $5,171,202Actual return on plan assets(348,051) 808,007Employer contributions383,503 409,901Employee contributions— 40Settlements(1,794) —Benefits paid(607,559) (317,834)Fair value of assets at December 31$5,497,415 $6,071,316Funded status($1,907,502) ($1,915,771)Amount recognized in the balance sheet Non-current liabilities($1,907,502) ($1,915,771)Amount recognized as a regulatory asset Net loss$2,468,987 $2,418,206Amount recognized as AOCI (before tax) Prior service cost$— $398Net loss737,004 667,766 $737,004 $668,164167Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsQualified pension obligations, plan assets, funded status, amounts recognized in the Balance Sheets for the RegistrantSubsidiaries as of December 31, 2018 and 2017 are as follows:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Change in Projected BenefitObligation (PBO) Balance at January 1 $1,580,756 $1,785,700 $457,549 $217,896 $410,720 $384,049Service cost 24,757 33,783 7,286 2,693 6,356 7,102Interest cost 52,017 59,761 15,075 7,253 13,390 12,907Actuarial loss (79,621) (133,520) (26,611) (18,844) (21,656) (37,842)Benefits paid (134,101) (145,808) (39,210) (17,808) (39,206) (27,182)Balance at December 31 $1,443,808 $1,599,916 $414,089 $191,190 $369,604 $339,034Change in Plan Assets Fair value of assets atJanuary 1 $1,205,668 $1,365,741 $360,842 $165,747 $363,523 $274,432Actual return on plan assets (66,787) (75,926) (19,849) (9,221) (19,686) (15,520)Employer contributions 64,062 71,919 14,933 7,250 10,883 13,786Benefits paid (134,101) (145,808) (39,210) (17,808) (39,206) (27,182)Fair value of assets at December31 $1,068,842 $1,215,926 $316,716 $145,968 $315,514 $245,516Funded status ($374,966) ($383,990) ($97,373) ($45,222) ($54,090) ($93,518)Amounts recognized in thebalance sheet (funded status) Non-current liabilities ($374,966) ($383,990) ($97,373) ($45,222) ($54,090) ($93,518)Amounts recognized asregulatory asset Net loss $727,703 $686,138 $196,683 $91,448 $159,030 $168,559Amounts recognized as AOCI(before tax) Net loss $— $43,796 $— $— $— $—168Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Change in Projected BenefitObligation (PBO) Balance at January 1 $1,454,310 $1,624,233 $419,201 $197,464 $386,366 $335,381Service cost 20,358 27,698 5,890 2,500 5,455 6,145Interest cost 51,776 59,235 14,927 7,163 13,569 12,364Actuarial loss 131,729 147,704 38,726 19,507 25,339 45,471Benefits paid (77,417) (73,170) (21,195) (8,738) (20,009) (15,312)Balance at December 31 $1,580,756 $1,785,700 $457,549 $217,896 $410,720 $384,049Change in Plan Assets Fair value of assets at January 1 $1,041,592 $1,169,147 $314,349 $142,488 $317,576 $235,144Actual return on plan assets 161,868 182,261 48,572 22,104 48,952 36,387Employer contributions 79,625 87,503 19,116 9,893 17,004 18,213Benefits paid (77,417) (73,170) (21,195) (8,738) (20,009) (15,312)Fair value of assets at December31 $1,205,668 $1,365,741 $360,842 $165,747 $363,523 $274,432Funded status ($375,088) ($419,959) ($96,707) ($52,149) ($47,197) ($109,617)Amounts recognized in thebalance sheet (funded status) Non-current liabilities ($375,088) ($419,959) ($96,707) ($52,149) ($47,197) ($109,617)Amounts recognized asregulatory asset Net loss $706,783 $701,324 $191,877 $96,913 $145,412 $185,774Amounts recognized as AOCI (before tax) Net loss $— $44,765 $— $— $— $—Accumulated Pension Benefit ObligationThe accumulated benefit obligation for Entergy’s qualified pension plans was $6.9 billion and $7.4 billion at December 31,2018 and 2017, respectively.The qualified pension accumulated benefit obligation for each of the Registrant Subsidiaries for their employees as ofDecember 31, 2018 and 2017 was as follows: December 31, 2018 2017 (In Thousands)Entergy Arkansas$1,362,425 $1,492,876Entergy Louisiana$1,481,158 $1,652,939Entergy Mississippi$387,635 $430,268Entergy New Orleans$179,907 $205,316Entergy Texas$347,852 $387,083System Energy$317,848 $359,258169Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsOther Postretirement BenefitsEntergy also currently offers retiree medical, dental, vision, and life insurance benefits (other postretirement benefits) for eligibleretired employees. Employees who commenced employment before July 1, 2014 and who satisfy certain eligibility requirements(including retiring from Entergy after a certain age and/or years of service with Entergy and immediately commencing their Entergypension benefit), may become eligible for other postretirement benefits.Entergy uses a December 31 measurement date for its postretirement benefit plans.Effective January 1, 1993, Entergy adopted an accounting standard requiring a change from a cash method to an accrualmethod of accounting for postretirement benefits other than pensions. Entergy Arkansas, Entergy Mississippi, Entergy New Orleans,and Entergy Texas have received regulatory approval to recover accrued other postretirement benefit costs through rates. The LPSCordered Entergy Louisiana to continue the use of the pay-as-you-go method for ratemaking purposes for postretirement benefits otherthan pensions. However, the LPSC retains the flexibility to examine individual companies’ accounting for other postretirement benefitsto determine if special exceptions to this order are warranted. Pursuant to regulatory directives, Entergy Arkansas, Entergy Mississippi,Entergy New Orleans, Entergy Texas, and System Energy contribute the other postretirement benefit costs collected in rates intoexternal trusts. System Energy is funding, on behalf of Entergy Operations, other postretirement benefits associated with Grand Gulf.Trust assets contributed by participating Registrant Subsidiaries are in master trusts, established by Entergy Corporation andmaintained by a trustee. Each participating Registrant Subsidiary holds a beneficial interest in the trusts’ assets. The assets in themaster trusts are commingled for investment and administrative purposes. Although assets are commingled, supporting records aremaintained for the purpose of allocating the beneficial interest in net earnings/(losses) and the administrative expenses of the investmentaccounts to the various participating plans and participating Registrant Subsidiaries. Beneficial interest in an investment account’s netincome/(loss) is comprised of interest and dividends, realized and unrealized gains and losses, and expenses. Beneficial interest fromthese investments is allocated to the plans and participating Registrant Subsidiary based on their portion of net assets in the pooledaccounts.170Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsComponents of Net Other Postretirement Benefit Cost and Other Amounts Recognized as a Regulatory Asset and/or AOCIEntergy Corporation’s and its subsidiaries’ total 2018, 2017, and 2016 other postretirement benefit costs, including amountscapitalized and amounts recognized as a regulatory asset and/or other comprehensive income, included the following components: 2018 2017 2016 (In Thousands)Other postretirement costs: Service cost - benefits earned during the period$27,129 $26,915 $32,291Interest cost on accumulated postretirement benefit obligation (APBO)50,725 55,838 56,331Expected return on assets(41,493) (37,630) (41,820)Amortization of prior service credit(37,002) (41,425) (45,490)Recognized net loss13,729 21,905 18,214Net other postretirement benefit cost$13,088 $25,603 $19,526Other changes in plan assets and benefit obligations recognized as a regulatoryasset and /or AOCI (before tax) Arising this period: Prior service credit for period$— ($2,564) ($20,353)Net (gain)/loss(274,354) (66,922) 49,805Amounts reclassified from regulatory asset and /or AOCI to net periodic benefitcost in the current year: Amortization of prior service credit37,002 41,425 45,490Amortization of net loss(13,729) (21,905) (18,214)Total($251,081) ($49,966) $56,728Total recognized as net periodic benefit income/(cost), regulatory asset, and/orAOCI (before tax)($237,993) ($24,363) $76,254Estimated amortization amounts from regulatory asset and/or AOCI to netperiodic benefit cost in the following year Prior service credit($35,377) ($37,002) ($41,425)Net loss$1,430 $13,729 $21,905171Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsTotal 2018, 2017, and 2016 other postretirement benefit costs of the Registrant Subsidiaries, including amounts capitalized anddeferred, for their employees included the following components:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy Other postretirement costs: Service cost - benefits earnedduring the period $3,170 $6,225 $1,284 $516 $1,319 $1,223Interest cost on APBO 7,986 11,154 2,731 1,669 3,754 1,998Expected return on assets (17,368) — (5,213) (5,250) (9,784) (3,130)Amortization of prior servicecredit (5,110) (7,735) (1,823) (745) (2,316) (1,513)Recognized net loss 1,154 1,550 1,508 137 823 932Net other postretirementbenefit (income)/cost ($10,168) $11,194 ($1,513) ($3,673) ($6,204) ($490)Other changes in planassets and benefitobligations recognized asa regulatory asset and/orAOCI (before tax) Arising this period: Net gain ($32,219) ($73,249) ($7,794) ($981) ($10,561) ($6,680)Amounts reclassified fromregulatory asset and/orAOCI to net periodicpension cost in the currentyear: Amortization of prior servicecredit 5,110 7,735 1,823 745 2,316 1,513Amortization of net loss (1,154) (1,550) (1,508) (137) (823) (932)Total ($28,263) ($67,064) ($7,479) ($373) ($9,068) ($6,099)Total recognized as netperiodic otherpostretirement cost,regulatory asset, and/orAOCI (before tax) ($38,431) ($55,870) ($8,992) ($4,046) ($15,272) ($6,589)Estimated amortizationamounts from regulatoryasset and/or AOCI to netperiodic cost in thefollowing year Prior service credit ($4,950) ($7,349) ($1,756) ($682) ($2,243) ($1,450)Net (gain)/loss $576 ($695) $723 $231 $485 $354172Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansasEntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Other postretirement costs: Service cost - benefits earnedduring the period $3,451 $6,373 $1,160 $567 $1,488 $1,278Interest cost on APBO 9,020 12,101 2,759 1,874 4,494 2,236Expected return on assets (15,836) — (4,801) (4,635) (8,720) (2,869)Amortization of prior servicecredit (5,110) (7,735) (1,823) (745) (2,316) (1,513)Recognized net loss 4,460 1,859 1,675 418 3,303 1,560Net other postretirementbenefit (income)/cost ($4,015) $12,598 ($1,030) ($2,521) ($1,751) $692Other changes in planassets and benefitobligations recognized asa regulatory asset and/orAOCI (before tax) Arising this period: Net (gain)/loss ($29,534) ($1,256) $506 ($7,342) ($22,255) ($5,459)Amounts reclassified fromregulatory asset and/orAOCI to net periodicpension cost in the currentyear: Amortization of prior servicecredit 5,110 7,735 1,823 745 2,316 1,513Amortization of net loss (4,460) (1,859) (1,675) (418) (3,303) (1,560)Total ($28,884) $4,620 $654 ($7,015) ($23,242) ($5,506)Total recognized as netperiodic otherpostretirementincome/(cost), regulatoryasset, and/or AOCI(before tax) ($32,899) $17,218 ($376) ($9,536) ($24,993) ($4,814)Estimated amortizationamounts from regulatoryasset and/or AOCI to netperiodic cost in thefollowing year Prior service credit ($5,110) ($7,735) ($1,823) ($745) ($2,316) ($1,513)Net loss $1,154 $1,550 $1,508 $137 $823 $932173Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2016 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Other postretirement costs: Service cost - benefits earnedduring the period $3,913 $7,476 $1,543 $622 $1,590 $1,337Interest cost on APBO 9,297 13,041 2,835 1,791 4,154 2,117Expected return on assets (17,855) — (5,517) (4,617) (9,575) (3,257)Amortization of prior servicecredit (5,472) (7,787) (934) (745) (2,722) (1,570)Recognized net loss 4,256 2,926 893 146 2,148 1,149Net other postretirementbenefit (income)/cost ($5,861) $15,656 ($1,180) ($2,803) ($4,405) ($224)Other changes in planassets and benefitobligations recognized asa regulatory asset and/orAOCI (before tax) Arising this period: Prior service credit forthe period ($1,007) ($4,647) ($6,219) $— $— $—Net (gain)/loss 3,331 (13,117) 8,715 5,717 13,378 4,997Amounts reclassified fromregulatory asset and/orAOCI to net periodicpension cost in the currentyear: Amortization of prior servicecredit 5,472 7,787 934 745 2,722 1,570Amortization of net loss (4,256) (2,926) (893) (146) (2,148) (1,149)Total $3,540 ($12,903) $2,537 $6,316 $13,952 $5,418Total recognized as netperiodic otherpostretirementincome/(cost), regulatoryasset, and/or AOCI(before tax) ($2,321) $2,753 $1,357 $3,513 $9,547 $5,194Estimated amortizationamounts from regulatoryasset and/or AOCI to netperiodic cost in thefollowing year Prior service credit ($5,110) ($7,739) ($1,824) ($745) ($2,316) ($1,513)Net loss $4,460 $1,859 $1,675 $418 $3,303 $1,560174Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsOther Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and Recognized in theBalance SheetOther postretirement benefit obligations, plan assets, funded status, and amounts not yet recognized and recognized in theConsolidated Balance Sheets of Entergy Corporation and its Subsidiaries as of December 31, 2018 and 2017 are as follows: 2018 2017 (In Thousands)Change in APBO Balance at January 1$1,563,487 $1,568,963Service cost27,129 26,915Interest cost50,725 55,838Plan amendments— (2,564)Plan participant contributions37,049 35,080Actuarial gain(346,429) (23,409)Benefits paid(99,785) (97,829)Medicare Part D subsidy received443 493Balance at December 31$1,232,619 $1,563,487Change in Plan Assets Fair value of assets at January 1$659,327 $596,660Actual return on plan assets(30,582) 81,143Employer contributions43,773 44,273Plan participant contributions37,049 35,080Benefits paid(99,785) (97,829)Fair value of assets at December 31$609,782 $659,327Funded status($622,837) ($904,160)Amounts recognized in the balance sheet Current liabilities($44,276) ($45,237)Non-current liabilities(578,561) (858,923)Total funded status($622,837) ($904,160)Amounts recognized as a regulatory asset Prior service credit($25,778) ($40,461)Net loss51,774 144,966 $25,996 $104,505Amounts recognized as AOCI (before tax) Prior service credit($42,730) ($65,047)Net loss(33,569) 161,322 ($76,299) $96,275175Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsOther postretirement benefit obligations, plan assets, funded status, and amounts not yet recognized and recognized in theBalance Sheets of the Registrant Subsidiaries as of December 31, 2018 and 2017 are as follows:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Change in APBO Balance at January 1 $249,019 $345,389 $84,621 $53,548 $116,702 $61,381Service cost 3,170 6,225 1,284 516 1,319 1,223Interest cost 7,986 11,154 2,731 1,669 3,754 1,998Plan participant contributions 8,136 8,162 2,233 1,171 2,565 1,837Actuarial gain (61,960) (73,249) (16,762) (10,847) (27,527) (11,985)Benefits paid (18,581) (22,476) (5,145) (4,078) (8,516) (5,685)Medicare Part D subsidyreceived 60 64 14 8 13 22Balance at December 31 $187,830 $275,269 $68,976 $41,987 $88,310 $48,791Change in Plan Assets Fair value of assets atJanuary 1 $274,678 $— $82,433 $85,504 $154,171 $49,124Actual return on plan assets (12,373) — (3,755) (4,616) (7,182) (2,175)Employer contributions 195 14,314 87 3,793 3,808 569Plan participant contributions 8,136 8,162 2,233 1,171 2,565 1,837Benefits paid (18,581) (22,476) (5,145) (4,078) (8,516) (5,685)Fair value of assets atDecember 31 $252,055 $— $75,853 $81,774 $144,846 $43,670Funded status $64,225 ($275,269) $6,877 $39,787 $56,536 ($5,121)Amounts recognized in thebalance sheet Current liabilities $— ($17,740) $— $— $— $—Non-current liabilities 64,225 (257,529) 6,877 39,787 56,536 (5,121)Total funded status $64,225 ($275,269) $6,877 $39,787 $56,536 ($5,121)Amounts recognized inregulatory asset Prior service credit ($11,465) $— ($4,864) ($681) ($3,665) ($2,304)Net loss 9,021 — 15,945 3,151 13,094 8,774 ($2,444) $— $11,081 $2,470 $9,429 $6,470Amounts recognized inAOCI (before tax) Prior service credit $— ($12,264) $— $— $— $—Net gain — (23,214) — — — — $— ($35,478) $— $— $— $—176Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas System Energy (In Thousands)Change in APBO Balance at January 1 $258,787 $342,500 $78,485 $55,515 $127,700 $62,498Service cost 3,451 6,373 1,160 567 1,488 1,278Interest cost 9,020 12,101 2,759 1,874 4,494 2,236Plan participant contributions 7,875 7,855 2,160 1,151 2,453 1,779Actuarial (gain)/loss (11,691) (1,256) 5,858 (899) (12,469) (2,233)Benefits paid (18,497) (22,273) (5,823) (4,670) (6,980) (4,205)Medicare Part D subsidyreceived 74 89 22 10 16 28Balance at December 31 $249,019 $345,389 $84,621 $53,548 $116,702 $61,381Change in Plan Assets Fair value of assets atJanuary 1 $250,926 $— $75,945 $74,236 $137,069 $44,885Actual return on plan assets 33,679 — 10,153 11,078 18,506 6,095Employer contributions 695 14,418 (2) 3,709 3,123 570Plan participant contributions 7,875 7,855 2,160 1,151 2,453 1,779Benefits paid (18,497) (22,273) (5,823) (4,670) (6,980) (4,205)Fair value of assets atDecember 31 $274,678 $— $82,433 $85,504 $154,171 $49,124Funded status $25,659 ($345,389) ($2,188) $31,956 $37,469 ($12,257)Amounts recognized in thebalance sheet Current liabilities $— ($18,794) $— $— $— $—Non-current liabilities 25,659 (326,595) (2,188) 31,956 37,469 (12,257)Total funded status $25,659 ($345,389) ($2,188) $31,956 $37,469 ($12,257)Amounts recognized inregulatory asset Prior service credit ($16,574) $— ($6,687) ($1,427) ($5,980) ($3,819)Net loss 42,394 — 25,247 4,269 24,478 16,386 $25,820 $— $18,560 $2,842 $18,498 $12,567Amounts recognized inAOCI (before tax) Prior service credit $— ($19,999) $— $— $— $—Net loss — 51,585 — — — — $— $31,586 $— $— $— $—177Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNon-Qualified Pension PlansEntergy also sponsors non-qualified, non-contributory defined benefit pension plans that provide benefits to certain keyemployees. Entergy recognized net periodic pension cost related to these plans of $24.4 million in 2018, $37.6 million in 2017, and$24.9 million in 2016. In 2018, 2017, and 2016 Entergy recognized $7.7 million, $20.3 million, and $8.1 million, respectively insettlement charges related to the payment of lump sum benefits out of the plan that is included in the non-qualified pension plan costabove. The projected benefit obligation was $147 million as of December 31, 2018 of which $17 million was a current liability and$130 million was a non-current liability. The projected benefit obligation was $162.3 million as of December 31, 2017 of which $26.4million was a current liability and $136 million was a non-current liability. The accumulated benefit obligation was $131.9 million and$144.7 million as of December 31, 2018 and 2017, respectively. The unamortized prior service cost and net loss are recognized inregulatory assets ($51.9 million at December 31, 2018 and $55.2 million at December 31, 2017) and accumulated other comprehensiveincome before taxes ($19.2 million at December 31, 2018 and $35.9 million at December 31, 2017).The following Registrant Subsidiaries participate in Entergy’s non-qualified, non-contributory defined benefit pension plans thatprovide benefits to certain key employees. The net periodic pension cost for their employees for the non-qualified plans for 2018,2017, and 2016, was as follows: EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)2018$474 $180 $300 $81 $6502017$679 $185 $251 $73 $4992016$1,819 $231 $236 $65 $504Included in the 2018 net periodic pension cost above are settlement charges of $30 thousand and $139 thousand for EntergyArkansas and Entergy Texas, respectively, related to the lump sum benefits paid out of the plan. Included in the 2017 net periodicpension cost above are settlement charges of $269 thousand for Entergy Arkansas related to the lump sum benefits paid out of the plan.Included in the 2016 net periodic pension cost above are settlement charges of $1.4 million and $1 thousand for Entergy Arkansas andEntergy Mississippi, respectively, related to the lump sum benefits paid out of the plan.The projected benefit obligation for their employees for the non-qualified plans as of December 31, 2018 and 2017 was asfollows: EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)2018$2,752 $1,881 $2,732 $206 $7,9522017$4,221 $2,061 $2,737 $583 $8,913178Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe accumulated benefit obligation for their employees for the non-qualified plans as of December 31, 2018 and 2017 was asfollows: EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)2018$2,519 $1,881 $2,427 $206 $7,7242017$3,825 $2,061 $2,250 $519 $8,602The following amounts were recorded on the balance sheet as of December 31, 2018 and 2017:2018 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)Current liabilities ($198) ($229) ($128) ($16) ($672)Non-current liabilities (2,554) (1,652) (2,604) (191) (7,280)Total funded status ($2,752) ($1,881) ($2,732) ($207) ($7,952)Regulatory asset/(liability) $1,314 $79 $1,009 ($579) ($517)Accumulated other comprehensive income (beforetaxes) $— $5 $— $— $—2017 EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)Current liabilities ($376) ($231) ($135) ($21) ($788)Non-current liabilities (3,845) (1,830) (2,603) (562) (8,125)Total funded status ($4,221) ($2,061) ($2,738) ($583) ($8,913)Regulatory asset/(liability) $2,995 $166 $1,186 ($140) $133Accumulated other comprehensive income (beforetaxes) $— $11 $— $— $—179Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsReclassification out of Accumulated Other Comprehensive Income (Loss)Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (beforetaxes and including amounts capitalized) as of December 31, 2018: QualifiedPension Costs OtherPostretirementCosts Non-QualifiedPension Costs Total (In Thousands)Entergy Amortization of prior service cost($398) $22,379 ($281) $21,700Amortization of loss(87,828) (7,730) (3,628) (99,186)Settlement loss(828) — (2,379) (3,207) ($89,054) $14,649 ($6,288) ($80,693)Entergy Louisiana Amortization of prior service cost$— $7,735 $— $7,735Amortization of loss(3,468) (1,550) (7) (5,025) ($3,468) $6,185 ($7) $2,710Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (beforetaxes and including amounts capitalized) as of December 31, 2017: QualifiedPension Costs OtherPostretirementCosts Non-QualifiedPension Costs Total (In Thousands)Entergy Amortization of prior service cost($261)$26,867 ($355) $26,251Amortization of loss(73,800) (8,805) (3,397) (86,002)Settlement loss— — (7,544) (7,544) ($74,061) $18,062 ($11,296) ($67,295)Entergy Louisiana Amortization of prior service cost$—$7,735 ($1) $7,734Amortization of loss(3,459) (1,859) (9) (5,327) ($3,459) $5,876 ($10) $2,407Accounting for Pension and Other Postretirement BenefitsAccounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans. This ismeasured as the difference between plan assets at fair value and the benefit obligation. Entergy uses a December 31 measurement datefor its pension and other postretirement plans. Employers are to record previously unrecognized gains and losses, prior service costs,and any remaining transition asset or obligation (that resulted from adopting prior pension and other postretirement benefits accountingstandards) as comprehensive income and/or as a regulatory asset reflective of the recovery mechanism for pension and otherpostretirement benefit costs in the Registrant Subsidiaries’ respective regulatory jurisdictions. For the portion of Entergy Louisiana thatis not regulated, the unrecognized prior service cost, gains and losses, and transition asset/obligation for its pension and otherpostretirement benefit obligations are recorded as other comprehensive income. Entergy Louisiana recovers other postretirementbenefit costs on a pay-as-you-go basis and records the unrecognized prior service cost, gains and losses, and transition obligation for itsother postretirement benefit obligation as other comprehensive income. Accounting standards also require that changes in the fundedstatus be recorded as other comprehensive income and/or a regulatory asset in the period in which the changes occur.180Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsWith regard to pension and other postretirement costs, Entergy calculates the expected return on pension and otherpostretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) ofplan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the differencebetween actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.Qualified Pension and Other Postretirement Plans’ AssetsThe Plan Administrator’s trust asset investment strategy is to invest the assets in a manner whereby long-term earnings on theassets (plus cash contributions) provide adequate funding for retiree benefit payments. The mix of assets is based on an optimizationstudy that identifies asset allocation targets in order to achieve the maximum return for an acceptable level of risk, while minimizing theexpected contributions and pension and postretirement expense.In the optimization studies, the Plan Administrator formulates assumptions about characteristics, such as expected asset classinvestment returns, volatility (risk), and correlation coefficients among the various asset classes. The future market assumptions used inthe optimization study are determined by examining historical market characteristics of the various asset classes and makingadjustments to reflect future conditions expected to prevail over the study period.The target asset allocation for pension adjusts dynamically based on the pension plans’ funded status. The current targets areshown below. The expectation is that the allocation to fixed income securities will increase as the pension plans’ funded statusincreases. The following ranges were established to produce an acceptable, economically efficient plan to manage around the targets.For postretirement assets the target and range asset allocations (as shown below) reflect recommendations made in the latestoptimization study. The target asset allocations for postretirement assets adjust dynamically based on the funded status of each sub-account within each trust. The current weighted average targets shown below represent the aggregate of all targets for all sub-accountswithin all trusts.Entergy’s qualified pension and postretirement weighted-average asset allocations by asset category at December 31, 2018 and2017 and the target asset allocation and ranges for 2018 are as follows:Pension Asset Allocation Target Range Actual 2018 Actual 2017Domestic Equity Securities 39% 32%to46% 40% 45%International Equity Securities 19% 15%to23% 18% 20%Fixed Income Securities 42% 39%to45% 41% 34%Other 0% 0%to10% 1% 1%Postretirement Asset Allocation Non-Taxable and Taxable Target Range Actual 2018 Actual 2017Domestic Equity Securities 27% 22%to32% 27% 30%International Equity Securities 18% 13%to23% 17% 20%Fixed Income Securities 55% 50%to60% 56% 50%Other 0% 0%to5% 0% 0%181Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsIn determining its expected long-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviewspast performance, current and expected future asset allocations, and capital market assumptions of its investment consultant and someinvestment managers.The expected long-term rate of return for the qualified pension plans’ assets is based primarily on the geometric average of thehistorical annual performance of a representative portfolio weighted by the target asset allocation defined in the table above, along withother indications of expected return on assets. The time period reflected is a long dated period spanning several decades.The expected long-term rate of return for the non-taxable postretirement trust assets is determined using the same methodologydescribed above for pension assets, but the aggregate asset allocation specific to the non-taxable postretirement assets is used.For the taxable postretirement trust assets, the investment allocation includes tax-exempt fixed income securities. This assetallocation, in combination with the same methodology employed to determine the expected return for other postretirement assets (asdescribed above), and with a modification to reflect applicable taxes, is used to produce the expected long-term rate of return fortaxable postretirement trust assets.Concentrations of Credit RiskEntergy’s investment guidelines mandate the avoidance of risk concentrations. Types of concentrations specified to be avoidedinclude, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, geographic area andindividual security issuance. As of December 31, 2018, all investment managers and assets were materially in compliance with theapproved investment guidelines, therefore there were no significant concentrations (defined as greater than 10 percent of plan assets) ofcredit risk in Entergy’s pension and other postretirement benefit plan assets.Fair Value MeasurementsAccounting standards provide the framework for measuring fair value. That framework provides a fair value hierarchy thatprioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quotedprices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3measurements).The three levels of the fair value hierarchy are described below:•Level 1 - Level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has theability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur insufficient frequency and volume to provide pricing information on an ongoing basis.•Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observablefor the asset or liability at the measurement date. Assets are valued based on prices derived by an independent party that usesinputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can bechallenged with the independent parties and/or overridden if it is believed such would be more reflective of fair value. Level 2inputs include the following:- quoted prices for similar assets or liabilities in active markets;- quoted prices for identical assets or liabilities in inactive markets;- inputs other than quoted prices that are observable for the asset or liability; or- inputs that are derived principally from or corroborated by observable market data by correlation or other means.182Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsIf an asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term ofthe asset or liability.•Level 3 - Level 3 refers to securities valued based on significant unobservable inputs. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair valuemeasurement. The following tables set forth by level within the fair value hierarchy, measured at fair value on a recurring basis atDecember 31, 2018, and December 31, 2017, a summary of the investments held in the master trusts for Entergy’s qualified pensionand other postretirement plans in which the Registrant Subsidiaries participate.Qualified Defined Benefit Pension Plan Trusts2018 Level 1 Level 2 Level 3 Total (In Thousands)Short-term investments $— $7,715(a)$— $7,715Equity securities: Corporate stocks: Preferred 8,250(b)— — 8,250Common 695,003(b)—(b)— 695,003Common collective trusts (c) 2,408,053Registered investment companies 108,740(d)— — 108,740Fixed income securities: U.S. Government securities —(b)675,880(a)— 675,880Corporate debt instruments — 619,310(a)— 619,310Registered investment companies (e) 29,374(d)2,697(d)— 931,439Other 1,866(f)48,482(f)— 50,348Other: Insurance company general account(unallocated contracts) — 39,322(g)— 39,322Total investments $843,233 $1,393,406 $— $5,544,060Cash 2,591Other pending transactions 5,956Less: Other postretirement assets included intotal investments (55,192)Total fair value of qualified pension assets $5,497,415183Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 Level 1 Level 2 Level 3 Total (In Thousands)Equity securities: Corporate stocks: Preferred $11,461(b)$— $— $11,461Common 663,923(b)34(b)— 663,957Common collective trusts (c) 3,198,799Registered investment companies 125,174(d)— — 125,174Fixed income securities: U.S. Government securities —(b)638,832(a)— 638,832Corporate debt instruments — 619,735(a)— 619,735Registered investment companies (e) 45,768(d)2,735(d)— 764,251Other 46(f)62,559(f)— 62,605Other: Insurance company general account(unallocated contracts) — 37,994(g)— 37,994Total investments $846,372 $1,361,889 $— $6,122,808Cash 1,508Other pending transactions 5,179Less: Other postretirement assets includedin total investments (58,179)Total fair value of qualified pension assets $6,071,316Other Postretirement Trusts2018 Level 1 Level 2 Level 3 Total (In Thousands)Equity securities: Common collective trust (c) $244,729Fixed income securities: U.S. Government securities 63,174(b)80,039(a)— 143,213Corporate debt instruments — 105,989(a)— 105,989Registered investment companies 2,442(d)— — 2,442Other — 56,980(f)— 56,980Total investments $65,616 $243,008 $— $553,353Other pending transactions 1,237Plus: Other postretirement assets included in theinvestments of the qualified pension trust 55,192Total fair value of other postretirement assets $609,782184Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 Level 1 Level 2 Level 3 Total (In Thousands)Equity securities: Common collective trust (c) $300,139Fixed income securities: U.S. Government securities 81,602(b)76,790(a)— 158,392Corporate debt instruments — 92,869(a)— 92,869Registered investment companies 3,127(d)— — 3,127Other — 45,627(f)— 45,627Total investments $84,729 $215,286 $— $600,154Other pending transactions 994Plus: Other postretirement assets included in theinvestments of the qualified pension trust 58,179Total fair value of other postretirement assets $659,327(a)Certain preferred stocks and certain fixed income debt securities (corporate, government, and securitized) are stated at fair valueas determined by broker quotes.(b)Common stocks, certain preferred stocks, and certain fixed income debt securities (government) are stated at fair valuedetermined by quoted market prices.(c)The common collective trusts hold investments in accordance with stated objectives. The investment strategy of the trusts is tocapture the growth potential of equity markets by replicating the performance of a specified index. Net asset value per share ofcommon collective trusts estimate fair value. Certain of these common collective trusts are not publicly quoted, and are valuedby the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in thefair value table.(d)Registered investment companies are money market mutual funds with a stable net asset value of one dollar per share.Registered investment companies may hold investments in domestic and international bond markets or domestic equities andestimate fair value using net asset value per share.(e)Certain of these registered investment companies are not publicly quoted, and are valued by the fund administrators using netasset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table.(f)The other remaining assets are U.S. municipal and foreign government bonds stated at fair value as determined by brokerquotes.(g)The unallocated insurance contract investments are recorded at contract value, which approximates fair value. The contractvalue represents contributions made under the contract, plus interest, less funds used to pay benefits and contract expenses, andless distributions to the master trust.185Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEstimated Future Benefit PaymentsBased upon the assumptions used to measure Entergy’s qualified pension and other postretirement benefit obligations atDecember 31, 2018, and including pension and other postretirement benefits attributable to estimated future employee service, Entergyexpects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for Entergy Corporation and itssubsidiaries will be as follows: Estimated Future Benefits Payments Qualified Pension Non-QualifiedPension Other Postretirement(before Medicare Subsidy) Estimated FutureMedicare D SubsidyReceipts (In Thousands)Year(s) 2019$552,111 $16,964 $78,232 $8652020$437,699 $14,679 $80,312 $9772021$461,562 $10,563 $81,718 $1,1022022$467,822 $17,805 $82,624 $1,2292023$480,531 $17,578 $82,337 $1,3702024 - 2028$2,481,536 $68,687 $400,498 $9,007Based upon the same assumptions, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be receivedover the next ten years for the Registrant Subsidiaries for their employees will be as follows:Estimated Future Qualified PensionBenefits Payments EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Year(s) 2019 $100,948 $145,515 $30,687 $18,436 $34,401 $20,7922020 $91,941 $101,275 $27,376 $12,476 $27,273 $19,9072021 $92,675 $104,465 $27,023 $12,555 $27,137 $20,6282022 $94,051 $106,307 $27,348 $12,938 $27,420 $21,6782023 $94,474 $107,771 $27,773 $13,250 $27,797 $21,9702024 - 2028 $479,455 $547,028 $139,930 $64,413 $129,657 $114,223Estimated Future Non-Qualified Pension BenefitsPayments EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)Year(s) 2019 $198 $229 $128 $16 $6722020 $295 $217 $306 $16 $7332021 $254 $204 $203 $16 $7532022 $503 $194 $213 $15 $6862023 $356 $180 $191 $15 $9042024 - 2028 $1,295 $711 $1,633 $72 $3,481186Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEstimated Future OtherPostretirement Benefits Payments(before Medicare Part D Subsidy) EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Year(s) 2019 $13,709 $17,933 $4,320 $3,634 $5,802 $3,0822020 $13,520 $18,306 $4,508 $3,576 $5,964 $3,0682021 $13,444 $18,526 $4,615 $3,468 $6,109 $3,1602022 $13,183 $18,714 $4,689 $3,326 $6,206 $3,1632023 $12,926 $18,842 $4,686 $3,251 $6,207 $3,1262024 - 2028 $61,088 $91,994 $23,192 $14,573 $29,810 $14,814Estimated Future Medicare Part DSubsidy EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Thousands)Year(s) 2019 $192 $193 $66 $39 $71 $282020 $216 $215 $72 $42 $77 $342021 $239 $240 $79 $44 $84 $392022 $264 $265 $85 $46 $91 $462023 $291 $292 $92 $48 $97 $542024 - 2028 $1,836 $1,919 $559 $270 $599 $394ContributionsEntergy currently expects to contribute approximately $176.9 million to its qualified pension plans and approximately $47.6million to other postretirement plans in 2019. The expected 2019 pension and other postretirement plan contributions of the RegistrantSubsidiaries for their employees are shown below. The 2019 required pension contributions will be known with more certainty whenthe January 1, 2019 valuations are completed, which is expected by April 1, 2019.The Registrant Subsidiaries expect to contribute approximately the following to the qualified pension and other postretirementplans for their employees in 2019: EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy (In Thousands)Pension Contributions$27,112 $26,451 $7,701 $1,800 $1,645 $8,285Other Postretirement Contributions$501 $17,933 $123 $2,140 $56 $20187Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsActuarial AssumptionsThe significant actuarial assumptions used in determining the pension PBO and the other postretirement benefit APBO as ofDecember 31, 2018 and 2017 were as follows: 2018 2017Weighted-average discount rate: Qualified pension4.37% - 4.52%Blended 4.47% 3.70% - 3.82%Blended 3.78%Other postretirement4.42% 3.72%Non-qualified pension3.98% 3.34%Weighted-average rate of increase in future compensation levels3.98% 3.98%Assumed health care trend rate: Pre-656.59% 6.95%Post-657.15% 7.25%Ultimate rate4.75% 4.75%Year ultimate rate is reached and beyond: Pre-652027 2027 Post-652026 2027The significant actuarial assumptions used in determining the net periodic pension and other postretirement benefit costs for2018, 2017, and 2016 were as follows: 2018 2017 2016Weighted-average discount rate: Qualified pension: Service cost3.89% 4.75% 5.00% Interest cost3.44% 3.73% 3.90%Other postretirement: Service cost3.88% 4.60% 4.92% Interest cost3.33% 3.61% 3.78%Non-qualified pension: Service cost3.35% 3.65% 3.65% Interest cost2.76% 3.10% 3.10%Weighted-average rate of increase in futurecompensation levels3.98% 3.98% 4.23%Expected long-term rate of return on plan assets: Pension assets7.50% 7.50% 7.75%Other postretirement non-taxable assets6.50% - 7.50% 6.50% - 7.50% 7.75%Other postretirement taxable assets5.50% 5.75% 6.00%Assumed health care trend rate: Pre-656.95% 6.55% 6.75%Post-657.25% 7.25% 7.55%Ultimate rate4.75% 4.75% 4.75%Year ultimate rate is reached and beyond: Pre-652027 2026 2024 Post-652027 2026 2024 188Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsIn 2016, Entergy refined its approach to estimating the service cost and interest cost components of qualified pension, otherpostretirement, and non-qualified pension costs. Under the refined approach, instead of using the weighted-average obligation discountrates at the beginning of the year, 2016 service cost and interest costs’ expected cash flows were discounted by the applicable spotrates. The refinement in approach was a change in accounting estimate and, accordingly, the effect was reflected prospectively. Themeasurement of the benefit obligation was not affected. With respect to the mortality assumptions, Entergy used the RP-2014 Employee and Healthy Annuitant Tables (adjusted to baseyear 2006) with a fully generational MP-2018 projection scale, in determining its December 31, 2018 pension plans’ PBOs and otherpostretirement benefit APBO. Entergy used the RP-2014 Employee and Healthy Annuitant Tables (adjusted to base year 2006) with afully generational MP-2017 projection scale, in determining its December 31, 2017 pension plans’ PBOs and other postretirementbenefit APBO. Entergy’s health care cost trend is affected by both medical cost inflation, and with respect to capped costs, the effects ofgeneral inflation. A one percentage point change in Entergy’s assumed health care cost trend rate for 2018 would have the followingeffects: 1 Percentage Point Increase 1 Percentage Point Decrease2018 Impact on theAPBO Impact on the sum ofservice costs and interestcost Impact on theAPBO Impact on the sum ofservice costs and interestcost Increase /(Decrease)(In Thousands)Entergy Corporation and itssubsidiaries $120,335 $9,254 ($100,393) ($7,593)The Registrant Subsidiaries’ health care cost trend is affected by both medical cost inflation, and with respect to capped costs,the effects of general inflation. A one percentage point change in the assumed health care cost trend rate for 2018 would have thefollowing effects for the Registrant Subsidiaries for their employees: 1 Percentage Point Increase 1 Percentage Point Decrease2018 Impact on theAPBO Impact on the sum ofservice costs and interestcost Impact on theAPBO Impact on the sum ofservice costs and interestcost Increase/(Decrease)(In Thousands)Entergy Arkansas $15,906 $1,129 ($13,323) ($942)Entergy Louisiana $27,684 $2,112 ($23,071) ($1,732)Entergy Mississippi $6,768 $460 ($5,665) ($379)Entergy New Orleans $3,281 $217 ($2,784) ($180)Entergy Texas $8,673 $605 ($7,292) ($498)System Energy $5,537 $416 ($4,578) ($339)Defined Contribution PlansEntergy sponsors the Savings Plan of Entergy Corporation and Subsidiaries (System Savings Plan). The System Savings Plan isa defined contribution plan covering eligible employees of Entergy and certain of its subsidiaries. The participating Entergy subsidiarymakes matching contributions to the System Savings Plan for all eligible participating employees in an amount equal to either 70% or100% of the participants’ basic contributions, up to 6% of their eligible earnings per pay period. The matching contribution is allocatedto investments as directed by the employee.189Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy also sponsors the Savings Plan of Entergy Corporation and Subsidiaries VI (established in April 2007) and the SavingsPlan of Entergy Corporation and Subsidiaries VII (established in April 2007) to which matching contributions are also made. The plansare defined contribution plans that cover eligible employees, as defined by each plan, of Entergy and certain of its subsidiaries.Effective as of the close of business on December 31, 2017, the Savings Plan of Entergy Corporation and Subsidiaries IV (EntergySavings Plan IV) was merged into the System Savings Plan and all of the assets of Entergy Savings Plan IV were transferred to theSystem Savings Plan. Entergy’s subsidiaries’ contributions to defined contribution plans collectively were $54.3 million in 2018, $49.1 million in2017, and $47 million in 2016. The majority of the contributions were to the System Savings Plan.The Registrant Subsidiaries’ 2018, 2017, and 2016 contributions to defined contribution plans for their employees were asfollows: Year EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Thousands)2018 $3,985 $5,450 $2,307 $795 $1,9922017 $3,741 $5,079 $2,133 $731 $1,8652016 $3,528 $4,746 $1,997 $708 $1,778NOTE 12. STOCK-BASED COMPENSATION (Entergy Corporation)Entergy grants stock options, restricted stock, performance units, and restricted stock units to key employees of the Entergysubsidiaries under its Equity Ownership Plans which are shareholder-approved stock-based compensation plans. Effective May 8,2015, Entergy’s shareholders approved the 2015 Equity Ownership Plan (2015 Plan). The maximum number of common shares thatcan be issued from the 2015 Plan for stock-based awards is 6,900,000 with no more than 1,500,000 available for incentive stock optiongrants. The 2015 Plan applies to awards granted on or after May 8, 2015 and awards expire ten years from the date of grant. As ofDecember 31, 2018, there were 2,006,268 authorized shares remaining for stock-based awards, including 1,500,000 for incentive stockoption grants.Stock OptionsStock options are granted at exercise prices that equal the closing market price of Entergy Corporation common stock on thedate of grant. Generally, stock options granted will become exercisable in equal amounts on each of the first three anniversaries of thedate of grant. Unless they are forfeited previously under the terms of the grant, options expire 10 years after the date of the grant if theyare not exercised.The following table includes financial information for stock options for each of the years presented: 2018 2017 2016 (In Millions)Compensation expense included in Entergy’s consolidated net income$4.3 $4.4 $4.4Tax benefit recognized in Entergy’s consolidated net income$1.1 $1.7 $1.7Compensation cost capitalized as part of fixed assets and inventory$0.7 $0.7 $0.7190Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy determines the fair value of the stock option grants by considering factors such as lack of marketability, stock retentionrequirements, and regulatory restrictions on exercisability in accordance with accounting standards. The stock option weighted-averageassumptions used in determining the fair values are as follows: 2018 2017 2016Stock price volatility17.44% 18.39% 20.38%Expected term in years7.33 7.35 7.25Risk-free interest rate2.54% 2.31% 1.77%Dividend yield4.75% 4.75% 4.50%Dividend payment per share$3.58 $3.50 $3.42Stock price volatility is calculated based upon the daily public stock price volatility of Entergy Corporation common stock over a periodequal to the expected term of the award. The expected term of the options is based upon historical option exercises and the weightedaverage life of options when exercised and the estimated weighted average life of all vested but unexercised options. In 2008, Entergyimplemented stock ownership guidelines for its senior executive officers. These guidelines require an executive officer to own sharesof Entergy Corporation common stock equal to a specified multiple of his or her salary. Until an executive officer achieves thisownership position the executive officer is required to retain 75% of the net-of-tax net profit upon exercise of the option to be held inEntergy Corporation common stock. The reduction in fair value of the stock options due to this restriction is based upon an estimate ofthe call option value of the reinvested gain discounted to present value over the applicable reinvestment period. A summary of stock option activity for the year ended December 31, 2018 and changes during the year are presented below: Numberof Options Weighted-AverageExercisePrice AggregateIntrinsicValue Weighted-AverageContractualLifeOptions outstanding as of January 1, 20185,164,854 $83.26 Options granted687,400 $78.08 Options exercised(1,419,087) $72.76 Options forfeited/expired(1,439,834) $108.00 Options outstanding as of December 31, 20182,993,333 $75.14 $32,708,805 6.48 yearsOptions exercisable as of December 31, 20181,709,905 $75.64 $17,826,376 4.99 yearsWeighted-average grant-date fair value of optionsgranted during 2018$6.99 The weighted-average grant-date fair value of options granted during the year was $6.54 for 2017 and $7.40 for 2016. The totalintrinsic value of stock options exercised was $19 million during 2018, $11 million during 2017, and $5 million during 2016. Theintrinsic value, which has no effect on net income, of the outstanding stock options exercised is calculated by the positive differencebetween the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as ofDecember 31, 2018. The aggregate intrinsic value of the stock options outstanding as of December 31, 2018 was $33 million. Theintrinsic value of “in the money” stock options is $34 million as of December 31, 2018. Entergy recognizes compensation cost over thevesting period of the options based on their grant-date fair value. The total fair value of options that vested was approximately $4million during 2018, $6 million during 2017, and $5 million during 2016. Cash received from option exercises was $103 million for theyear ended December 31, 2018. The tax benefits realized from options exercised was $5 million for the year ended December 31,2018.191Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe following table summarizes information about stock options outstanding as of December 31, 2018: Options Outstanding Options ExercisableRange of As of Weighted-AverageRemainingContractual Life-Yrs. WeightedAverage ExercisePrice NumberExercisable asof WeightedAverage ExercisePriceExercise Prices 12/31/2018 12/31/2018 $51 -$64.99 322,500 4.71 $63.70 322,500 $63.70$65 -$78.99 2,229,833 6.81 $73.88 946,405 $73.07$79 -$91.99 441,000 6.08 $89.90 441,000 $89.90$51 -$91.99 2,993,333 6.48 $75.14 1,709,905 $75.64Stock-based compensation cost related to non-vested stock options outstanding as of December 31, 2018 not yet recognized isapproximately $5 million and is expected to be recognized over a weighted-average period of 1.68 years.Restricted Stock AwardsEntergy grants restricted stock awards earned under its stock benefit plans in the form of stock units. One-third of the restrictedstock awards will vest upon each anniversary of the grant date and are expensed ratably over the three year vesting period. Shares ofrestricted stock have the same dividend and voting rights as other common stock and are considered issued and outstanding shares ofEntergy upon vesting. In January 2018 the Board approved and Entergy granted 333,850 restricted stock awards under the 2015 EquityOwnership Plan. The restricted stock awards were made effective as of January 25, 2018 and were valued at $78.08 per share, whichwas the closing price of Entergy Corporation’s common stock on that date. The following table includes information about the restricted stock awards outstanding as of December 31, 2018: Shares Weighted-Average GrantDate Fair Value PerShareOutstanding shares at January 1, 2018709,611 $72.92Granted364,306 $77.75Vested(332,614) $75.54Forfeited(47,777) $73.37Outstanding shares at December 31, 2018693,526 $74.17The following table includes financial information for restricted stock for each of the years presented: 2018 2017 2016 (In Millions)Compensation expense included in Entergy’s consolidated net income$19.8 $19.7 $19.8Tax benefit recognized in Entergy’s consolidated net income$5.1 $7.6 $7.6Compensation cost capitalized as part of fixed assets and inventory$5.7 $5.2 $4.5The total fair value of the restricted stock awards granted was $28 million, $29 million, and $29 million for the years endedDecember 31, 2018, 2017, and 2016.192Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe total fair value of the restricted stock awards vested was $25 million, $24 million, and $23 million for the years endedDecember 31, 2018, 2017, and 2016, respectively.Long-Term Performance Unit ProgramEntergy grants long-term incentive awards earned under its stock benefit plans in the form of performance units, whichrepresents the value of one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividendsaccrued during the performance period. The Long-Term Performance Unit Program specifies a minimum, target, and maximumachievement level, the achievement of which will determine the number of performance units that may be earned. Entergy measuresperformance by assessing Entergy’s total shareholder return relative to the total shareholder return of the companies in the PhiladelphiaUtility Index. For the 2018-2020 performance period, a cumulative Utility earnings metric was added to the Long-Term PerformanceUnit Program to supplement the relative total shareholder return measure that historically has been used in this program with eachmeasure equally weighted. For each metric, there is no payout for performance that falls within the lowest quartile of performance. Fortop quartile performance, a maximum payout of 200% of target is earned.In January 2018 the Board approved and Entergy granted 182,408 performance units under the 2015 Equity Ownership andLong-Term Cash Incentive Plan. The performance units were made effective as of January 25, 2018, and half were valued at $78.08per share, the closing price of Entergy’s common stock on that date; and half were valued at $86.75 per share. Shares of theperformance units have the same dividend and voting rights as other common stock, are considered issued and outstanding shares ofEntergy upon vesting, and are expensed ratably over the 3-year vesting period.The following table includes information about the long-term performance units outstanding at the target level as of December31, 2018: Shares Weighted-AverageGrant Date Fair ValuePer ShareOutstanding shares at January 1, 2018534,151 $83.60Granted199,859 $82.03Vested(50,812) $99.02Forfeited(116,572) $95.51Outstanding shares at December 31, 2018566,626 $79.21The following table includes financial information for the long-term performance units for each of the years presented: 2018 2017 2016 (In Millions)Compensation expense included in Entergy’s consolidated net income$11.5 $10.8 $12.3Tax benefit recognized in Entergy’s consolidated net income$2.9 $4.2 $4.8Compensation cost capitalized as part of fixed assets and inventory$3.3 $3.0 $2.9 The total fair value of the long-term performance units granted was $16 million, $19 million, and $21 million for the yearsended December 31, 2018, 2017, and 2016, respectively.In January 2018, Entergy issued 50,812 shares of Entergy Corporation common stock at a share price of $78.51 for awardsearned and dividends accrued under the 2015-2017 Long-Term Performance Unit Program. In January 2017, Entergy issued 86,964shares of Entergy Corporation common stock at a share price of $71.89 for awards earned193Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsand dividends accrued under the 2014-2016 Long-Term Performance Unit Program. In January 2016, Entergy issued 54,103 shares ofEntergy Corporation common stock at a share price of $68.09 for awards earned and dividends accrued under the 2013-2015 Long-Term Performance Unit Program.Restricted Stock Unit AwardsEntergy grants restricted stock unit awards earned under its stock benefit plans in the form of stock units that are subject to time-based restrictions. The restricted stock units may be settled in shares of Entergy Corporation common stock or the cash value of sharesof Entergy Corporation common stock at the time of vesting. The costs of restricted stock unit awards are charged to income over therestricted period, which varies from grant to grant. The average vesting period for restricted stock unit awards granted is 39months. As of December 31, 2018, there were 186,763 unvested restricted stock units that are expected to vest over an average periodof 18 months.The following table includes information about the restricted stock unit awards outstanding as of December 31, 2018: Shares Weighted-AverageGrant Date Fair ValuePer ShareOutstanding shares at January 1, 2018201,570 $75.48Granted22,850 $79.11Vested(37,657) $72.97Outstanding shares at December 31, 2018186,763 $76.43The following table includes financial information for restricted stock unit awards for each of the years presented: 2018 2017 2016 (In Millions)Compensation expense included in Entergy’s consolidated net income$2.9 $2.5 $2.2Tax benefit recognized in Entergy’s consolidated net income$0.7 $1.0 $0.8Compensation cost capitalized as part of fixed assets and inventory$0.7 $0.6 $0.4The total fair value of the restricted stock unit awards granted was $2 million, $3 million, and $5 million for the years endedDecember 31, 2018, 2017, and 2016, respectively.The total fair value of the restricted stock unit awards vested was $3 million, $0.4 million, and $2 million for the years endedDecember 31, 2018, 2017, and 2016, respectively.NOTE 13. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy) Entergy’s reportable segments as of December 31, 2018 are Utility and Entergy Wholesale Commodities. Utility includes thegeneration, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and naturalgas utility service in portions of Louisiana. Entergy Wholesale Commodities includes the ownership, operation, and decommissioningof nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants towholesale customers. Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell theelectric power produced by those plants to wholesale customers. “All Other” includes the parent company, Entergy Corporation, andother business activity.194Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy’s segment financial information is as follows:2018 Utility Entergy WholesaleCommodities* All Other Eliminations Consolidated (In Thousands)Operating revenues $9,540,670 $1,468,905 $— ($123) $11,009,452Asset write-offs, impairments, andrelated charges $— $532,321 $— $— $532,321Depreciation, amortization, &decommissioning $1,367,944 $388,732 $1,274 $— $1,757,950Interest and investment income $203,936 $14,543 $31,602 ($186,217) $63,864Interest expense $552,919 $33,694 $179,358 ($58,623) $707,348Income taxes ($732,548) ($269,025) ($35,253) $— ($1,036,826)Consolidated net income (loss) $1,495,061 ($340,641) ($164,271) ($127,594) $862,555Total assets $44,777,167 $5,459,275 $733,366 ($2,694,742) $48,275,066Cash paid for long-lived assetadditions $3,987,424 $283,707 $86 $— $4,271,2172017 Utility Entergy WholesaleCommodities* All Other Eliminations Consolidated (In Thousands)Operating revenues $9,417,866 $1,656,730 $— ($115) $11,074,481Asset write-offs, impairments, andrelated charges $— $538,372 $— $— $538,372Depreciation, amortization, &decommissioning $1,345,906 $448,079 $1,678 $— $1,795,663Interest and investment income $218,317 $224,121 $21,669 ($175,910) $288,197Interest expense $547,301 $23,714 $139,619 ($48,291) $662,343Income taxes $794,616 ($146,480) ($105,566) $— $542,570Consolidated net income (loss) $773,148 ($172,335) ($47,840) ($127,620) $425,353Total assets $42,978,669 $5,638,009 $1,011,612 ($2,921,141) $46,707,149Investment in affiliates - at equity $198 $— $— $— $198Cash paid for long-lived assetadditions $3,680,513 $320,667 $438 $— $4,001,618195Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2016 Utility Entergy WholesaleCommodities* All Other Eliminations Consolidated (In Thousands)Operating revenues $8,996,106 $1,849,638 $— ($99) $10,845,645Asset write-offs, impairments, andrelated charges $— $2,835,637 $— $— $2,835,637Depreciation, amortization, &decommissioning $1,298,043 $374,922 $1,647 $— $1,674,612Interest and investment income $189,994 $108,466 $27,385 ($180,718) $145,127Interest expense $557,546 $22,858 $139,090 ($53,124) $666,370Income taxes $424,388 ($1,192,263) ($49,384) $— ($817,259)Consolidated net income (loss) $1,151,133 ($1,493,124) ($94,917) ($127,595) ($564,503)Total assets $41,098,751 $6,696,038 $1,283,816 ($3,174,171) $45,904,434Investment in affiliates - at equity $198 $— $— $— $198Cash paid for long-lived assetadditions $3,754,225 $289,639 $393 $— $4,044,257Businesses marked with * are sometimes referred to as the “competitive businesses.” Eliminations are primarily intersegmentactivity. Almost all of Entergy’s goodwill is related to the Utility segment. On December 29, 2014, the Vermont Yankee plant ceased power production and entered its decommissioning phase. InDecember 2015, Rhode Island State Energy Center, a natural gas-fired combined cycle generating plant, was sold. In October 2015management announced the intention to shut down the FitzPatrick plant in 2017 and the Pilgrim plant in 2019, earlier than previouslyexpected. In 2016 management announced the planned sale of Vermont Yankee in 2018, the planned sale of FitzPatrick in 2017, andthe planned amendment of the Consumers Energy PPA to terminate early, in May 2018, and the subsequent plan to shut down thePalisades plant in 2018, earlier than expected. In January 2017 management announced a settlement with New York State to shut downIndian Point 2 in 2020 and Indian Point 3 in 2021, both earlier than expected. In March 2017 the FitzPatrick plant was sold to Exelon.In September 2017 management announced the termination of the PPA amendment agreement with Consumers Energy and the revisedplan to continue to operate Palisades under the current PPA and to shut down Palisades permanently on May 31, 2022. In July 2018,Entergy entered into a purchase and sale agreement with Holtec International to sell 100% of the equity interests in Entergy NuclearGeneration Company, the owner of Pilgrim, and 100% of the equity interests in Entergy Nuclear Palisades, LLC, the owner of Palisadesand the Big Rock Point Site. The Pilgrim transaction is expected to close by the end of 2019, and the Palisades transaction is expectedto close by the end of 2022. In December 2018 the Vermont Public Utility Commission approved the sale of Vermont Yankee and, inJanuary 2019, Vermont Yankee was sold to NorthStar.Management expects these transactions to result in the cessation of merchant power generation at all Entergy WholesaleCommodities nuclear power plants owned and operated by Entergy by 2022. Entergy will continue to have the obligation todecommission the nuclear plants while they are owned by Entergy. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions. The employee retention and severance expenses and other benefits-related costs, and contracted economic development contributions are included in "Other operation and maintenance" in theconsolidated statement of operations.196Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsTotal restructuring charges in 2018, 2017, and 2016 were comprised of the following: Employee retention andseverance expenses andother benefits-relatedcosts Contracted economicdevelopment costs Total (In Millions)Balance as of December 31, 2015 $— $— $—Restructuring costs accrued 74 21 95Non-cash portion (3) — (3)Cash paid out 1 — 1Balance as of December 31, 2016 $70 $21 $91Restructuring costs accrued 113 — 113Non-cash portion — (7) (7)Cash paid out 100 — 100Balance as of December 31, 2017 $83 $14 $97Restructuring costs accrued 139 — 139Cash paid out 43 — 43Balance as of December 31, 2018 $179 $14 $193In addition, Entergy Wholesale Commodities incurred $532 million in 2018 and $538 million in 2017 of impairment and other relatedcharges associated with these strategic decisions and transactions. See Note 14 to the financial statements for further discussion of theseimpairment charges.Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses of approximately$120 million in 2019 and a total of approximately $110 million from 2020 through 2022 associated with these strategic transactions.Geographic AreasFor the years ended December 31, 2018, 2017, and 2016, the amount of revenue Entergy derived from outside of the UnitedStates was insignificant. As of December 31, 2018 and 2017, Entergy had no long-lived assets located outside of the United States.Registrant SubsidiariesEach of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for SystemEnergy, which is an electricity generation business. Each of the Registrant Subsidiaries’ operations is managed on an integrated basisby that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures,and operating results.197Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 14. ACQUISITIONS, DISPOSITIONS, AND IMPAIRMENT OF LONG-LIVED ASSETS (Entergy Corporation, EntergyArkansas, Entergy Louisiana, and Entergy New Orleans)AcquisitionsUnion Power StationIn March 2016, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans purchased the Union Power Station, a 1,980MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union PowerStation consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). EntergyLouisiana purchased two of the power blocks and a 50% undivided ownership interest in certain assets related to the facility, andEntergy Arkansas and Entergy New Orleans each purchased one power block and a 25% undivided ownership interest in such relatedassets. The aggregate purchase price for the Union Power Station was approximately $949 million (approximately $237 million for eachpower block and associated assets).Palisades Purchased Power AgreementEntergy’s purchase of the Palisades plant in 2007 included a unit-contingent, 15-year purchased power agreement (PPA) withConsumers Energy for 100% of the plant’s output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. The PPA was at below-market prices at the time ofthe acquisition and Entergy amortizes a liability to revenue over the life of the agreement. The amount amortized each period is basedupon the present value, calculated at the date of acquisition, of each year’s difference between revenue under the agreement andrevenue based on estimated market prices. Amounts amortized to revenue were $6 million in 2018, $28 million in 2017, and $13million in 2016. Amounts to be amortized to revenue through the remaining life of the agreement will be approximately $10 million in2019, $11 million in 2020, $12 million in 2021, and $5 million in 2022.DispositionsWillow GlenIn December 2018, Entergy Louisiana sold the Willow Glen Power Station, a non-operating gas plant. Entergy Louisiana soldWillow Glen for approximately $12 million in cash and the transfer of the obligation to decommission the plant. Entergy Louisianaassumed a regulatory liability of $5.7 million. Entergy Louisiana realized a pre-tax gain of $14.8 million on the sale. Entergy Louisianarecorded a $31.9 million regulatory liability to recognize the obligation to refund the customer excess collections for decommissioningWillow Glen.Vermont YankeeIn November 2016, Entergy entered into an agreement to sell 100% of the membership interests in Entergy Nuclear VermontYankee, LLC to a subsidiary of NorthStar. Entergy Nuclear Vermont Yankee was the owner of the Vermont Yankee plant. The sale ofEntergy Nuclear Vermont Yankee to NorthStar included the transfer of the nuclear decommissioning trust fund and the asset retirementobligation for the spent fuel management and decommissioning of the plant.In March 2018, Entergy and NorthStar entered into a settlement agreement and a Memorandum of Understanding with State ofVermont agencies and other interested parties that set forth the terms on which the agencies and parties support the Vermont PublicUtility Commission’s approval of the transaction. The agreements provide additional financial assurance for decommissioning, spentfuel management and site restoration, and detail the site restoration standards. In October 2018 the NRC issued an order approving theapplication to transfer Vermont Yankee’s license to NorthStar for decommissioning. In December 2018, the Vermont Public UtilityCommission issued an order198Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsapproving the transaction consistent with the Memorandum of Understanding’s terms. On January 11, 2019, Entergy and NorthStarclosed the transaction.Entergy Nuclear Vermont Yankee had an outstanding credit facility that was used to pay for dry fuel storage costs. This creditfacility was guaranteed by Entergy Corporation. A subsidiary of Entergy assumed the obligations under the credit facility. At theclosing of the sale transaction, NorthStar caused Entergy Nuclear Vermont Yankee, renamed NorthStar Vermont Yankee, to issue a$139 million promissory note to the Entergy subsidiary that assumed the credit facility obligations. The amount of the note included thebalance outstanding on the credit facility, as well as borrowing fees and costs incurred by Entergy in connection with the credit facility.With the receipt of the NRC and Vermont Public Utility Commission approvals and the resolution among the parties of thesignificant conditions of the sale, Entergy concluded that as of December 31, 2018 Vermont Yankee was in held for sale status. Entergyaccordingly evaluated the Vermont Yankee asset retirement obligation in light of the terms of the sale transaction and evaluated theremaining values of the Vermont Yankee assets. These evaluations resulted in an increase in the asset retirement obligation and $173million of asset impairment and related other charges in the fourth quarter 2018. See Note 9 to the financial statements for additionaldiscussion of the asset retirement obligation. Upon closing of the transaction in January 2019, the Vermont Yankee decommissioningtrust, along with the decommissioning obligation for the plant, was transferred to NorthStar. The assets and liabilities associated with thesale of Vermont Yankee are classified as held for sale on the Entergy Corporation and Subsidiaries Consolidated Balance Sheet as ofDecember 31, 2018. As of December 31, 2018, the value of the decommissioning trust was $532 million. As of December 31, 2018,the asset retirement cost asset was $127 million, classified within other deferred debits, and the asset retirement cost obligation was$568 million, classified within other non-current liabilities.FitzPatrickIn August 2016, Entergy entered into an agreement to sell the FitzPatrick plant, an 838 MW nuclear power plant owned byEntergy in the Entergy Wholesale Commodities segment. In March 2017 the NRC approved the sale of the plant to Exelon. Thetransaction closed in March 2017 for a purchase price of $110 million, which included a $10 million non-refundable signing fee paid inAugust 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain onthe sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid byEntergy. The disposition-date fair value of the decommissioning trust fund was $805 million, classified within other deferred debits, andthe disposition-date fair value of the asset retirement obligation was $727 million, classified within other non-current liabilities. Thetransaction also included property, plant, and equipment with a net book value of zero, materials and supplies, and prepaid assets.As part of the transaction, Entergy entered into a reimbursement agreement with Exelon pursuant to which Exelon reimbursedEntergy for specified out-of-pocket costs associated with Entergy’s operation of FitzPatrick prior to closing of the sale. In the firstquarter 2017, Entergy billed Exelon for reimbursement of $98 million of other operation and maintenance expenses, $7 million in lostoperating revenues, and $3 million in taxes other than income taxes, partially offset by a $10 million defueling credit to Exelon.As discussed in Note 3 to the financial statements, as a result of the sale of FitzPatrick on March 31, 2017, Entergy redeterminedthe plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017.Top DeerIn November 2016, Entergy sold its 50% membership interest in Top Deer Wind Ventures, LLC, a wind-powered electricgeneration joint venture owned by Entergy in the Entergy Wholesale Commodities segment and accounted for as an equity methodinvestment. Entergy sold its 50% membership interest in Top Deer for approximately $0.5 million and realized a pre-tax loss of $0.2million on the sale.199Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsImpairment of Long-lived Assets2017 and 2018 ImpairmentsIn 2017 and 2018, Entergy continued to execute its strategy to reduce the size of Entergy Wholesale Commodities’ merchantfleet, with planned shutdowns of Pilgrim by May 31, 2019, Indian Point 2 by April 30, 2020, Indian Point 3 by April 30, 2021, andPalisades on May 31, 2022. The remaining two Entergy Wholesale Commodities’ nuclear plants, FitzPatrick and Vermont Yankee, havebeen sold. The FitzPatrick plant was classified as held-for-sale at December 31, 2016, and subsequently sold to Exelon in March 2017.The Vermont Yankee plant was classified as held-for-sale at December 31, 2018, and subsequently sold to NorthStar on January 11,2019.In 2018, Entergy Wholesale Commodities incurred $532 million, and in 2017 it incurred $538 million, of impairment chargesrelated to nuclear fuel spending, nuclear refueling outage spending, expenditures for capital assets, and asset retirement obligationrevisions. These costs were charged to expense as incurred as a result of the impaired fair value of the Entergy Wholesale Commoditiesnuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’sstrategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associatedwith nuclear fuel-related spending, expenditures for capital assets and, except for Palisades, expects to continue to charge these costs toexpense as incurred because Entergy expects the value of the plants to continue to be impaired.With respect to Palisades, Entergy and Consumers Energy had agreed to amend the existing PPA to terminate early, on May 31,2018. In September 2017, however, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy willcontinue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previouslyplanned. Entergy intends to shut down the Palisades plant permanently on May 31, 2022. As a result of the change in expectedoperating life of the Palisades plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceededthe carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, andexpenditures for capital assets incurred at Palisades after September 30, 2017 are no longer charged to expense as incurred, butrecorded as assets and depreciated or amortized, subject to the typical periodic impairment reviews prescribed in the accounting rules.2018 Pilgrim ImpairmentThe Pilgrim plant is expected to cease operations on May 31, 2019, at the end of its current fuel cycle. Entergy NuclearGeneration Company filed its Post-Shutdown Decommissioning Activities Report (PSDAR) with the NRC in the fourth quarter 2018 forthe Pilgrim plant. As part of the development of the PSDAR, Entergy obtained a revised decommissioning cost study in the third quarter2018. The revised estimate resulted in a $117.5 million increase in the decommissioning cost liability and a corresponding impairmentcharge.2018 Vermont Yankee ImpairmentAs discussed above in Dispositions, on January 11, 2019, Entergy sold the Vermont Yankee plant to NorthStar. With the receiptof the NRC and Vermont Public Utility Commission approvals and the resolution among the parties of the significant conditions of thesale, Entergy concluded that as of December 31, 2018 Vermont Yankee was in held-for- sale status. Entergy accordingly evaluated theVermont Yankee asset retirement obligation in light of the terms of the sale transaction, and evaluated the remaining values of theVermont Yankee assets. These evaluations resulted in $173 million of asset impairment and related charges in the fourth quarter 2018.See Note 9 to the financial statements for additional discussion of the revision of the asset retirement obligation.200Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2016 Palisades and Indian Point ImpairmentsIn December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, onMay 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the earlytermination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the MichiganPublic Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1,2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. As a result of the planned PPA terminationand its intention to shut down the plant, Entergy tested the recoverability of the plant and related assets as of December 31, 2016.Entergy and Consumers Energy subsequently agreed, in September 2017, to terminate the PPA amendment agreement and Entergy nowintends to shut down the Palisades plant permanently on May 31, 2022.Indian Point 2 and Indian Point 3 had an application pending for renewed NRC licenses. Various parties, including the State ofNew York, expressed opposition to renewal of the licenses. Under federal law, nuclear power plants may continue to operate beyondtheir original license expiration dates while their timely filed renewal applications are pending NRC approval. Indian Point 2 reachedthe expiration date of its original NRC operating license on September 28, 2013, and Indian Point 3 reached the expiration date of itsoriginal NRC operating license on December 12, 2015. Upon expiration of their operating licenses, each plant entered into a period ofextended operation under the timely renewal rule.In January 2017, Entergy announced that it reached a settlement with New York State to shut down Indian Point 2 by April 30,2020 and Indian Point 3 by April 30, 2021, and resolve all New York State-initiated legal challenges to Indian Point’s operating licenserenewal. As part of the settlement, New York State agreed to issue Indian Point’s water quality certification and Coastal ZoneManagement Act consistency certification and to withdraw its objection to license renewal before the NRC. New York State also agreedto issue a water discharge permit, which is required regardless of whether the plant is seeking a renewed NRC license. The shutdownsare conditioned, among other things, upon such actions being taken by New York State. As a result of its evaluation of alternatives tothe continued operation of the Indian Point plants, and taking into consideration the status of negotiations with the State of New York,Entergy tested the recoverability of the plants and related assets as of December 31, 2016.The tests for Palisades and Indian Point indicated that the probability-weighted undiscounted net cash flows did not exceed thecarrying values of the plants and related assets as of December 31, 2016.As of December 31, 2016 the estimated fair value of the Palisades plant and related long-lived assets was $206 million, whilethe carrying value was $558 million, resulting in an impairment charge of $352 million. Materials and supplies were evaluated andwritten down by $48 million. In summary, as of December 31, 2016, the total impairment loss and related charges for Palisades was$400 million ($258 million net-of-tax). The pre-impairment carrying value of $558 million included the effect of a $129 millionincrease in Palisades’ estimated decommissioning cost liability and the related asset retirement cost asset. The increase in the estimateddecommissioning cost liability primarily resulted from the change in expectation regarding the timing of decommissioning cash flows.See Note 9 to the financial statements for further discussion regarding the Palisades decommissioning cost revision.As of December 31, 2016 the estimated fair value of the Indian Point plants and related long-lived assets was $433 million,while the carrying value was $2,619 million, resulting in an impairment charge of $2,186 million. Materials and supplies wereevaluated and written down by $157 million. In summary, as of December 31, 2016, the total impairment loss and related charges forIndian Point was $2,343 million ($1,511 million net-of-tax). The pre-impairment carrying value of $2,619 million included the effect ofa $392 million increase in Indian Point’s estimated decommissioning cost liability and the related asset retirement cost asset. Theincrease in the estimated decommissioning cost liability primarily resulted from the change in expectation regarding the timing ofdecommissioning cash flows. See Note 9 to the financial statements for further discussion regarding the Indian Point decommissioningcost revision.201Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsOverall Regarding All ImpairmentsThe impairments and other related charges are recorded as a separate line item in Entergy’s consolidated statements ofoperations and are included within the results of the Entergy Wholesale Commodities segment. In addition to the impairments and otherrelated charges, Entergy expects to incur additional charges through mid-2022 associated with these strategic transactions. See Note 13to the financial statements for further discussion of these additional charges.The fair value analyses for Palisades and Indian Point in 2016 were performed based on the income approach, a discountedcash flow method, to determine the amount of impairment. The estimates of fair value were based on the prices that Entergy wouldexpect to receive in hypothetical sales of Palisades and Indian Point plants and related assets to a market participant. In order todetermine these prices, Entergy used significant observable inputs, including quoted forward power and gas prices, where available.Significant unobservable inputs, such as projected long-term pre-tax operating margins (cash basis) and estimated weighted-averagecosts of capital, were also used in the estimation of fair value. In addition, Entergy made certain assumptions regarding future taxdeductions associated with the plants and related assets, the amount and timing of recoveries from future litigation with the DOE relatedto spent fuel storage costs, and the expected operating life of the plant. Based on the use of significant unobservable inputs, the fairvalue measurement for the entirety of the asset group, and for each type of asset within the asset group, are classified as Level 3 in thefair value hierarchy discussed in Note 15 to the financial statements.The following table sets forth a description of significant unobservable inputs used in the valuation of the Palisades and IndianPoint plants and related assets:Significant Unobservable Inputs Amount Weighted-Average2016 Weighted-average cost of capital Indian Point (a) 7.0%-7.5% 7.2%Palisades 6.5% 6.5% Long-term pre-tax operating margin (cash basis) Indian Point 19.7% 19.7%Palisades (b) (c) 17.8%-38.8% 34.6%(a)The cash flows extending through the 2021 shutdown at Indian Point 3 were assigned a higher discount factor to incorporate theincreased risk associated with longer operations.(b)Most of the Palisades output is sold under a 15-year power purchase agreement, entered at the plant’s acquisition in 2007, thatexpires in 2022. The power purchase agreement prices currently exceed market prices and escalate each year, up to$61.50/MWh in 2022.(c)The fair value of Palisades at December 31, 2016 is based on the probability weighting of whether the PPA will terminate beforethe originally scheduled termination in 2022.Entergy’s Accounting Policy and Entergy Wholesale Commodities Accounting groups, which report to the Chief Accounting Officer,were primarily responsible for determining the valuation of the Palisades and Indian Point plants and related assets, in consultation withexternal advisors. Entergy’s Accounting Policy group obtained and reviewed information from other Entergy departments withexpertise on the various inputs and assumptions that were necessary to calculate the fair values of the asset groups.202Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 15. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy)Market RiskIn the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergymay incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest raterisk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. Tothe extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to pricevolatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to itscustomers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in theday ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities also uses acombination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market pricefalls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a morepredictable cash flow.Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, anddiversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period duringwhich the option may be exercised and the relationship between the current market price of the underlying instrument and the option’scontractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market riskto which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen basedon ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedgeproduct and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firmsettlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance withstated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s riskmanagement policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies,including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.DerivativesSome derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others areclassified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale riskmanagement tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tollingagreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rateswaps. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designatedas hedging instruments.Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage priceexposure for Entergy Wholesale Commodities generation. The maximum length of time over which Entergy Wholesale Commodities iscurrently hedging the variability in future cash flows with derivatives for forecasted power transactions at December 31, 2018 isapproximately 2.25 years. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is98% for 2019, of which approximately 73% is sold under financial derivatives and the remainder under normal purchase/normal salecontracts. 203Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsTotal planned generation for 2019 is 25.6 TWh. Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These masteragreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash,letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. Thecollateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold.The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guarantee, as determined inaccordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of all positions in theevent of a failure or inability to post collateral.Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions thatrequire an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of thecontracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of December 31,2018, derivative contracts with six counterparties were in a liability position (approximately $34 million total). In addition to thecorporate guarantee, $19 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As ofDecember 31, 2017, derivative contracts with eight counterparties were in a liability position (approximately $65 million total). Inaddition to the corporate guarantee, $1 million in cash collateral was required to be posted by the Entergy subsidiary to itscounterparties and $4 million in cash collateral and $34 million in letters of credit were required to be posted by its counterparties to theEntergy subsidiary. If the Entergy Corporation credit rating falls below investment grade, Entergy would have to post collateral equal tothe estimated outstanding liability under the contract at the applicable date. Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and EntergyMississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Dailyprices or the NYMEX Henry Hub. These swaps and options are marked-to-market through fuel expense with offsetting regulatoryassets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on aportion of projected annual exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi andprojected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executednatural gas swaps and options as of December 31, 2018 is 5 years for Entergy Louisiana. The maximum length of time over whichEntergy has executed natural gas swaps as of December 31, 2018 is 10 months for Entergy Mississippi and 10 months for Entergy NewOrleans. The total volume of natural gas swaps and options outstanding as of December 31, 2018 is 45,276,000 MMBtu for Entergy,including 36,540,000 MMBtu for Entergy Louisiana, 8,160,000 MMBtu for Entergy Mississippi, and 576,000 MMBtu for Entergy NewOrleans. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to providecollateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.During the second quarter 2018, Entergy participated in the annual financial transmission rights auction process for the MISOplanning year of June 1, 2018 through May 31, 2019. Financial transmission rights are derivative instruments which representeconomic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated ashedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts thecarrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses onfinancial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operatingcompanies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume offinancial transmission rights outstanding as of December 31, 2018 is 47,313 GWh for Entergy, including 10,511 GWh for EntergyArkansas, 20,452 GWh for Entergy Louisiana, 6,222 GWh for Entergy Mississippi, 2,330 GWh for Entergy New Orleans, and 7,600GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cashand/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rightsheld by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financialtransmission rights exposure for Entergy Wholesale204Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsCommodities as of December 31, 2018 and December 31, 2017. Letters of credit posted with MISO covered the financial transmissionrights exposure for Entergy Mississippi and Entergy Texas as of December 31, 2018 and Entergy Arkansas, Entergy Mississippi, andEntergy Texas as of December 31, 2017.The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2018 are shown in thetable below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements andare presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.Instrument Balance Sheet Location Fair Value(a) Offset (b) Net (c) (d) Business (In Millions) Derivatives designated ashedging instruments Assets: Electricity swaps and options Prepayments and other(current portion) $32 ($32) $— Entergy WholesaleCommoditiesElectricity swaps and optionsOther deferred debits andother assets (non-currentportion) $7 ($7) $— Entergy WholesaleCommodities Liabilities: Electricity swaps and options Other current liabilities(current portion) $54 ($33) $21 Entergy WholesaleCommoditiesElectricity swaps and options Other non-current liabilities(non-current portion) $20 ($7) $13 Entergy WholesaleCommoditiesDerivatives not designated ashedging instruments Assets: Electricity swaps and options Prepayments and other(current portion) $4 ($2) $2 Entergy WholesaleCommoditiesElectricity swaps and options Other deferred debits andother assets (non-currentportion) $1 $— $1 Entergy WholesaleCommoditiesNatural gas swaps and options Other deferred debits andother assets (non-currentportion) $2 $— $2 UtilityFinancial transmission rights Prepayments and other $16 ($1) $15 Utility and EntergyWholesaleCommodities Liabilities: Electricity swaps and options Other current liabilities(current portion) $1 ($1) $— Entergy WholesaleCommoditiesNatural gas swaps and options Other current liabilities $1 $— $1 Utility205Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2017 are shown in thetable below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements andare presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.Instrument Balance Sheet Location Fair Value(a) Offset (b) Net (c) (d) Business (In Millions) Derivatives designated ashedging instruments Assets: Electricity swaps and options Prepayments and other(current portion) $19 ($19) $— Entergy WholesaleCommoditiesElectricity swaps and options Other deferred debits andother assets (non-currentportion) $19 ($14) $5 Entergy WholesaleCommodities Liabilities: Electricity swaps and options Other current liabilities(current portion) $86 ($20) $66 Entergy WholesaleCommoditiesElectricity swaps and options Other non-current liabilities(non-current portion) $17 ($14) $3 Entergy WholesaleCommoditiesDerivatives not designatedas hedging instruments Assets: Electricity swaps and options Prepayments and other(current portion) $9 ($9) $— Entergy WholesaleCommoditiesFinancial transmission rights Prepayments and other $22 ($1) $21 Utility and EntergyWholesaleCommodities Liabilities: Electricity swaps and options Other current liabilities(current portion) $9 ($8) $1 Entergy WholesaleCommoditiesNatural gas swaps Other current liabilities $6 $— $6 Utility(a)Represents the gross amounts of recognized assets/liabilities(b)Represents the netting of fair value balances with the same counterparty(c)Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated BalanceSheet(d)Excludes cash collateral in the amount of $19 million posted as of December 31, 2018 and $1 million posted and $4 millionheld as of December 31, 2017. Also excludes letters of credit in the amount of $4 million posted as of December 31, 2018 and$34 million in letters of credit held as of December 31, 2017.206Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for theyears ended December 31, 2018, 2017, and 2016 are as follows:Instrument Amount of gain(loss) recognized inothercomprehensiveincome Income Statement location Amount of gain(loss) reclassified fromaccumulated othercomprehensive incomeinto income (a) (In Millions) (In Millions)2018 Electricity swaps and options ($40) Competitive business operating revenues ($68) 2017 Electricity swaps and options $44 Competitive business operating revenues $109 2016 Electricity swaps and options $135 Competitive business operating revenues $293(a)Before taxes of ($14) million, $38 million, and $103 million, for the years ended December 31, 2018, 2017, and 2016,respectivelyAt each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings duringthe period. The ineffective portion of cash flow hedges is recorded in competitive businesses operating revenues. The change in fairvalue of Entergy’s cash flow hedges due to ineffectiveness was ($5.9) million, ($3) million, and ($356) thousand for the years endedDecember 31, 2018, 2017, and 2016, respectively. Based on market prices as of December 31, 2018, unrealized gains (losses) recorded in accumulated other comprehensiveincome on cash flow hedges relating to power sales totaled ($28) million of net unrealized losses. Approximately ($17) million isexpected to be reclassified from accumulated other comprehensive income to operating revenues in the next twelve months. The actualamount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices. Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, andthen de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transactionoccurs. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets orliabilities on the balance sheet and offset as they flow through to earnings. 207Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements forthe years ended December 31, 2018, 2017, and 2016 are as follows:Instrument Amount of gain (loss)recognized in accumulatedother comprehensiveincome Income Statement location Amount of gain (loss)recorded in theincome statement (In Millions) (In Millions)2018 Natural gas swaps and options $— Fuel, fuel-related expenses, andgas purchased for resale(a)$8Financial transmission rights $— Purchased power expense(b)$131Electricity swaps and options $—(c)Competitive business operatingrevenues $8 2017 Natural gas swaps $— Fuel, fuel-related expenses, andgas purchased for resale(a)($31)Financial transmission rights $— Purchased power expense(b)$139Electricity swaps and options $—(c)Competitive business operatingrevenues $— 2016 Natural gas swaps $— Fuel, fuel-related expenses, andgas purchased for resale(a)$11Financial transmission rights $— Purchased power expense(b)$125Electricity swaps and options $—(c)Competitive business operatingrevenues ($11)(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, andgas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset orliability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refundedthrough fuel cost recovery mechanisms.(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operatingcompanies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded asan offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financialtransmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recoverymechanisms.(c)Amount of gain recognized in accumulated other comprehensive income from electricity swaps and options de-designated ashedged items.208Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balancesheets as of December 31, 2018 and 2017 are shown in the table below. Certain investments, including those not designated as hedginginstruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance withaccounting guidance for derivatives and hedging. Instrument Balance Sheet Location Gross FairValue (a) OffsettingPosition (b) Net FairValue (c)(d) Registrant (In Millions) 2018 Assets: Natural gas swaps andoptions Prepayments and other $0.3 $— $0.3 Entergy LouisianaNatural gas swaps andoptions Other deferred debits andother assets $1.6 $— $1.6 Entergy Louisiana Financial transmissionrights Prepayments and other $3.6 ($0.2) $3.4 Entergy ArkansasFinancial transmissionrights Prepayments and other $8.4 ($0.1) $8.3 Entergy LouisianaFinancial transmissionrights Prepayments and other $2.2 $— $2.2 Entergy MississippiFinancial transmissionrights Prepayments and other $1.3 $— $1.3 Entergy New Orleans Liabilities: Financial transmissionrights Other current liabilities $0.9 ($1.4) ($0.5) Entergy Texas Natural gas swaps andoptions Other current liabilities $1.1 $— $1.1 Entergy LouisianaNatural gas swaps Other current liabilities $0.1 $— $0.1 Entergy New Orleans209Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsInstrument Balance Sheet Location Gross FairValue (a) OffsettingPosition (b) Net FairValue (c)(d) Registrant 2017 Assets: Financial transmissionrights Prepayments and other $3.2 ($0.2) $3.0 Entergy ArkansasFinancial transmissionrights Prepayments and other $11.0 ($0.8) $10.2 Entergy LouisianaFinancial transmissionrights Prepayments and other $2.1 $— $2.1 Entergy MississippiFinancial transmissionrights Prepayments and other $2.2 $— $2.2 Entergy New OrleansFinancial transmissionrights Prepayments and other $3.6 ($0.2) $3.4 Entergy Texas Liabilities: Natural gas swaps Other current liabilities $5.0 $— $5.0 Entergy LouisianaNatural gas swaps Other current liabilities $1.2 $— $1.2 Entergy MississippiNatural gas swaps Other current liabilities $0.2 $— $0.2 Entergy New Orleans(a)Represents the gross amounts of recognized assets/liabilities(b)Represents the netting of fair value balances with the same counterparty(c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets(d)As of December 31, 2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million forEntergy Mississippi, and $4.1 million for Entergy Texas. As of December 31, 2017, letters of credit posted with MISO coveredfinancial transmission rights exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.05million for Entergy Texas.210Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their incomestatements for the years ended December 31, 2018, 2017, and 2016 are as follows:Instrument Income Statement Location Amount of gain (loss)recorded in the incomestatement Registrant (In Millions) 2018 Natural gas swaps and options Fuel, fuel-related expenses, andgas purchased for resale $4.4(a)Entergy LouisianaNatural gas swaps Fuel, fuel-related expenses, andgas purchased for resale $3.2(a)Entergy MississippiNatural gas swaps Fuel, fuel-related expenses, andgas purchased for resale $0.2(a)Entergy New Orleans Financial transmission rights Purchased power $25.3(b)Entergy ArkansasFinancial transmission rights Purchased power $72.7(b)Entergy LouisianaFinancial transmission rights Purchased power $26.3(b)Entergy MississippiFinancial transmission rights Purchased power $13.8(b)Entergy New OrleansFinancial transmission rights Purchased power ($6.0)(b)Entergy Texas 2017 Natural gas swaps Fuel, fuel-related expenses, andgas purchased for resale ($25.4)(a)Entergy LouisianaNatural gas swaps Fuel, fuel-related expenses, andgas purchased for resale ($5.2)(a)Entergy MississippiNatural gas swaps Fuel, fuel-related expenses, andgas purchased for resale ($0.3)(a)Entergy New Orleans Financial transmission rights Purchased power $41.7(b)Entergy ArkansasFinancial transmission rights Purchased power $45.8(b)Entergy LouisianaFinancial transmission rights Purchased power $18.9(b)Entergy MississippiFinancial transmission rights Purchased power $9.1(b)Entergy New OrleansFinancial transmission rights Purchased power $22.3(b)Entergy Texas 2016 Natural gas swaps Fuel, fuel-related expenses, andgas purchased for resale $8.4(a)Entergy LouisianaNatural gas swaps Fuel, fuel-related expenses, andgas purchased for resale $3.1(a)Entergy MississippiNatural gas swaps Fuel, fuel-related expenses, andgas purchased for resale ($0.4)(a)Entergy New Orleans Financial transmission rights Purchased power $23.2(b)Entergy ArkansasFinancial transmission rights Purchased power $69.7(b)Entergy LouisianaFinancial transmission rights Purchased power $16.6(b)Entergy MississippiFinancial transmission rights Purchased power $4.1(b)Entergy New OrleansFinancial transmission rights Purchased power $10.2(b)Entergy Texas211Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements(a)Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-related expenses, andgas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset orliability. The gains or losses recorded as fuel expenses when the swaps and options are settled are recovered or refundedthrough fuel cost recovery mechanisms.(b)Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operatingcompanies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded asan offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financialtransmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recoverymechanisms.Fair ValuesThe estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices,market quotes, and financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore,estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realizedon financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future ratesand therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assetsand liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount thatwould be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date ofmeasurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use inpricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generallyunobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchyestablishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priorityfor unobservable inputs. The three levels of the fair value hierarchy are:•Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has theability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur insufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individuallyowned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrowaccounts), debt instruments, and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestrictedhighly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.•Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observablefor the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that useinputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can bechallenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fairvalue. Level 2 inputs include the following:–quoted prices for similar assets or liabilities in active markets;–quoted prices for identical assets or liabilities in inactive markets;–inputs other than quoted prices that are observable for the asset or liability; or212Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements–inputs that are derived principally from or corroborated by observable market data by correlation or other means.Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using observable inputs.•Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. Theseinputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset orliability. Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges ofpower sales at merchant power plants.The values for power contract assets or liabilities are based on both observable inputs including public market prices andinterest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and creditadjusted counterparty interest rates. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities areperformed by the Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accountinggroup. The primary functions of the Business Unit Risk Control group include: gathering, validating and reporting market data,providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing andadministering protocols for the management of market risks, and implementing and maintaining controls around changes to market datain the energy trading and risk management system. The Business Unit Risk Control group is also responsible for managing the energytrading and risk management system, forecasting revenues, forward positions and analysis. The Accounting Policy and EntergyWholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting andanalysis and financial accounting. The Business Unit Risk Control group reports to the Vice President and Treasurer while theAccounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and wouldequal the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contractsinclude cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commoditiesbusiness. The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating pricesdetermined each period from quoted forward power market prices. The differences between the fixed price in the swap contract andthese market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted riskfree rate are recorded as derivative contract assets or liabilities. For contracts that have unit contingent terms, a further discount isapplied based on the historical relationship between contract and market prices for similar contract terms.The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated atthe end of each month for accounting purposes. Inputs to the valuation include end of day forward market prices for the period whenthe transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and U.S. Treasuryrates for a risk-free return rate. As described further below, prices and implied volatilities are reviewed and can be adjusted if it isdetermined that there is a better representation of fair value. On a daily basis, the Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options. TheBusiness Unit Risk Control group also validates forward market prices by comparing them to other sources of forward market prices orto settlement prices of actual market transactions. Significant differences are analyzed and potentially adjusted based on these othersources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options are alsovalidated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with othersources of market implied volatilities. Moreover, on at least a monthly basis, the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis. The scenario analysis is213Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementscommunicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivativetransactions, an analysis is completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’portfolio. In particular, the credit and liquidity effects are calculated for this analysis. This analysis is communicated to seniormanagement within Entergy and Entergy Wholesale Commodities.The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISObetween applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3assets and liabilities. The valuations of these assets and liabilities are performed by the Business Unit Risk Control group. The valuesare calculated internally and verified against the data published by MISO. Entergy’s Accounting Policy and Entergy WholesaleCommodities Accounting groups review these valuations for reasonableness, with the assistance of others within the organization withknowledge of the various inputs and assumptions used in the valuation. The Business Unit Risk Control groups report to the VicePresident and Treasurer. The Accounting Policy and Entergy Wholesale Commodities Accounting groups report to the ChiefAccounting Officer.The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for atfair value on a recurring basis as of December 31, 2018 and December 31, 2017. The assessment of the significance of a particularinput to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $424 $— $— $424Decommissioning trust funds (a): Equity securities 1,686 — — 1,686Debt securities 1,259 1,625 — 2,884Common trusts (b) 2,350Power contracts — — 3 3Securitization recovery trust account 51 — — 51Escrow accounts 403 — — 403Gas hedge contracts — 2 — 2Financial transmission rights — — 15 15 $3,823 $1,627 $18 $7,818Liabilities: Power contracts $— $— $34 $34Gas hedge contracts 1 — — 1 $1 $— $34 $35214Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $725 $— $— $725Decommissioning trust funds (a): Equity securities 526 — — 526Debt securities 1,125 1,425 — 2,550Common trusts (b) 4,136Power contracts — — 5 5Securitization recovery trust account 45 — — 45Escrow accounts 406 — — 406Financial transmission rights — — 21 21 $2,827 $1,425 $26 $8,414Liabilities: Power contracts $— $— $70 $70Gas hedge contracts 6 — — 6 $6 $— $70 $76(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate thereturns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9to the financial statements for additional information on the investment portfolios.(b)Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practicalexpedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investmentsallows daily trading at the net asset value and trades settle at a later date.The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classifiedas Level 3 in the fair value hierarchy for the years ended December 31, 2018, 2017, and 2016: 2018 2017 2016 PowerContractsFinancialtransmissionrights PowerContractsFinancialtransmissionrights PowerContractsFinancialtransmissionrights (In Millions)Balance as of January 1,($65)$21 $5$21 $189$23Total gains (losses) forthe period (a) Included in earnings2(1) (3)1 (10)—Included in othercomprehensiveincome(40)— 44— 135—Included as a regulatoryliability/asset—80 —76 —68Issuances of financialtransmission rights—46 —62 —55Settlements72(131) (111)(139) (309)(125)Balance as of December31,($31)$15 ($65)$21 $5$21(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is($3.5) million, $0.9 million, and $0.2 million for the years ended December 31, 2018, 2017, and 2016, respectively.215Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy andsignificant unobservable inputs to each which cause that classification, as of December 31, 2018:Transaction Type Fair Value as ofDecember 31, 2018 Significant UnobservableInputs Range fromAverage % Effect on FairValue (In Millions) (In Millions)Power contracts - electricityswaps ($31) Unit contingent discount +/- 4% - 4.75% ($3) - ($4) The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classifiedas Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:Significant UnobservableInput Transaction Type Position Change to Input Effect on Fair Value Unit contingent discount Electricity swaps Sell Increase (Decrease) Decrease (Increase)The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted forat fair value on a recurring basis as of December 31, 2018 and December 31, 2017. The assessment of the significance of a particularinput to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.Entergy Arkansas2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Decommissioning trust funds (a): Equity securities $4.0 $— $— $4.0Debt securities 94.8 286.5 — 381.3Common trusts (b) 526.7Securitization recovery trustaccount 4.7 — — 4.7Financial transmission rights — — 3.4 3.4 $103.5 $286.5 $3.4 $920.12017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Decommissioning trust funds (a): Equity securities $11.7 $— $— $11.7Debt securities 115.8 232.4 — 348.2Common trusts (b) 585.0Securitization recovery trustaccount 3.7 — — 3.7Escrow accounts 2.4 — — 2.4Financial transmission rights — — 3.0 3.0 $133.6 $232.4 $3.0 $954.0216Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEntergy Louisiana2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $43.1 $— $— $43.1Decommissioning trust funds (a): Equity securities 13.3 — — 13.3Debt securities 162.0 370.9 — 532.9Common trusts (b) 738.8Escrow accounts 289.5 — — 289.5Securitization recovery trustaccount 3.6 — — 3.6Gas hedge contracts — 1.9 — 1.9Financial transmission rights — — 8.3 8.3 $511.5 $372.8 $8.3 $1,631.4 Liabilities: Gas hedge contracts $0.7 $0.4 $— $1.12017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $30.1 $— $— $30.1Decommissioning trust funds (a): Equity securities 15.2 — — 15.2Debt securities 143.3 350.5 — 493.8Common trusts (b) 803.1Escrow accounts 289.5 — — 289.5Securitization recovery trustaccount 2.0 — — 2.0Financial transmission rights — — 10.2 10.2 $480.1 $350.5 $10.2 $1,643.9 Liabilities: Gas hedge contracts $5.0 $— $— $5.0Entergy Mississippi2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $36.9 $— $— $36.9Escrow accounts 32.4 — — 32.4Financial transmission rights — — 2.2 2.2 $69.3 $— $2.2 $71.5217Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $4.5 $— $— $4.5Escrow accounts 32.0 — — 32.0Financial transmission rights — — 2.1 2.1 $36.5 $— $2.1 $38.6 Liabilities: Gas hedge contracts $1.2 $— $— $1.2Entergy New Orleans2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $19.7 $— $— $19.7Securitization recovery trustaccount 2.2 — — 2.2Escrow accounts 80.9 — — 80.9Financial transmission rights — — 1.3 1.3 $102.8 $— $1.3 $104.1 Liabilities: Gas hedge contracts $0.1 $— $— $0.12017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $32.7 $— $— $32.7Securitization recovery trustaccount 1.5 — — 1.5Escrow accounts 81.9 — — 81.9Financial transmission rights — — 2.2 2.2 $116.1 $— $2.2 $118.3 Liabilities: Gas hedge contracts $0.2 $— $— $0.2Entergy Texas2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Securitization recovery trustaccount $40.2 $— $— $40.2 Liabilities: Financial transmission rights $— $— $0.5 $0.5218Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements2017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $115.5 $— $— $115.5Securitization recovery trustaccount 37.7 — — 37.7Financial transmission rights — — 3.4 3.4 $153.2 $— $3.4 $156.6System Energy2018 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $95.6 $— $— $95.6Decommissioning trust funds (a): Equity securities 4.4 — — 4.4Debt securities 224.5 139.7 — 364.2Common trusts (b) 500.9 $324.5 $139.7 $— $965.12017 Level 1 Level 2 Level 3 Total (In Millions)Assets: Temporary cash investments $287.1 $— $— $287.1Decommissioning trust funds (a): Equity securities 3.1 — — 3.1Debt securities 187.2 143.3 — 330.5Common trusts (b) 572.1 $477.4 $143.3 $— $1,192.8(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate thereturns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9to the financial statements for additional information on the investment portfolios.(b)Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practicalexpedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investmentsallows daily trading at the net asset value and trades settle at a later date.219Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classifiedas Level 3 in the fair value hierarchy for the year ended December 31, 2018.EntergyArkansas EntergyLouisianaEntergyMississippiEntergy NewOrleansEntergyTexas (In Millions) Balance as of January 1,$3.0 $10.2 $2.1 $2.2 $3.4Issuances of financial transmissionrights11.8 20.0 4.5 3.7 6.1Gains (losses) included as a regulatoryliability/asset13.9 50.8 21.9 9.2 (16.0)Settlements(25.3) (72.7) (26.3) (13.8) 6.0Balance as of December 31,$3.4 $8.3 $2.2 $1.3 ($0.5)The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classifiedas Level 3 in the fair value hierarchy for the year ended December 31, 2017. EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas (In Millions) Balance as of January 1,$5.4 $8.5 $3.2 $1.1 $3.1Issuances of financial transmissionrights8.9 31.0 9.6 5.0 7.1Gains included as a regulatoryliability/asset30.4 16.5 8.2 5.2 15.5Settlements(41.7) (45.8) (18.9) (9.1) (22.3)Balance as of December 31,$3.0 $10.2 $2.1 $2.2 $3.4NOTE 16. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and SystemEnergy)The NRC requires Entergy subsidiaries to maintain nuclear decommissioning trusts to fund the costs of decommissioning ANO1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, andPalisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cashequivalents.Entergy implemented ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of FinancialAssets and Financial Liabilities” effective January 1, 2018. The ASU requires investments in equity securities, excluding thoseaccounted for under the equity method or resulting in consolidation of the investee, to be measured at fair value with changesrecognized in net income. Entergy implemented this ASU using a modified retrospective method, and Entergy recorded an adjustmentincreasing retained earnings and increasing accumulated other comprehensive loss by $633 million as of January 1, 2018, for thecumulative effect of the unrealized gains and losses on investments in equity securities held by the decommissioning trust funds that donot meet the criteria for regulatory accounting treatment. Beginning in 2018, unrealized gains and losses on investments in equitysecurities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensiveincome. In accordance with the regulatory treatment of the decommissioning trust funds of the220Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsRegistrant Subsidiaries, an offsetting amount of unrealized gains/(losses) will continue to be recorded in other regulatoryliabilities/assets.As discussed in Note 14 to the financial statements, in January 2019, Entergy completed the sale of the Vermont Yankee plantto NorthStar. As part of the transaction, Entergy transferred the Vermont Yankee decommissioning trust fund to NorthStar. As ofDecember 31, 2018, the value of the decommissioning trust fund was $532 million.Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the RegistrantSubsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trustfunds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in otherregulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsettingamount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant. Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meetthe criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trustfunds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized inthe accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair marketvalue) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive incomecomponent of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. A portion ofEntergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses onboth the equity and debt securities held in the registered investment company are recognized in earnings. Generally, Entergy recordsgains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.The unrealized gains/(losses) recognized during the year ended December 31, 2018 on equity securities still held as ofDecember 31, 2018 were ($249) million. The equity securities are generally held in funds that are designed to approximate orsomewhat exceed the return of the Standard Poor’s 500 Index. A relatively small percentage of the equity securities are held in fundsintended to replicate the return of the Wilshire 4500 index or the Russell 3000 Index. The debt securities are generally held inindividual government and credit issuances.The available-for-sale securities held as of December 31, 2018 and 2017 are summarized as follows: Fair Value TotalUnrealizedGains TotalUnrealizedLosses (In Millions)2018 Debt Securities (a) $2,495 $19 $35 2017 Equity Securities $4,662 $2,131 $1Debt Securities 2,550 44 16Total $7,212 $2,175 $17(a)Debt securities presented herein do not include the $389 million of debt securities held in the wholly-owned registeredinvestment company, which are not accounted for as available-for-sale. The unrealized gains/(losses) above are reported before deferred taxes of $472 million as of December 31, 2017 for equitysecurities, and ($1) million as of December 31, 2018 and $7 million as of December 31, 2017 for debt securities. The amortized cost ofavailable-for-sale debt securities was $2,511 million as of December 31, 2018 and $2,539 million as of December 31, 2017. As ofDecember 31, 2018, available-for-sale debt securities have an average221Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementscoupon rate of approximately 3.19%, an average duration of approximately 4.50 years, and an average maturity of approximately 7.93years.The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securitieshave been in a continuous loss position, are as follows as of December 31, 2018: Fair Value GrossUnrealizedLosses (In Millions)Less than 12 months$652 $9More than 12 months782 26Total$1,434 $35The fair value and gross unrealized losses of available-for-sale securities, summarized by investment type and length of timethat the securities have been in a continuous loss position, are as follows as of December 31, 2017: Equity Securities Debt Securities FairValue GrossUnrealizedLosses FairValue GrossUnrealizedLosses (In Millions)Less than 12 months$8 $1 $1,099 $7More than 12 months— — 265 9Total$8 $1 $1,364 $16The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2018 and 2017are as follows: 2018 2017 (In Millions)less than 1 year$199 $741 year - 5 years1,066 9025 years - 10 years544 81210 years - 15 years77 14715 years - 20 years78 10020 years+531 515Total$2,495 $2,550During the years ended December 31, 2018, 2017, and 2016, proceeds from the dispositions of available-for-sale securitiesamounted to $2,406 million, $3,163 million, and $2,409 million, respectively. During the years ended December 31, 2018, 2017, and2016, gross gains of $7 million, $149 million, and $32 million, respectively, and gross losses of $47 million, $13 million, and $13million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatoryliabilities/assets into earnings.The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as ofDecember 31, 2018 are $471 million for Indian Point 1, $598 million for Indian Point 2, $781 million for Indian Point 3, $444 millionfor Palisades, $1,028 million for Pilgrim, and $532 million for Vermont Yankee. The fair values of the decommissioning trust fundsrelated to the Entergy Wholesale Commodities nuclear plants as of December 31, 2017 are $491 million for Indian Point 1, $621million for Indian Point 2, $798 million for Indian Point 3, $458222Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsmillion for Palisades, $1,068 million for Pilgrim, and $613 million for Vermont Yankee. The fair values of the decommissioning trustfunds for the Registrant Subsidiaries’ nuclear plants are detailed below.Entergy ArkansasEntergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. Theavailable-for-sale securities held as of December 31, 2018 and 2017 are summarized as follows: Fair Value TotalUnrealizedGains TotalUnrealizedLosses (In Millions)2018 Debt Securities $381.3 $0.6 $8.2 2017 Equity Securities $596.7 $354.9 $—Debt Securities 348.2 2.1 3.0Total $944.9 $357.0 $3.0The amortized cost of available-for-sale debt securities was $389 million as of December 31, 2018 and $349.1 million as ofDecember 31, 2017. As of December 31, 2018, the available-for-sale debt securities have an average coupon rate of approximately2.87%, an average duration of approximately 4.75 years, and an average maturity of approximately 7.34 years.The unrealized gains/(losses) recognized during the year ended December 31, 2018 on equity securities still held as ofDecember 31, 2018 were ($49.3) million. The equity securities are generally held in funds that are designed to approximate the returnof the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate thereturn of the Wilshire 4500 Index.The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securitieshave been in a continuous loss position, are as follows as of December 31, 2018: Fair Value GrossUnrealizedLosses (In Millions)Less than 12 months$65.8 $0.5More than 12 months231.1 7.7Total$296.9 $8.2223Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe fair value and gross unrealized losses of available-for-sale securities, summarized by investment type and length of timethat the securities have been in a continuous loss position, are as follows as of December 31, 2017: Equity Securities Debt Securities FairValue GrossUnrealizedLosses FairValue GrossUnrealizedLosses (In Millions)Less than 12 months$— $— $168.0 $1.2More than 12 months— — 41.4 1.8Total$— $— $209.4 $3.0The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2018 and 2017are as follows: 2018 2017 (In Millions)less than 1 year$32.5 $13.01 year - 5 years170.3 123.45 years - 10 years114.0 180.610 years - 15 years10.3 4.815 years - 20 years8.1 3.420 years+46.1 23.0Total$381.3 $348.2During the years ended December 31, 2018, 2017, and 2016, proceeds from the dispositions of available-for-sale securitiesamounted to $82.1 million, $339.4 million, and $197.4 million, respectively. During the years ended December 31, 2018, 2017, and2016, gross gains of $0.1 million, $17.7 million, and $1.8 million, respectively, and gross losses of $2.9 million, $0.6 million, and $0.8million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.Entergy LouisianaEntergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. Theavailable-for-sale securities held as of December 31, 2018 and 2017 are summarized as follows: Fair Value TotalUnrealizedGains TotalUnrealizedLosses (In Millions)2018 Debt Securities $532.9 $4.1 $6.0 2017 Equity Securities $818.3 $461.2 $—Debt Securities 493.8 10.9 3.6Total $1,312.1 $472.1 $3.6224Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe amortized cost of available-for-sale debt securities was $534.8 million as of December 31, 2018 and $490 million as ofDecember 31, 2017. As of December 31, 2018, the available-for-sale debt securities have an average coupon rate of approximately4.04%, an average duration of approximately 6.51 years, and an average maturity of approximately 13.59 years.The unrealized gains/(losses) recognized during the year ended December 31, 2018 on equity securities still held as ofDecember 31, 2018 were ($61.6) million. The equity securities are generally held in funds that are designed to approximate the returnof the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate thereturn of the Wilshire 4500 Index.The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securitieshave been in a continuous loss position, are as follows as of December 31, 2018: Fair Value GrossUnrealizedLosses (In Millions)Less than 12 months$170.1 $2.1More than 12 months145.8 3.9Total$315.9 $6.0The fair value and gross unrealized losses of available-for-sale securities, summarized by investment type and length of timethat the securities have been in a continuous loss position, are as follows as of December 31, 2017: Equity Securities Debt Securities FairValue GrossUnrealizedLosses FairValue GrossUnrealizedLosses (In Millions)Less than 12 months$— $— $135.3 $1.1More than 12 months— — 84.4 2.5Total$— $— $219.7 $3.6The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2018 and 2017are as follows: 2018 2017 (In Millions)less than 1 year$31.1 $23.21 year - 5 years130.5 122.85 years - 10 years111.0 109.310 years - 15 years29.0 52.715 years - 20 years37.1 50.720 years+194.2 135.1Total$532.9 $493.8During the years ended December 31, 2018, 2017, and 2016, proceeds from the dispositions of available-for-sale securitiesamounted to $401.7 million, $231.3 million, and $219.2 million, respectively. During the years ended December 31, 2018, 2017, and2016, gross gains of $2.1 million, $12 million, and $3.9 million, respectively, and gross225Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementslosses of $7.5 million, $0.4 million, and $0.4 million, respectively, related to available-for-sale securities were reclassified out of otherregulatory liabilities/assets into earnings.System Energy System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. Theavailable-for-sale securities held as of December 31, 2018 and 2017 are summarized as follows: Fair Value TotalUnrealizedGains TotalUnrealizedLosses (In Millions)2018 Debt Securities $364.2 $2.9 $5.8 2017 Equity Securities $575.2 $308.6 $—Debt Securities 330.5 4.2 1.2Total $905.7 $312.8 $1.2The amortized cost of available-for-sale debt securities was $367.1 million as of December 31, 2018 and $327.5 million as ofDecember 31, 2017. As of December 31, 2018, the available-for-sale debt securities have an average coupon rate of approximately3.15%, an average duration of approximately 6.05 years, and an average maturity of approximately 8.86 years.The unrealized gains/(losses) recognized during the year ended December 31, 2018 on equity securities still held as ofDecember 31, 2018 were ($40.7) million. The equity securities are generally held in funds that are designed to approximate the returnof the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate thereturn of the Wilshire 4500 Index.The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securitieshave been in a continuous loss position, are as follows as of December 31, 2018: Fair Value GrossUnrealizedLosses (In Millions)Less than 12 months$89.7 $2.4More than 12 months79.8 3.4Total$169.5 $5.8226Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe fair value and gross unrealized losses of available-for-sale securities, summarized by investment type and length of timethat the securities have been in a continuous loss position, are as follows as of December 31, 2017: Equity Securities Debt Securities FairValue GrossUnrealizedLosses FairValue GrossUnrealizedLosses (In Millions)Less than 12 months$— $— $196.9 $1.0More than 12 months— — 10.4 0.2Total$— $— $207.3 $1.2The fair value of available-for-sale debt securities, summarized by contractual maturities, as of December 31, 2018 and 2017are as follows: 2018 2017 (In Millions)less than 1 year$22.8 $4.11 year - 5 years188.0 173.05 years - 10 years73.4 78.510 years - 15 years5.2 1.015 years - 20 years10.2 6.920 years+64.6 67.0Total$364.2 $330.5During the years ended December 31, 2018, 2017, and 2016, proceeds from the dispositions of available-for-sale securitiesamounted to $361.9 million, $565.4 million, and $499.3 million, respectively. During the years ended December 31, 2018, 2017, and2016, gross gains of $0.5 million, $1.4 million, and $3.5 million, respectively, and gross losses of $6.1 million, $3.3 million, and $1.7million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.Other-than-temporary impairments and unrealized gains and lossesEntergy evaluates the available-for-sale debt securities in the Entergy Wholesale Commodities’ nuclear decommissioning trustfunds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. Theassessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergyhas the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, ifEntergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment isconsidered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis(credit loss). Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for theyears ended December 31, 2018, 2017, and 2016. Entergy’s trusts are managed by third parties who operate in accordance withagreements that define investment guidelines and place restrictions on the purchases and sales of investments.NOTE 17. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy)Under applicable authoritative accounting guidance, a variable interest entity (VIE) is an entity that conducts a business or holdsproperty that possesses any of the following characteristics: an insufficient amount of equity at risk227Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsto finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rightsthat are disproportionate to their ownership interest), or where equity holders do not receive expected losses or returns. An entity mayhave an interest in a VIE through ownership or other contractual rights or obligations, and is required to consolidate a VIE if it is theVIE’s primary beneficiary. The primary beneficiary of a VIE is the entity that has the power to direct the activities of the VIE that mostsignificantly affect the VIE’s economic performance, and has the obligation to absorb losses or has the right to residual returns thatwould potentially be significant to the entity.Entergy Arkansas, Entergy Louisiana, and System Energy consolidate the respective companies from which they lease nuclearfuel, usually in a sale and leaseback transaction. This is because Entergy directs the nuclear fuel companies with respect to nuclear fuelpurchases, assists the nuclear fuel companies in obtaining financing, and, if financing cannot be arranged, the lessee (Entergy Arkansas,Entergy Louisiana, or System Energy) is responsible to repurchase nuclear fuel to allow the nuclear fuel company (the VIE) to meet itsobligations. During the term of the arrangements, none of the Entergy operating companies have been required to provide financialsupport apart from their scheduled lease payments. See Note 4 to the financial statements for details of the nuclear fuel companies’credit facility and commercial paper borrowings and long-term debt that are reported by Entergy, Entergy Arkansas, Entergy Louisiana,and System Energy. These amounts also represent Entergy’s and the respective Registrant Subsidiary’s maximum exposure to lossesassociated with their respective interests in the nuclear fuel companies.Entergy Gulf States Reconstruction Funding I, LLC, and Entergy Texas Restoration Funding, LLC, companies wholly-ownedand consolidated by Entergy Texas, are variable interest entities and Entergy Texas is the primary beneficiary. In June 2007, EntergyGulf States Reconstruction Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s HurricaneRita reconstruction costs. In November 2009, Entergy Texas Restoration Funding issued senior secured transition bonds (securitizationbonds) to finance Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs. With the proceeds, the variable interest entitiespurchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amountssufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texasbalance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of the variable interest entities, includingthe transition property, and the creditors of the variable interest entities do not have recourse to the assets or revenues of Entergy Texas.Entergy Texas has no payment obligations to the variable interest entities except to remit transition charge collections. See Note 5 to thefinancial statements for additional details regarding the securitization bonds.Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, is a variableinterest entity and Entergy Arkansas is the primary beneficiary. In August 2010, Entergy Arkansas Restoration Funding issued stormcost recovery bonds to finance Entergy Arkansas’s January 2009 ice storm damage restoration costs. With the proceeds, EntergyArkansas Restoration Funding purchased from Entergy Arkansas the storm recovery property, which is the right to recover fromcustomers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property isreflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet. The creditors of Entergy Arkansas do not haverecourse to the assets or revenues of Entergy Arkansas Restoration Funding, including the storm recovery property, and the creditors ofEntergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas. Entergy Arkansas has nopayment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections. See Note 5 to thefinancial statements for additional details regarding the storm cost recovery bonds.Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy Louisiana, isa variable interest entity and Entergy Louisiana is the primary beneficiary. In September 2011, Entergy Louisiana Investment RecoveryFunding issued investment recovery bonds to recover Entergy Louisiana’s investment recovery costs associated with the canceled LittleGypsy repowering project. With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana theinvestment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficientto service the bonds. The investment recovery property is reflected as a regulatory asset on the consolidated Entergy Louisiana balance228Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementssheet. The creditors of Entergy Louisiana do not have recourse to the assets or revenues of Entergy Louisiana Investment RecoveryFunding, including the investment recovery property, and the creditors of Entergy Louisiana Investment Recovery Funding do not haverecourse to the assets or revenues of Entergy Louisiana. Entergy Louisiana has no payment obligations to Entergy LouisianaInvestment Recovery Funding except to remit investment recovery charge collections. See Note 5 to the financial statements foradditional details regarding the investment recovery bonds.Entergy New Orleans Storm Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy New Orleans,is a variable interest entity, and Entergy New Orleans is the primary beneficiary. In July 2015, Entergy New Orleans Storm RecoveryFunding issued storm cost recovery bonds to recover Entergy New Orleans’s Hurricane Isaac storm restoration costs, including carryingcosts, the costs of funding and replenishing the storm recovery reserve, and up-front financing costs associated with the securitization.With the proceeds, Entergy New Orleans Storm Recovery Funding purchased from Entergy New Orleans the storm recovery property,which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds.The storm recovery property is reflected as a regulatory asset on the consolidated Entergy New Orleans balance sheet. The creditors ofEntergy New Orleans do not have recourse to the assets or revenues of Entergy New Orleans Storm Recovery Funding, including thestorm recovery property, and the creditors of Entergy New Orleans Storm Recovery Funding do not have recourse to the assets orrevenues of Entergy New Orleans. Entergy New Orleans has no payment obligations to Entergy New Orleans Storm Recovery Fundingexcept to remit storm recovery charge collections. See Note 5 to the financial statements for additional details regarding thesecuritization bonds.Entergy Louisiana was considered to hold a variable interest in the lessor from which it leased an undivided interest in theWaterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessorwas no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 millionthrough March 2016. See Note 10 to the financial statements for a discussion of Entergy Louisiana’s purchase of the Waterford 3leased assets.System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest in the Grand Gulfnuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financialstatements. System Energy made payments on its lease, including interest, of $17.2 million in 2018, $17.2 million in 2017, and $17.2million in 2016. The lessor is a bank acting in the capacity of owner trustee for the benefit of equity investors in the transactionpursuant to trust agreement entered solely for the purpose of facilitating the lease transaction. It is possible that System Energy may beconsidered as the primary beneficiary of the lessor, but it is unable to apply the authoritative accounting guidance with respect to thisVIE because the lessor is not required to, and could not, provide the necessary financial information to consolidate the lessor. BecauseSystem Energy accounts for this leasing arrangement as a capital financing, however, System Energy believes that consolidating thelessor would not materially affect the financial statements. In the unlikely event of default under a lease, remedies available to thelessor include payment by the lessee of the fair value of the undivided interest in the plant, payment of the present value of the basicrent payments, or payment of a predetermined casualty value. System Energy believes, however, that the obligations recorded on thebalance sheet materially represent its potential exposure to loss.Entergy has also reviewed various lease arrangements, power purchase agreements, including agreements for renewable power,and other agreements that represent variable interests in other legal entities which have been determined to be variable interestentities. In these cases, Entergy has determined that it is not the primary beneficiary of the related VIE because it does not have thepower to direct the activities of the VIE that most significantly affect the VIE’s economic performance, or it does not have theobligation to absorb losses or the right to residual returns that would potentially be significant to the entity, or both. NOTE 18. TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, Entergy Texas, and System Energy)Each Registrant Subsidiary purchases electricity from or sells electricity to the other Registrant Subsidiaries,229Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementsor both, under rate schedules filed with the FERC. The Registrant Subsidiaries receive management, technical, advisory, operating, andadministrative services from Entergy Services; and receive management, technical, and operating services from EntergyOperations. These transactions are on an “at cost” basis.As described in Note 1 to the financial statements, all of System Energy’s operating revenues consist of billings to EntergyArkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.As described in Note 4 to the financial statements, the Registrant Subsidiaries participate in Entergy’s money pool and earninterest income from the money pool. As described in Note 2 to the financial statements, Entergy Louisiana receives preferredmembership interest distributions from Entergy Holdings Company.The tables below contain the various affiliate transactions of the Utility operating companies, System Energy, and other Entergyaffiliates.Intercompany Revenues EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Millions)2018$104.3 $299.0 $2.5 $— $58.8 $456.72017$127.8 $282.4 $1.7 $— $57.9 $633.52016$49.4 $376.6 $2.9 $30.3 $180.2 $548.3Intercompany Operating Expenses EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Millions)2018$471.9 $627.8 $266.8 $256.4 $240.2 $176.52017$510.2 $619.5 $310.5 $286.1 $234.6 $197.02016$467.4 $670.8 $256.5 $276.7 $343.7 $146.0Intercompany Interest and Investment Income EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy (In Millions) 2018$0.4 $128.2 $— $— $0.2 $1.22017$— $128.0 $— $0.2 $— $0.92016$— $127.7 $0.1 $— $— $0.1Transactions with Equity Method InvesteesEWO Marketing, LLC, an indirect wholly-owned subsidiary of Entergy, paid capacity charges and gas transportation to RSCogen in the amounts of $24 million in 2018, $24.6 million in 2017, and $24.7 million in 2016.Entergy’s operating transactions with its other equity method investees were not significant in 2018, 2017, or 2016.230Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNOTE 19. REVENUE RECOGNITION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,Entergy New Orleans, Entergy Texas, and System Energy)Revenue RecognitionEntergy implemented ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” effective January 1, 2018. Topic606 requires entities to “recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflectsthe consideration to which the entity expects to be entitled in exchange for those goods or services.” The ASU details a five-step modelthat should be followed to achieve the core principle. This accounting was applied to all contracts using the modified retrospectivemethod, which requires an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date.Because the standard did not result in any material change in how Entergy recognizes revenue, however, no adjustment to retainedearnings was required. Similarly, there was no effect on revenues recognized under Topic 606 for the year ended December 31, 2018.Revenues from electric service and the sale of natural gas are recognized when services are transferred to the customer in anamount equal to what Entergy has the right to bill the customer because this amount represents the value of services provided tocustomers.Entergy’s total revenues for the year ended December 31, 2018 were as follows: 2018 (In Thousands)Utility: Residential $3,565,522Commercial 2,426,477Industrial 2,499,227Governmental 225,882 Total billed retail 8,717,108 Sales for resale (a) 299,567Other electric revenues (b) 326,910Non-customer revenues (c) 40,526 Total electric revenues 9,384,111 Natural gas 156,436 Entergy Wholesale Commodities: Competitive businesses sales (a) 1,547,994Non-customer revenues (c) (79,089) Total competitive businesses 1,468,905 Total operating revenues $11,009,452231Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe Registrant Subsidiaries’ total revenues for the year ended December 31, 2018 were as follows:2018 EntergyArkansas EntergyLouisiana EntergyMississippi EntergyNewOrleans EntergyTexas (In Thousands) Residential $807,098 $1,244,413 $578,568 $261,585 $673,858Commercial 425,523 941,321 461,832 217,182 380,619Industrial 434,387 1,462,462 175,056 33,371 393,951Governmental 16,537 68,587 43,747 72,058 24,953 Total billed retail 1,683,5453,716,7831,259,203584,1961,473,381 Sales for resale (a) 248,861 356,603 25,812 29,506 97,478Other electric revenues (b) 111,875 144,978 39,897 4,718 31,413Non-customer revenues (c) 16,362 14,177 10,200 6,313 3,630 Total electric revenues 2,060,643 4,232,541 1,335,112 624,733 1,605,902 Natural gas — 63,779 — 92,657 — Total operatingrevenues $2,060,643 $4,296,320 $1,335,112 $717,390 $1,605,902(a)Sales for resale and competitive businesses sales include day-ahead sales of energy in a market administered by an ISO. Thesesales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actualpower generated and delivered in the real time market. Given the short duration of these transactions, Entergy does not considerthem to be derivatives subject to fair value adjustments, and includes them as part of customer revenues.(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administeredmarket and unbilled revenue.(c)Non-customer revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue programs,provisions for revenue subject to refund, and late fees.Electric RevenuesEntergy’s primary source of revenue is from retail electric sales sold under tariff rates approved by regulators in its variousjurisdictions. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas generate, transmit,and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas. Energy is provided ondemand throughout the month, measured by a meter located at the customer’s property. Approved rates vary by customer class due todiffering requirements of the customers and market factors involved in fulfilling those requirements. Entergy issues monthly bills tocustomers at rates approved by regulators for power and related services provided during the previous billing cycle.To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies record anestimate for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factorsincluding billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and market pricesof power in the respective jurisdiction. The inputs are revised as needed to approximate actual usage and cost. Each month, estimatedunbilled amounts are recorded as unbilled revenue and accounts receivable, and the prior month’s estimate is reversed. Price andvolume differences resulting from factors232Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statementssuch as weather affect the calculation of unbilled revenues from one period to the other. This may result in variability of reportedrevenues from one period to the next as prior estimates are reversed and new estimates recorded.Entergy may record revenue based on rates that are subject to refund. Such revenues are reduced by estimated refund amountswhen Entergy believes refunds are probable based on the status of rate proceedings as of the date financial statements are prepared.Because these refunds will be made through a reduction in future rates, and not as a reduction in bills previously issued, they arepresented as non-customer revenue in the table above.System Energy’s only source of revenue is the sale of electric power and capacity generated from its 90% interest in the GrandGulf nuclear plant to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy issuesmonthly bills to its affiliated customers equal to its actual operating costs plus a return on common equity approved by the FERC.Entergy’s Utility operating companies also sell excess power not needed for its own customers, primarily through transactionswith MISO, a regional transmission organization that maintains functional control over the combined transmission systems of itsmembers and manages one of the largest energy markets in the U.S. In the MISO market, Entergy offers its generation and bids its loadinto the market. MISO settles these offers and bids based on locational marginal prices. These represent pricing for energy at a givenlocation based on a market clearing price that takes into account physical limitations on the transmission system, generation, anddemand throughout the MISO region. MISO evaluates each market participant’s energy offers and demand bids to economically andreliably dispatch the entire MISO system. Entergy nets purchases and sales within the MISO market and reports in operating revenueswhen in a net selling position and in operating expenses when in a net purchasing position.Natural GasEntergy Louisiana and Entergy New Orleans also distribute natural gas to retail customers in and around Baton Rouge,Louisiana, and New Orleans, Louisiana, respectively. Gas transferred to customers is measured by a meter at the customer’s property.Entergy issues monthly invoices to customers at rates approved by regulators for the volume of gas transferred to date.Competitive Businesses RevenuesThe Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power and capacityproduced by its operating plants to wholesale customers. The majority of Entergy Wholesale Commodities revenues are from Entergy’snuclear power plants located in the northern United States. Entergy issues monthly invoices to the counterparties for these electric salesat the respective contracted or ISO market rate of electricity and related services provided during the previous month.Most of the Palisades nuclear plant output is sold under a 15-year PPA with Consumers Energy, executed as part of theacquisition of the plant in 2007 and expiring in 2022. The PPA prices are for a set price per MWh and escalate each year, up to$61.50/MWh in 2022. Entergy issues monthly invoices to Consumers Energy for electric sales based on the actual output of electricityand related services provided during the previous month at the contract price. Additionally, as the PPA pricing was considered below-market at the time of acquisition, a liability was recorded for the fair value of the below-market PPA, and is being amortized to revenueover the life of the agreement.Practical Expedients and ExceptionsEntergy has elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected termof one year or less, or for revenue recognized in an amount equal to what Entergy has the right to bill the customer for servicesperformed.233Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsMost of Entergy’s contracts, except in a few cases where there are defined minimums or stated terms, are on demand. Thisresults in customer bills that vary each month based on an approved tariff and usage. Entergy imposes monthly or annual minimumrequirements on some customers primarily as credit and cost recovery guarantees and not as pricing for unsatisfied performanceobligations. These minimums typically expire after the initial term or when specified costs have been recovered. The minimum amountsare part of each month’s bill and recognized as revenue accordingly. Some of the subsidiaries within the Entergy WholesaleCommodities segment have operations and maintenance services contracts that have fixed components and terms longer than one year.The total fixed consideration related to these unsatisfied performance obligations, however, is not material to Entergy revenues.Recovery of Fuel CostsEntergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which alloweither current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel componentof revenues is based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a generalrate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from EntergyArkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to GrandGulf. The capital costs are based on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus SystemEnergy’s effective interest cost for its debt allocable to its investment in Grand Gulf.Taxes Imposed on Revenue-Producing TransactionsGovernmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transactionbetween a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents thesetaxes on a net basis, excluding them from revenues.NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation, Entergy Arkansas, Entergy Louisiana,Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)Operating results for the four quarters of 2018 and 2017 for Entergy Corporation and subsidiaries were: OperatingRevenues OperatingIncome (Loss) Consolidated NetIncome (Loss) Net Income (Loss)Attributable toEntergyCorporation (In Thousands)2018: First Quarter$2,723,881 $335,664 $136,200 $132,761Second Quarter$2,668,770 $91,597 $248,860 $245,421Third Quarter$3,104,319 $271,035 $539,818 $536,379Fourth Quarter$2,512,482 ($228,931) ($62,323) ($65,900)2017: First Quarter$2,588,458 $195,493 $86,051 $82,605Second Quarter$2,618,550 $168,839 $413,368 $409,922Third Quarter$3,243,628 $759,003 $401,644 $398,198Fourth Quarter$2,623,845 $237,072 ($475,710) ($479,113)234Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsEarnings (loss) per average common share 2018 2017 Basic Diluted Basic DilutedFirst Quarter$0.73 $0.73 $0.46 $0.46Second Quarter$1.36 $1.34 $2.28 $2.27Third Quarter$2.96 $2.92 $2.22 $2.21Fourth Quarter($0.37) ($0.36) ($2.67) ($2.66)Results of operations for 2018 include: 1) $532 million ($421 million net-of-tax) of impairment charges due to costs beingcharged directly to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce thesize of the Entergy Wholesale Commodities’ merchant fleet; 2) a $170 million reduction of income tax expense and a regulatoryliability of $40 million ($30 million net-of-tax) as a result of customer credits recognized by Utility, as a result of internal restructuring;3) a $107 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a restructuring of theinvestment holdings in one of its nuclear plant decommissioning trust funds; 4) a $52 million income tax benefit, recognized byEntergy Louisiana, as a result of the settlement of the 2012-2013 IRS audit, associated with the Hurricane Katrina and Hurricane Ritacontingent sharing obligation associated with the Louisiana Act 55 financing; and 5) a $23 million reduction of income tax expense,recognized by Entergy Wholesale Commodities, as a result of a state income tax audit. See Note 14 to the financial statements forfurther discussion of the impairment and related charges. See Notes 2 and 3 to the financial statements for further discussion of theinternal restructuring and customer credits. See Note 3 to the financial statements for further discussion of the IRS audit settlement, thestate income tax audit, and restructuring of the decommissioning trust fund investment holdings.Results of operations for 2017 include: 1) $538 million ($350 million net-of-tax) of impairment charges due to costs beingcharged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assetsdue to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of theEntergy Wholesale Commodities’ merchant fleet; 2) a reduction in net income of $181 million, including a $34 million net-of-taxreduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in net income of $52million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemakingprocess due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax ratefrom 35% to 21%; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a changein the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See Note 14 to the financialstatements for further discussion of the impairment and related charges. See Note 3 to the financial statements for further discussion ofthe effects of the Tax Cuts and Jobs Act and the change in the tax classification.235Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsThe business of the Utility operating companies is subject to seasonal fluctuations with the peak periods occurring during thethird quarter. Operating results for the Registrant Subsidiaries for the four quarters of 2018 and 2017 were:Operating Revenues EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy (In Thousands)2018: First Quarter$551,024 $1,029,344 $315,743 $188,275 $348,940 $148,443Second Quarter$494,605 $1,072,788 $353,689 $178,446 $403,486 $112,456Third Quarter$568,399 $1,206,612 $367,734 $200,182 $477,231 $78,965Fourth Quarter$446,615 $987,576 $297,946 $150,487 $376,245 $116,8432017: First Quarter$474,351 $880,783 $258,443 $168,989 $363,927 $154,787Second Quarter$496,662 $1,083,434 $291,212 $176,222 $378,488 $164,956Third Quarter$673,226 $1,290,494 $349,197 $199,017 $432,909 $156,106Fourth Quarter$495,680 $1,045,839 $299,377 $171,842 $369,569 $157,609Operating Income (Loss) EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy (In Thousands)2018: First Quarter$66,647 $141,319 $41,432 $17,869 $41,082 $30,941Second Quarter$26,501 $150,160 ($63,801) $27,943 $58,637 $23,406Third Quarter$34,785 $236,518 $45,215 $21,544 $99,966 ($17,879)Fourth Quarter($82,704) $147,774 $23,600 $6,836 $6,741 $7,2122017: First Quarter$42,696 $158,766 $40,159 $21,983 $38,620 $42,482Second Quarter$72,625 $200,018 $55,795 $27,823 $47,802 $43,035Third Quarter$173,270 $298,674 $84,813 $33,771 $78,993 $38,980Fourth Quarter$18,180 $217,179 $43,049 $12,832 $34,143 $42,486236Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial StatementsNet Income (Loss) EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans Entergy Texas SystemEnergy (In Thousands)2018: First Quarter$36,255 $111,593 $22,843 $10,882 $17,350 $22,308Second Quarter$82,556 $184,358 $38,242 $18,269 $30,789 $23,387Third Quarter$128,890 $218,308 $50,733 $21,407 $65,846 $22,972Fourth Quarter$5,006 $161,355 $14,260 $2,594 $48,250 $25,4422017: First Quarter$14,304 $94,378 $17,158 $10,978 $10,854 $20,347Second Quarter$38,550 $124,479 $28,303 $14,882 $21,101 $19,350Third Quarter$92,638 $186,284 $46,545 $18,529 $39,588 $20,583Fourth Quarter($5,648) ($88,794) $18,026 $164 $4,630 $18,316Earnings (Loss) Applicable to Common Equity EntergyArkansas EntergyMississippi Entergy NewOrleans (In Thousands)2018: First Quarter$35,898 $22,605 $10,882Second Quarter$82,199 $38,003 $18,269Third Quarter$128,533 $50,495 $21,407Fourth Quarter$4,828 $14,141 $2,5942017: First Quarter$13,947 $16,920 $10,737Second Quarter$38,193 $28,064 $14,641Third Quarter$92,281 $46,307 $18,288Fourth Quarter($6,005) $17,788 $46237Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyENTERGY’S BUSINESSEntergy is an integrated energy company engaged primarily in electric power production and retail distributionoperations. Entergy owns and operates power plants with approximately 30,000 MW of electric generating capacity, including nearly9,000 MW of nuclear power. Entergy delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi, andTexas. Entergy had annual revenues of $11 billion in 2018 and had more than 13,000 employees as of December 31, 2018.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 ofArkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gasdistribution business.•The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclearpower plants located in the northern United States and the sale of the electric power produced by its operating plants towholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and ownsinterests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from theMerchant Power Business” for discussion of the operation and planned shutdown or sale of each of the Entergy WholesaleCommodities nuclear power plants.See Note 13 to the financial statements for financial information regarding Entergy’s business segments.StrategyEntergy’s strategy is to operate a world-class utility business that creates sustainable value for its customers, employees,communities, and owners. Entergy’s current scope includes electricity generation, transmission, and distribution as well as natural gasdistribution. Entergy focuses on operational excellence with an emphasis on safety, reliability, customer service, sustainability, costefficiency, risk management, and engaged employees. Entergy also continually seeks opportunities to grow its utility business tobenefit all stakeholders and to optimize its portfolio of assets in an ever-dynamic market. The Utility business segment will continue tomodernize its operations, maintain reliability, and better serve its customers while growing the business. The Entergy WholesaleCommodities business segment will continue to manage the risk of its operating portfolio as Entergy completes its exit from themerchant power business.Utility The Utility business segment includes five wholly-owned retail electric utility subsidiaries: Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. These companies generate, transmit, distribute, and sellelectric power to retail and wholesale customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy Louisiana and Entergy NewOrleans also provide natural gas utility services to customers in and around Baton Rouge, Louisiana, and New Orleans, Louisiana,respectively. Also included in the Utility is System Energy, a wholly-owned subsidiary of Entergy Corporation that owns or leases 90percent of Grand Gulf. System Energy sells its power and capacity from Grand Gulf at wholesale to Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, and Entergy New Orleans. The five retail utility subsidiaries are each regulated by the FERC and bystate utility commissions, or, in the case of Entergy New Orleans, the City Council. System Energy is regulated by the FERC becauseall of its transactions are at wholesale. The overall generation portfolio of the Utility, which relies heavily on natural gas and nucleargeneration, is consistent with Entergy’s strong support for the environment.238Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyCustomersAs of December 31, 2018, the Utility operating companies provided retail electric and gas service to customers in Arkansas,Louisiana, Mississippi, and Texas, as follows: Electric Customers Gas Customers Area Served (In Thousands) (%) (In Thousands) (%)Entergy ArkansasPortions of Arkansas 711 25% Entergy LouisianaPortions of Louisiana 1,084 37% 93 46%Entergy MississippiPortions of Mississippi 450 15% Entergy New OrleansCity of New Orleans 202 7% 107 54%Entergy TexasPortions of Texas 454 16% Total customers 2,901 100% 200 100%Electric Energy SalesThe electric energy sales of the Utility operating companies are subject to seasonal fluctuations, with the peak sales periodnormally occurring during the third quarter of each year. On July 20, 2018, Entergy reached a 2018 peak demand of 21,587 MWh,compared to the 2017 peak of 21,671 MWh recorded on July 20, 2017. Selected electric energy sales data is shown in the table below:Selected 2018 Electric Energy Sales Data EntergyArkansas EntergyLouisiana EntergyMississippi Entergy NewOrleans EntergyTexas SystemEnergy Entergy (a) (In GWh)Sales to retail customers22,525 56,150 13,691 5,914 19,220 — 117,498Sales for resale: Affiliates1,773 5,498 — — 1,516 6,264 —Others6,447 1,762 1,060 1,484 962 — 11,715Total30,745 63,410 14,751 7,398 21,698 6,264 129,213Average use per residential customer(kWh)13,916 15,521 15,515 13,219 15,448 — 14,956(a)Includes the effect of intercompany eliminations.The following table illustrates the Utility operating companies’ 2018 combined electric sales volume as a percentage of totalelectric sales volume, and 2018 combined electric revenues as a percentage of total 2018 electric revenue, each by customer class.Customer Class % of Sales Volume % of RevenueResidential 28.7 38.0Commercial 22.8 25.9Industrial (a) 37.4 26.6Governmental 2.0 2.4Wholesale/Other 9.1 7.1(a)Major industrial customers are primarily in the petroleum refining and chemical industries.239Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergySee “Selected Financial Data” for each of the Utility operating companies for the detail of their sales by customer class for2014-2018.Selected 2018 Natural Gas Sales DataEntergy New Orleans and Entergy Louisiana provide both electric power and natural gas to retail customers. Entergy NewOrleans and Entergy Louisiana sold 11,183,773 and 7,205,692 Mcf, respectively, of natural gas to retail customers in 2018. In 2018,99% of Entergy Louisiana’s operating revenue was derived from the electric utility business, and only 1% from the natural gasdistribution business. For Entergy New Orleans, 87% of operating revenue was derived from the electric utility business and 13% fromthe natural gas distribution business in 2018. Following is data concerning Entergy New Orleans’s 2018 retail operating revenue sources.Customer Class Electric Operating Revenue Natural Gas OperatingRevenueResidential 45% 48%Commercial 37% 27%Industrial 6% 6%Governmental/Municipal 12% 19%240Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyRetail Rate RegulationGeneral (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas)Each Utility operating company regularly participates in retail rate proceedings. The status of material retail rate proceedings isdescribed in Note 2 to the financial statements. Certain aspects of the Utility operating companies’ retail rate mechanisms are discussedbelow. Rate base (inbillions) Currentauthorizedreturn oncommon equity Weightedaverage costof capital(after-tax) Equityratio Regulatory construct EntergyArkansas $7.547 (a) 9.25% - 10.25% 5.25% 36.55% - forward test year formula rate plan- riders: MISO, capacity, Grand Gulf, tax adjustment, energy efficiency, fuel and purchased power EntergyLouisiana(electric) $9.7 (b) 9.95% (c) 7.23% 49.1% - formula rate plan through 2019 test year- riders/specific recovery: MISO, capacity, transmission, fuel EntergyLouisiana (gas) $0.0645 (d) 9.45% - 10.45% 7.25% 49.53% - gas rate stabilization plan- rider: gas infrastructure EntergyMississippi $2.413 (e) 9.28% - 11.36% 7.13% 48.05% - formula rate plan with forward-looking features- riders: power management, Grand Gulf, fuel, MISO, unit power cost, storm damage, energy efficiency, ad valorem tax adjustment, grid modernization, restructuring credit Entergy NewOrleans (electric) $0.299 (f) 10.7% - 11.5% 8.58% 50.08% - rate case- riders/specific recovery: fuel, capacity Entergy NewOrleans (gas) $0.089 (g) 10.25% -11.25% 8.40% 50.08% - rate case- rider: purchased gas Entergy Texas $2.446 (h) 9.65% 7.73% 50.9% - rate case- riders: fuel, distribution and transmission, rate case expenses, AMI surcharge, limited-term Tax Act, federal income tax, among others System Energy $1.429 (i) 10.94% (j) 8.89% 65% - monthly cost of service 241Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energy(a)Based on 2019 forward test year.(b)Based on December 31, 2017 test year and excludes approximately $520 million transmission plant through August 31, 2018,included in transmission rider.(c)Authorized return on common equity for 2018 and 2019 test years will be 9.8%.(d)Based on September 30, 2017 test year.(e)Based on 2018 forward test year.(f)Based on December 31, 2011 test year and excludes approximately $228 million first-year average rate base for Union.(g)Based on December 31, 2011 test year.(h)Based on December 31, 2017 adjusted test year(i)Based on calculation as of December 31, 2018.(j)See Note 2 to the financial statements for discussion of ongoing proceedings at the FERC challenging System Energy’sauthorized return on common equity.Entergy ArkansasFuel and Purchased Power Cost RecoveryEntergy Arkansas’s rate schedules include an energy cost recovery rider to recover fuel and purchased power costs in monthlybills. The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period commencing on April 1of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The energy cost recovery ridertariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs. InDecember 2007 the APSC issued an order stating that Entergy Arkansas’s energy cost recovery rider will remain in effect, and anyfuture termination of the rider would be subject to eighteen months advance notice by the APSC, which would occur following noticeand hearing.Entergy LouisianaFuel RecoveryEntergy Louisiana’s rate schedules include a fuel adjustment clause designed to recover the cost of fuel and purchased powercosts. The fuel adjustment clause contains a surcharge or credit for deferred fuel expense and related carrying charges arising from themonthly reconciliation of actual fuel costs incurred with fuel cost revenues billed to customers, including carrying charges. See Note 2to the financial statements for a discussion of proceedings related to audits of Entergy Louisiana’s fuel adjustment clause filings.To help stabilize electricity costs, Entergy Louisiana received approval from the LPSC to hedge its exposure to natural gasprice volatility through the use of financial instruments. Entergy Louisiana hedges approximately one-third of the projected exposure tonatural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed onan annual basis. In January 2018, Entergy Louisiana filed an application with the LPSC to suspend these seasonal hedging programsand implement financial hedges with terms up to five years for a portion of its natural gas exposure, which was approved in November2018.Entergy Louisiana’s gas rates include a purchased gas adjustment clause based on estimated gas costs for the billing monthadjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed tocustomers, including carrying charges.242Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyRetail Rates - GasIn accordance with the settlement of Entergy Gulf States Louisiana’s gas rate stabilization plan for the test year ended September30, 2012, in August 2014, Entergy Gulf States Louisiana submitted for consideration a proposal for implementation of an infrastructurerider to recover expenditures associated with strategic plant investment and relocation projects mandated by local governments. Afterreview by the LPSC staff and inclusion of certain customer safeguards required by the LPSC staff, in December 2014, Entergy GulfStates Louisiana and the LPSC staff submitted a joint settlement for implementation of an accelerated gas pipe replacement programproviding for the replacement of approximately 100 miles of pipe over the next ten years, as well as relocation of certain existing piperesulting from local government-related infrastructure projects, and for a rider to recover the investment associated with these projects.The rider allows for recovery of approximately $65 million over ten years. The rider recovery will be adjusted on a quarterly basis toinclude actual investment incurred for the prior quarter and is subject to the following conditions, among others: a ten-year term;application of any earnings in excess of 10.45% as an offset to the revenue requirement of the infrastructure rider; adherence to aspecified spending plan, within plus or minus 20% annually; annual filings comparing actual versus planned rider spending with actualspending and explanation of variances exceeding 10%; and an annual true-up. The joint settlement was approved by the LPSC inJanuary 2015. Implementation of the infrastructure rider commenced with bills rendered on and after the first billing cycle of April2015.Storm Cost RecoverySee Note 2 to the financial statements for a discussion of Entergy Louisiana’s filings to recover storm-related costs.OtherIn March 2016 the LPSC opened two dockets to examine, on a generic basis, issues that it identified in connection with itsreview of Cleco Corporation’s acquisition by third party investors. The first docket is captioned “In re: Investigation of doubleleveraging issues for all LPSC-jurisdictional utilities,” and the second is captioned “In re: Investigation of tax structure issues for allLPSC-jurisdictional utilities.” In April 2016 the LPSC clarified that the concerns giving rise to the two dockets arose as a result of itsreview of the structure of the Cleco-Macquarie transaction and that the specific intent of the directives is to seek more informationregarding intra-corporate debt financing of a utility’s capital structure as well as the use of investment tax credits to mitigate the taxobligation at the parent level of a consolidated entity. No schedule has been set for either docket, and limited discovery has occurred.Entergy MississippiFuel RecoveryEntergy Mississippi’s rate schedules include energy cost recovery riders to recover fuel and purchased power costs. The energycost rate for each calendar year is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery of the energy costs as of the 12-month period ended September 30. Entergy Mississippi’s fuel cost recoveries are subject toannual audits conducted pursuant to the authority of the MPSC. To help stabilize electricity costs, Entergy Mississippi received approval from the MPSC to hedge its exposure to natural gasprice volatility through the use of financial instruments. Entergy Mississippi hedges approximately one-third of the projected exposureto natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewedon an annual basis.Storm Cost RecoverySee Note 2 to the financial statements for a discussion of proceedings regarding recovery of Entergy Mississippi’s storm-relatedcosts.243Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyFormula Rate PlanIn August 2012 the MPSC opened inquiries to review whether the current formulaic methodology used to calculate the return oncommon equity in both Entergy Mississippi’s formula rate plan and Mississippi Power Company’s annual formula rate plan was stillappropriate or could be improved to better serve the public interest. The intent of this inquiry and review was for informationalpurposes only; the evaluation of any recommendations for changes to the existing methodology would take place in a general rate caseor in the existing formula rate plan proceeding. In March 2013 the Mississippi Public Utilities Staff filed its consultant’s report whichnoted the return on common equity estimation methods used by Entergy Mississippi and Mississippi Power Company are commonlyused throughout the electric utility industry. The report suggested ways in which the methods used by Entergy Mississippi andMississippi Power Company might be improved, but did not recommend specific changes in the return on common equity formulas orcalculations at that time. In June 2014 the MPSC expanded the scope of the August 2012 inquiry to study the merits of adopting auniform formula rate plan that could be applied, where possible in whole or in part, to both Entergy Mississippi and Mississippi PowerCompany in order to achieve greater consistency in the plans. The MPSC directed the Mississippi Public Utilities Staff to investigate andreview Entergy Mississippi’s formula rate plan rider schedule and Mississippi Power Company’s Performance Evaluation Plan byconsidering the merits and deficiencies and possibilities for improvement of each and then to propose a uniform formula rate plan that,where possible, could be applicable to both companies. No procedural schedule has been set. In October 2014 the Mississippi PublicUtilities Staff conducted a public technical conference to discuss performance benchmarking and its potential application to the electricutilities’ formula rate plans. The docket remains open.Entergy New OrleansFuel RecoveryEntergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel andpurchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fueland purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges.Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billingmonth, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges. To help stabilize gas costs, Entergy New Orleans seeks approval annually from the City Council to continue implementation ofits natural gas hedging program consistent with the City Council’s stated policy objectives. The program uses financial instruments tohedge exposure to volatility in the wholesale price of natural gas purchased to serve Entergy New Orleans gas customers. Entergy NewOrleans hedges up to 25% of actual gas sales made during the winter months.Storm Cost RecoverySee Note 2 to the financial statements for a discussion of Entergy New Orleans’s efforts to recover storm-related costs.Entergy TexasFuel RecoveryEntergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including interest, that arenot included in base rates. Semi-annual revisions of the fixed fuel factor are made in March and244Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergySeptember based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuelfactor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT. The PUCT fuel costproceedings are discussed in Note 2 to the financial statements.At the PUCT’s April 2013 open meeting, the PUCT Commissioners discussed their view that a purchased power capacity riderwas good public policy. The PUCT issued an order in May 2013 adopting the rule allowing for a purchased power capacity rider,subject to an offsetting adjustment for load growth. The rule, as adopted, also includes a process for obtaining pre-approval by thePUCT of purchased power agreements. Entergy Texas has not exercised the option to recover its capacity costs under the new ridermechanism, but will continue to evaluate the benefits of utilizing the new rider to recover future capacity costs. Electric Industry RestructuringIn June 2009, a law was enacted in Texas that required Entergy Texas to cease all activities relating to Entergy Texas’stransition to competition. The law allows Entergy Texas to remain a part of the SERC Region, although it does not prevent EntergyTexas from joining another power region. The law provides that proceedings to certify a power region that Entergy Texas belongs to asa qualified power region can be initiated by the PUCT, or on motion by another party, when the conditions supporting such aproceeding exist. Under the law, the PUCT may not approve a transition to competition plan for Entergy Texas until the expiration offour years from the PUCT’s certification of Entergy Texas’s power region.The law also contains provisions that allow Entergy Texas to take advantage of a cost recovery mechanism that permits annualfilings for the recovery of reasonable and necessary expenditures for transmission infrastructure improvement and changes in wholesaletransmission charges. This mechanism was previously available to other non-ERCOT Texas utility companies, but not to EntergyTexas.The law further amended already existing law that had required Entergy Texas to propose for PUCT approval a tariff to alloweligible customers the ability to contract for competitive generation. The amending language in the law provides, among other things,that: 1) the tariff shall not be implemented in a manner that harms the sustainability or competitiveness of manufacturers who choosenot to participate in the tariff; 2) Entergy Texas shall “purchase competitive generation service, selected by the customer, and providethe generation at retail to the customer”; and 3) Entergy Texas shall provide and price transmission service and ancillary services underthat tariff at a rate that is unbundled from its cost of service. The law directs that the PUCT may not issue an order on the tariff that iscontrary to an applicable decision, rule, or policy statement of a federal regulatory agency having jurisdiction.Entergy Texas and the other parties to the PUCT proceeding to determine the design of the competitive generation tariff wereinvolved in negotiations throughout 2011 and 2012 with the objective of resolving as many disputed issues as possible regarding thetariff. The PUCT determined that unrecovered costs that could be recovered through the rider consist only of those costs necessary toimplement and administer the competitive generation program and do not include lost revenues or embedded generation costs. ThePUCT also ruled that the amount of customer load that may be included in the competitive generation service program is limited to 115MW. After additional negotiations, and ultimately the scheduling of a hearing to resolve remaining contested issues, the PUCT issuedthe order approving the competitive generation service rider in July 2013. Entergy Texas filed for rehearing of the PUCT’s July 2013order, which the PUCT denied. Entergy Texas has since filed its appeal of that PUCT order to the Travis County District Court, whichfound in favor of the PUCT in an order issued in October 2014. In November 2014, Entergy Texas appealed the District Court’s orderwhich moves the appeal to the Third Court of Appeals. Entergy Texas and opposing parties filed briefs and responses in the first quarter2015. Oral argument was held in May 2015. In March 2016 the Court of Appeals upheld the District Court’s ruling favoring the PUCT.In May 2016, Entergy Texas filed with the Texas Supreme Court a petition for review of the Court of Appeals ruling. In January 2017,Entergy Texas filed its petitioner’s brief on the merits with the Texas Supreme Court. In June 2017 the Texas Supreme Court deniedEntergy Texas’s petition in this matter.245Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyIn September 2011 the PUCT adopted a proposed rule implementing a distribution cost recovery factor to recover capital andcapital-related costs related to distribution infrastructure. The distribution cost recovery factor permits utilities once per year toimplement an increase or decrease in rates above or below amounts reflected in base rates to reflect depreciation expense, federalincome tax and other taxes, and return on investment. The distribution cost recovery factor rider may be changed a maximum of fourtimes between base rate cases.FranchisesEntergy Arkansas holds exclusive franchises to provide electric service in approximately 308 incorporated cities and towns inArkansas. These franchises are unlimited in duration and continue unless the municipalities purchase the utility property. In Arkansasfranchises are considered to be contracts and, therefore, are terminable pursuant to the terms of the franchise agreement and applicablestatutes.Entergy Louisiana holds non-exclusive franchises to provide electric service in approximately 175 incorporated municipalitiesand in the unincorporated areas of approximately 59 parishes of Louisiana. Entergy Louisiana holds non-exclusive franchises toprovide natural gas service to customers in the City of Baton Rouge and in East Baton Rouge Parish. Municipal franchise agreementterms range from 25 to 60 years while parish franchise terms range from 25 to 99 years.Entergy Mississippi has received from the MPSC certificates of public convenience and necessity to provide electric service toareas within 45 counties, including a number of municipalities, in western Mississippi. Under Mississippi statutory law, such certificatesare exclusive. Entergy Mississippi may continue to serve in such municipalities upon payment of a statutory franchise fee, regardless ofwhether an original municipal franchise is still in existence.Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to indeterminate permits set forth incity ordinances. These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans’s electricand gas utility properties.Entergy Texas holds a certificate of convenience and necessity from the PUCT to provide electric service to areas withinapproximately 27 counties in eastern Texas, and holds non-exclusive franchises to provide electric service in approximately 68incorporated municipalities. Entergy Texas typically obtains 25-year franchise agreements as existing agreements expire. EntergyTexas’s electric franchises expire during 2019-2058.The business of System Energy is limited to wholesale power sales. It has no distribution franchises.Property and Other Generation ResourcesOwned Generating StationsThe total capability of the generating stations owned and leased by the Utility operating companies and System Energy as ofDecember 31, 2018, is indicated below:246Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energy Owned and Leased Capability MW(a)Company Total Gas/Oil Nuclear Coal Hydro SolarEntergy Arkansas 5,196 2,118 1,817 1,188 73 —Entergy Louisiana 9,143 6,646 2,135 362 — —Entergy Mississippi 2,796 2,382 — 413 — 1Entergy New Orleans 508 507 — — — 1Entergy Texas 2,376 2,109 — 267 — —System Energy 1,252 — 1,252 — — —Total 21,271 13,762 5,204 2,230 73 2(a)“Owned and Leased Capability” is the dependable load carrying capability as demonstrated under actual operating conditionsbased on the primary fuel (assuming no curtailments) that each station was designed to utilize.Summer peak load for the Utility has averaged 21,568 MW over the previous decade. The Utility operating companies’ load and capacity projections are reviewed periodically to assess the need and timing foradditional generating capacity and interconnections. These reviews consider existing and projected demand, the availability and priceof power, the location of new load, the economy, environmental regulations, public policy goals, and the age and condition ofEntergy’s existing infrastructure.The Utility operating companies’ long-term resource strategy (Portfolio Transformation Strategy) calls for the bulk of capacityneeds to be met through long-term resources, whether owned or contracted. Over the past decade, the Portfolio TransformationStrategy has resulted in the addition of about 5,723 MW of new long-term resources and the deactivation of over 4,834 MW of legacygeneration. As MISO market participants, the Utility operating companies also participate in MISO’s Day Ahead and Real Time Energyand Ancillary Services markets to economically dispatch generation and purchase energy to serve customers reliably and at the lowestreasonable cost.Other Generation ResourcesRFP ProcurementsThe Utility operating companies from time to time issue requests for proposals (RFP) to procure supply-side resources fromsources other than the spot market to meet the unique regional needs of the Utility operating companies. The RFPs issued by the Utilityoperating companies have sought resources needed to meet near-term MISO reliability requirements as well as longer-termrequirements through a broad range of wholesale power products, including limited-term (1 to 3 years) and long-term contractualproducts and asset acquisitions. The RFP process has resulted in selections or acquisitions, including, among other things:•Entergy Louisiana’s June 2005 purchase of the 718 MW, gas-fired Perryville plant, of which 35% of the output is sold toEntergy Texas;•Entergy Arkansas’s September 2008 purchase of the 789 MW, combined-cycle, gas-fired Ouachita Generating Facility. EntergyLouisiana, as successor in interest to Entergy Gulf States Louisiana, owns one-third of the facility;•Entergy Arkansas’s November 2012 purchase of the 620 MW, combined-cycle, gas-fired Hot Spring Energy facility;•Entergy Mississippi’s November 2012 purchase of the 450 MW, combined-cycle, gas-fired Hinds Energy facility;•Entergy Louisiana’s construction of the 560 MW, combined-cycle, gas turbine Ninemile 6 generating facility at its existingNinemile Point electric generating station. The facility reached commercial operation in December 2014;247Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energy•Entergy Louisiana’s construction of the 980 MW, combined-cycle, gas turbine St. Charles generating facility at its existing LittleGypsy electric generating station. Entergy Louisiana received regulatory approval from the LPSC in December 2016 and thefacility is scheduled to be in service by mid-2019;•Entergy Texas’s construction of the 993 MW, combined-cycle, gas turbine Montgomery County generating facility at itsexisting Lewis Creek electric generating station. Entergy Texas received regulatory approval from the PUCT in July 2017 andthe facility is scheduled to be in service by mid-2021;•Entergy Louisiana’s construction of the 994 MW, combined-cycle, gas turbine Lake Charles generating facility at its existingNelson electric generating station. Entergy Louisiana received regulatory approval from the LPSC in July 2017 and the facilityis scheduled to be in service by mid-2020;•In August 2018, Entergy New Orleans executed an asset acquisition agreement, subject to applicable regulatory approvals andclosing conditions, structured as a build-own-transfer for a 50 MW solar photovoltaic electric generating facility located inWashington Parish, Louisiana. Entergy New Orleans also executed an agreement to purchase a project that will be developed.The New Orleans Solar Station is expected to be a 20 MW solar photovoltaic electric generating facility. Both the build-own-transfer and the New Orleans Solar Station were filed, in July 2018, as a package with the agreement with St. James Solar, LLC,discussed below, for regulatory approval in an effort to satisfy the commitment to transact for 100 MW of renewable resources;and•In October 2018, Entergy Mississippi signed an asset acquisition agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic facility located in Sunflower County, Mississippi. In December 2018, Entergy Mississippi filedfor regulatory approval.The RFP process has also resulted in the selection, or confirmation of the economic merits of, long-term purchased poweragreements (PPAs), including, among others:•River Bend 30% life-of-unit PPA between Entergy Louisiana and Entergy New Orleans for 100 MW related to EntergyLouisiana’s unregulated portion of the River Bend nuclear station, which portion was formerly owned by Cajun;•Entergy Arkansas wholesale base load capacity life-of-unit PPAs executed in 2003 totaling approximately 220 MW betweenEntergy Arkansas and Entergy Louisiana (110 MW) and between Entergy Arkansas and Entergy New Orleans (110 MW)related to the sale of a portion of Entergy Arkansas’s coal and nuclear base load resources (which had not been included inEntergy Arkansas’s retail rates);•In December 2009, Entergy Texas and Exelon Generation Company, LLC executed a 10-year agreement for 150-300 MW fromthe Frontier Generating Station located in Grimes County, Texas;•In May 2011, Entergy Texas and Calpine Energy Services, L.P. executed a 10-year agreement for 485 MW from the CarvilleEnergy Center located in St. Gabriel, Louisiana. Entergy Louisiana purchases 50% of the facility’s capacity and energy fromEntergy Texas. In July 2014, LS Power purchased the Carville Energy Center and replaced Calpine Energy Services as thecounterparty to the agreement;•In September 2012, Entergy Gulf States Louisiana executed a 20-year agreement for 28 MW, with the potential to purchase anadditional 9 MW when available, from Rain CII Carbon LLC’s pet coke calcining facility in Sulphur, Louisiana. The facilitybegan commercial operation in May 2013. Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, nowholds the agreement with the facility;•In March 2013, Entergy Gulf States Louisiana executed a 20-year agreement for 8.5 MW from Agrilectric Power Partners, LP’srefurbished rice hull-fueled electric generation facility located in Lake Charles, Louisiana. Entergy Louisiana, as successor ininterest to Entergy Gulf States Louisiana, now holds the agreement with Agrilectric;•In September 2013, Entergy Louisiana executed a 10-year agreement with TX LFG Energy, LP, a wholly-owned subsidiary ofMontauk Energy Holdings, LLC, to purchase approximately 3 MW from its landfill gas-fueled power generation facility locatedin Cleveland, Texas;•Entergy Mississippi’s cost-based purchase, beginning in January 2013, of 90 MW from Entergy Arkansas’s share of Grand Gulf(only 60 MW of this PPA came through the RFP process). Cost recovery for the 90 MW was approved by the MPSC in January2013;248Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energy•In April 2015, Entergy Arkansas and Stuttgart Solar, LLC executed a 20-year agreement for 81 MW from a solar photovoltaicelectric generation facility located near Stuttgart, Arkansas. The APSC approved the project and deliveries pursuant to thatagreement commenced in June 2018;•In November 2016, Entergy Louisiana and LS Power executed a 10-year agreement for 485 MW from the Carville EnergyCenter located in St. Gabriel, Louisiana. The transaction received regulatory approval and will begin in June 2022;•In November 2016, Entergy Louisiana and Occidental Chemical Corporation executed a 10-year agreement for 500 MW fromthe Taft Cogeneration facility located in Hahnville, Louisiana. The transaction received regulatory approval and began in June2018;•In June 2017, Entergy Arkansas and Chicot Solar, LLC executed a 20-year agreement for 100 MW from a solar photovoltaicelectric generating facility located in Chicot County, Arkansas. The transaction received regulatory approval and will begin inMay 2020;•In November 2017, Entergy Louisiana and LA3 West Baton Rouge, LLC executed a 20-year agreement for 50 MW from a solarphotovoltaic electric generating facility located in West Baton Rouge Parish, Louisiana. The transaction received regulatoryapproval in February 2019 and the agreement is expected to begin in March 2020; and•In July 2018, Entergy New Orleans and St. James Solar, LLC executed a 20-year agreement for 20 MW from a solarphotovoltaic electric generating facility located in St. James Parish, Louisiana. As discussed above, the purchased poweragreement was filed as a package for regulatory approval in July 2018 and the application is pending approval.In February 2019, Entergy Arkansas provided notice that it intends to issue an RFP for solar photovoltaic resources. This RFP isseeking up to 200 MW through an asset acquisition under a build-own-transfer transaction structure that can provide cost-effectiveenergy supply, fuel diversity, and other benefits to Entergy Arkansas’s customers.Other Procurements From Third PartiesThe Utility operating companies have also made resource acquisitions outside of the RFP process, including EntergyMississippi’s January 2006 acquisition of the 480 MW, combined-cycle, gas-fired Attala power plant; Entergy Gulf States Louisiana’sMarch 2008 acquisition of the 322 MW, simple-cycle, gas-fired Calcasieu Generating Facility; Entergy Louisiana’s April 2011acquisition of the 580 MW, combined-cycle, gas-fired Acadia Energy Center Unit 2; and Entergy Arkansas’s (Power Block 2), EntergyLouisiana’s (Power Blocks 3 and 4), and Entergy New Orleans’s (Power Block 1) March 2016 acquisitions of the 1,980 MW (summerrating), natural gas-fired, combined-cycle gas turbine Union Power Station power blocks, each rated at 495 MW (summer rating). TheUtility operating companies have also entered into various limited- and long-term contracts in recent years as a result of bilateralnegotiations.The Washington Parish Energy Center is a 361 MW natural gas-fired peaking power plant under advanced developmentapproximately 60 miles north of New Orleans on a partially developed site Calpine has owned since 2001. In May 2018, EntergyLouisiana received LPSC approval of its certification application for this simple-cycle power plant to be developed pursuant to anagreement with Entergy Louisiana, which will purchase the plant upon completion by 2021 for a fixed payment to reimburseconstruction costs plus an associated premium.The Choctaw Generating Station is an 810 MW natural gas fired combined-cycle turbine plant located near French Camp,Mississippi. In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and costrecovery. The application is pending. The transaction is anticipated to close by the end of 2019, subject to required regulatoryapprovals and closing conditions.InterconnectionsThe Utility operating companies’ generating units are interconnected by a transmission system operating at various voltages upto 500 kV. These generating units consist primarily of steam-electric production facilities and are249Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyprovided dispatch instructions by MISO. Entergy’s Utility operating companies are MISO market participants and are interconnectedwith many neighboring utilities. MISO is an essential link in the safe, cost-effective delivery of electric power across all or parts of 15U.S. states and the Canadian province of Manitoba. As a Regional Transmission Organization, MISO assures consumers of unbiasedregional grid management and open access to the transmission facilities under MISO’s functional supervision. In addition, the Utilityoperating companies are members of the SERC Reliability Corporation (SERC). SERC is a nonprofit corporation responsible forpromoting and improving the reliability, adequacy, and critical infrastructure of the bulk power supply systems in all or portions of 16central and southeastern states. SERC serves as a regional entity with delegated authority from the North American Electric ReliabilityCorporation (NERC) for the purpose of proposing and enforcing reliability standards within the SERC Region.Gas PropertyAs of December 31, 2018, Entergy New Orleans distributed and transported natural gas for distribution within New Orleans,Louisiana, through approximately 2,600 miles of gas pipeline. As of December 31, 2018, the gas properties of Entergy Louisiana,which are located in and around Baton Rouge, Louisiana, were not material to Entergy Louisiana’s financial position.TitleThe Utility operating companies’ generating stations are generally located on properties owned in fee simple. Most of thesubstations and transmission and distribution lines are constructed on private property or public rights-of-way pursuant to easements,servitudes, or appropriate franchises. Some substation properties are owned in fee simple. The Utility operating companies generallyhave the right of eminent domain, whereby they may perfect title to, or secure easements or servitudes on, private property for theirutility operations.Substantially all of the physical properties and assets owned by Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,Entergy New Orleans, Entergy Texas, and System Energy are subject to the liens of mortgages securing bonds issued by thosecompanies. The Lewis Creek generating station is owned by GSG&T, Inc., a subsidiary of Entergy Texas, and is not subject to itsmortgage lien. Lewis Creek is leased to and operated by Entergy Texas.Fuel SupplyThe sources of generation and average fuel cost per kWh for the Utility operating companies and System Energy for the years2016-2018 were: Natural Gas Nuclear Coal Purchased Power MISO PurchasesYear % ofGen Cents PerkWh % ofGen Cents PerkWh % ofGen Cents PerkWh % ofGen Cents PerkWh % ofGen Cents PerkWh2018 39 2.84 27 0.84 9 2.24 8 5.23 17 3.712017 38 2.60 26 0.86 8 2.35 8 4.02 20 3.092016 41 2.44 28 0.63 7 2.65 9 3.71 15 3.13250Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyActual 2018 and projected 2019 sources of generation for the Utility operating companies and System Energy, including certainpower purchases from affiliates under life of unit power purchase agreements, including the Unit Power Sales Agreement, are: Natural Gas Nuclear Coal Purchased Power(d) MISO Purchases(e) 2018 2019 2018 2019 2018 2019 2018 2019 2018 2019Entergy Arkansas (a)29% 31% 47% 53% 20% 15% — 1% 4% —Entergy Louisiana39% 53% 29% 28% 3% 4% 9% 15% 20% —Entergy Mississippi(b)48% 56% 16% 31% 16% 13% — — 20% —Entergy New Orleans(b)52% 53% 33% 44% 2% 2% 1% 1% 12% —Entergy Texas34% 31% 9% 16% 6% 10% 29% 43% 22% —System Energy (c)— — 100% 100% — — — — — —Utility (a) (b)39% 45% 27% 35% 9% 9% 8% 11% 17% —(a)Hydroelectric power provided less than 1% of Entergy Arkansas’s generation in 2018 and is expected to provide about less than1% of its generation in 2019.(b)Solar power provided less than 1% of Entergy Mississippi’s and Entergy New Orleans's generation in 2018 and is expected toprovide less than 1% of each of Entergy Mississippi’s and Entergy New Orleans's generation in 2019.(c)Capacity and energy from System Energy’s interest in Grand Gulf is allocated as follows under the Unit Power SalesAgreement: Entergy Arkansas - 36%; Entergy Louisiana - 14%; Entergy Mississippi - 33%; and Entergy New Orleans -17%. Pursuant to purchased power agreements, Entergy Arkansas is selling a portion of its owned capacity and energy fromGrand Gulf to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.(d)Excludes MISO purchases.(e)In December 2013, Entergy integrated its transmission system into the MISO RTO. Entergy offers all of its generation into theMISO energy market on a day-ahead and real-time basis and bids for power in the MISO energy market to serve the demand ofits customers, with MISO making dispatch decisions. The MISO purchases metric provided for 2018 is not projected for 2019.Some of the Utility’s gas-fired plants are also capable of using fuel oil, if necessary. Although based on current economics the Utilitydoes not expect fuel oil use in 2019, it is possible that various operational events including weather or pipeline maintenance mayrequire the use of fuel oil.Natural GasThe Utility operating companies have long-term firm and short-term interruptible gas contracts for both supply andtransportation. Over 50% of the Utility operating companies’ power plants maintain some level of long-term firm transportation. Short-term contracts and spot-market purchases satisfy additional gas requirements. Entergy Texas owns a gas storage facility that providesreliable and flexible natural gas service to certain generating stations.Many factors, including wellhead deliverability, storage, pipeline capacity, and demand requirements of end users, influence theavailability and price of natural gas supplies for power plants. Demand is tied to weather conditions as well as to the prices andavailability of other energy sources. Pursuant to federal and state regulations, gas supplies to power plants may be interrupted duringperiods of shortage. To the extent natural gas supplies are disrupted or natural gas prices significantly increase, the Utility operatingcompanies may use alternate fuels, such as oil when available, or rely to a larger extent on coal, nuclear generation, and purchasedpower.251Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyCoalEntergy Arkansas has committed to eight one- to three-year and two spot contracts that will supply approximately 85% of thetotal coal supply needs in 2019. These contracts are staggered in term so that not all contracts have to be renewed the same year. Theremaining 15% of total coal requirements will be satisfied by contracts with a term of less than one year. Based on continued improvedPowder River Basin (PRB) coal deliveries by rail and the high cost of alternate sources and modes of transportation, no alternative coalconsumption is expected at Entergy Arkansas during 2019. Coal will be transported to Arkansas via an existing transportationagreement that is expected to provide all of Entergy Arkansas’s rail transportation requirements for 2019.Entergy Louisiana has committed to five one- to three-year contracts that will supply approximately 90% of Nelson Unit 6 coalneeds in 2019. If needed, additional PRB coal will be purchased through contracts with a term of less than one year to provide theremaining supply needs. For the same reasons as for Entergy Arkansas’s plants, no alternative coal consumption is expected at NelsonUnit 6 during 2019. Coal will be transported to Nelson primarily via an existing transportation agreement that is expected to provide allof Entergy Louisiana’s rail transportation requirements for 2019.For the year 2018, coal transportation delivery rates to Entergy Arkansas-and Entergy Louisiana-operated coal-fired unitsperformed moderately lower than the previous years. However, delivery rates somewhat improved toward the end of the year andadditional railcar capacity helped make up some delivery short falls. It is expected that delivery times will improve in 2019. BothEntergy Arkansas and Entergy Louisiana control a sufficient number of railcars to satisfy the rail transportation requirement.The operator of Big Cajun 2 - Unit 3, Louisiana Generating, LLC, has advised Entergy Louisiana and Entergy Texas that it hasadequate rail car and barge capacity to meet the volumes of PRB coal requested for 2019. Entergy Louisiana’s and Entergy Texas’scoal nomination requests to Big Cajun 2 - Unit 3 are made on an annual basis.Nuclear FuelThe nuclear fuel cycle consists of the following:•mining and milling of uranium ore to produce a concentrate;•conversion of the concentrate to uranium hexafluoride gas;•enrichment of the uranium hexafluoride gas;•fabrication of nuclear fuel assemblies for use in fueling nuclear reactors; and•disposal of spent fuel.The Registrant Subsidiaries that own nuclear plants, Entergy Arkansas, Entergy Louisiana, and System Energy, are responsiblethrough a shared regulated uranium pool for contracts to acquire nuclear material to be used in fueling Entergy’s Utility nuclearunits. These companies own the materials and services in this shared regulated uranium pool on a pro rata fractional basis determinedby the nuclear generation capability of each company. Any liabilities for obligations of the pooled contracts are on a several but notjoint basis. The shared regulated uranium pool maintains inventories of nuclear materials during the various stages of processing. TheRegistrant Subsidiaries purchase enriched uranium hexafluoride for their nuclear plant reload requirements at the average inventory costfrom the shared regulated uranium pool. Entergy Operations, Inc. contracts separately for the fabrication of nuclear fuel as agent onbehalf of each of the Registrant Subsidiaries that owns a nuclear plant. All contracts for the disposal of spent nuclear fuel are betweenthe DOE and the owner of a nuclear power plant.Based upon currently planned fuel cycles, the nuclear units in both the Utility and Entergy Wholesale Commodities segmentshave a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion andenrichment services at what Entergy believes are reasonably predictable or fixed prices through most of 2023. The nuclear fuel supplyportfolio for the Entergy Wholesale Commodities segment252Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyhas been adjusted to reflect reduced overall requirements related to the planned permanent shutdowns of the Palisades, Pilgrim, IndianPoint 2, and Indian Point 3 plants. Entergy’s ability to purchase nuclear fuel at reasonably predictable prices, however, depends uponthe performance reliability of uranium miners. There are a number of possible supply alternatives that may be accessed to mitigate anysupplier performance failure, including potentially drawing upon Entergy’s inventory intended for later generation periods dependingupon its risk management strategy at that time, although the pricing of any alternate uranium supply from the market will be dependentupon the market for uranium supply at that time. In addition, some nuclear fuel contracts are on a non-fixed price basis subject toprevailing prices at the time of delivery.The effects of market price changes may be reduced and deferred by risk management strategies, such as negotiation of floorand ceiling amounts for long-term contracts, buying for inventory or entering into forward physical contracts at fixed prices whenEntergy believes it is appropriate and useful. Entergy buys uranium from a diversified mix of sellers located in a diversified mix ofcountries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S.Entergy’s ability to assure nuclear fuel supply also depends upon the performance reliability of conversion, enrichment, andfabrication services providers. There are fewer of these providers than for uranium. For conversion and enrichment services, likeuranium, Entergy diversifies its supply by supplier and country and may take special measures as needed to ensure supply of enricheduranium for the reliable fabrication of nuclear fuel. For fabrication services, each plant is dependent upon the effective performance ofthe fabricator of that plant’s nuclear fuel, therefore, Entergy provides additional monitoring, inspection, and oversight for the fabricationprocess to assure reliability and quality.Entergy Arkansas, Entergy Louisiana, and System Energy each have made arrangements to lease nuclear fuel and relatedequipment and services. The lessors, which are consolidated in the financial statements of Entergy and the applicable RegistrantSubsidiary, finance the acquisition and ownership of nuclear fuel through credit agreements and the issuance of notes. These creditfacilities are subject to periodic renewal, and the notes are issued periodically, typically for terms between three and seven years.Natural Gas Purchased for ResaleEntergy New Orleans has several suppliers of natural gas. Its system is interconnected with three interstate and three intrastatepipelines. Entergy New Orleans has a “no-notice” service gas purchase contract with CenterPoint Energy Services which guaranteesEntergy New Orleans gas delivery at specific delivery points and at any volume within the minimum and maximum set forth in thecontract amounts. The Centerpoint Energy Service gas supply is transported to Entergy New Orleans pursuant to a transportationservice agreement with Gulf South Pipeline Co. This service is subject to FERC-approved rates. Entergy New Orleans also makesinterruptible spot market purchases. Entergy Louisiana purchased natural gas for resale in 2018 under a firm contract from Sequent Energy Management L.P. Thegas is delivered through a combination of intrastate and interstate pipelines.As a result of the implementation of FERC-mandated interstate pipeline restructuring in 1993, curtailments of interstate gassupply could occur if Entergy Louisiana’s or Entergy New Orleans’s suppliers failed to perform their obligations to deliver gas undertheir supply agreements. Gulf South Pipeline Co. could curtail transportation capacity only in the event of pipeline system constraints.Federal Regulation of the UtilityState or local regulatory authorities, as described above, regulate the retail rates of the Utility operating companies. The FERCregulates wholesale sales of electricity rates and interstate transmission of electricity, including System Energy’s sales of capacity andenergy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy253Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyMississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. See Note 2 to the financial statements for furtherdiscussion of federal regulation proceedings.System Agreement (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, andEntergy Texas)Prior to each operating company’s termination of participation in the System Agreement (Entergy Arkansas in December 2013,Entergy Mississippi in November 2015, and Entergy Louisiana, Entergy New Orleans, and Entergy Texas each in August 2016), theUtility operating companies engaged in the coordinated planning, construction, and operation of generating and bulk transmissionfacilities under the terms of the System Agreement, which was a rate schedule approved by the FERC. Under the terms of the SystemAgreement, generating capacity and other power resources were jointly operated by the Utility operating companies that wereparticipating in the System Agreement. The System Agreement provided, among other things, that parties having generating reservesgreater than their allocated share of reserves (long companies) would receive payments from those parties having generating reservesthat were less than their allocated share of reserves (short companies). Such payments were at amounts sufficient to cover certain of thelong companies’ costs for intermediate and peaking oil/gas-fired generation, including operating expenses, fixed charges on debt,dividend requirements on preferred equity, and a fair rate of return on common equity investment. Under the System Agreement, therates used to compensate long companies were based on costs associated with the long companies’ steam electric generating unitsfueled by oil or gas and having an annual average heat rate above 10,000 Btu/kWh. In addition, for all energy exchanged among theUtility operating companies under the System Agreement, the companies purchasing exchange energy were required to pay the cost offuel consumed in generating such energy plus a charge to cover other associated costs. Entergy Arkansas terminated its participation inthe System Agreement in December 2013. Entergy Mississippi terminated its participation in the System Agreement in November 2015.The System Agreement terminated with respect to its remaining participants in August 2016.Although the System Agreement has terminated, certain of the Utility operating companies’ and their retail regulators arepursuing litigation involving the System Agreement at the FERC and in federal courts. The proceedings include challenges to theallocation of costs as defined by the System Agreement and other matters. See Note 2 to the financial statements for discussion of legalproceedings at the FERC and in federal courts involving the System Agreement.Transmission and MISO MarketsIn December 2013 the Utility operating companies integrated into the MISO RTO. Although becoming a member of MISO didnot affect the ownership by the Utility operating companies of their transmission facilities or the responsibility for maintaining thosefacilities, MISO maintains functional control over the combined transmission systems of its members and administers wholesale energyand ancillary services markets for market participants in the MISO region, including the Utility operating companies. MISO alsoexercises functional control of transmission planning and congestion management and provides schedules and pricing for thecommitment and dispatch of generation that is offered into MISO’s markets, as well as pricing for load that bids into the markets. TheUtility operating companies sell capacity, energy, and ancillary services on a bilateral basis to certain wholesale customers and offeravailable electricity production of their generating facilities into the MISO day-ahead and real-time energy markets pursuant to theMISO tariff and market rules. Each Utility operating company has its own transmission pricing zone and a formula rate template(included as Attachment O to the MISO tariff) used to establish transmission rates within MISO. The terms and conditions of the MISOtariff, including provisions related to the design and implementation of wholesale markets and the allocation of transmission upgradecosts, are subject to regulation by the FERC.System Energy and Related AgreementsSystem Energy recovers costs related to its interest in Grand Gulf through rates charged to Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, and Entergy New Orleans for capacity and energy under the Unit Power Sales Agreement (describedbelow). In December 1995, System Energy commenced a rate proceeding at the FERC. In July254Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energy2001 the rate proceeding became final, with the FERC approving a prospective 10.94% return on equity. In 1998 the FERC approvedrequests by Entergy Arkansas and Entergy Mississippi to accelerate a portion of their Grand Gulf purchased power obligations. EntergyArkansas’s and Entergy Mississippi’s acceleration of Grand Gulf purchased power obligations ceased effective July 2001 and July2003, respectively, as approved by the FERC. See Note 2 to the financial statements for discussion of complaints filed with the FERCregarding System Energy’s return on equity.Unit Power Sales AgreementThe Unit Power Sales Agreement allocates capacity, energy, and the related costs from System Energy’s ownership andleasehold interests in Grand Gulf to Entergy Arkansas (36%), Entergy Louisiana (14%), Entergy Mississippi (33%), and Entergy NewOrleans (17%). Each of these companies is obligated to make payments to System Energy for its entitlement of capacity and energy ona full cost-of-service basis regardless of the quantity of energy delivered. Payments under the Unit Power Sales Agreement are SystemEnergy’s only source of operating revenue. The financial condition of System Energy depends upon the continued commercialoperation of Grand Gulf and the receipt of such payments. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and EntergyNew Orleans generally recover payments made under the Unit Power Sales Agreement through rates charged to their customers.In the case of Entergy Arkansas and Entergy Louisiana, payments are also recovered through sales of electricity from theirrespective retained shares of Grand Gulf. Under a settlement agreement entered into with the APSC in 1985 and amended in 1988,Entergy Arkansas retains 22% of its 36% share of Grand Gulf-related costs and recovers the remaining 78% of its share in rates. In theevent that Entergy Arkansas is not able to sell its retained share to third parties, it may sell such energy to its retail customers at a priceequal to its avoided cost, which is currently less than Entergy Arkansas’s cost from its retained share. Entergy Arkansas has life-of-resources purchased power agreements with Entergy Louisiana and Entergy New Orleans that sell a portion of the output of EntergyArkansas’s retained share of Grand Gulf to those companies, with the remainder of the retained share being sold to Entergy Mississippithrough a separate life-of-resources purchased power agreement. In a series of LPSC orders, court decisions, and agreements from late1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to costs associated with Entergy Louisiana’s share of capacityand energy from Grand Gulf, subject to certain terms and conditions. Entergy Louisiana retains and does not recover from retailratepayers 18% of its 14% share of the costs of Grand Gulf capacity and energy and recovers the remaining 82% of its share inrates. Entergy Louisiana is allowed to recover through the fuel adjustment clause at 4.6 cents per kWh for the energy related to itsretained portion of these costs. Alternatively, Entergy Louisiana may sell such energy to non-affiliated parties at prices above the fueladjustment clause recovery amount, subject to the LPSC’s approval. Entergy Arkansas also has a life-of-resources purchased poweragreement with Entergy Mississippi to sell a portion of the output of Entergy Arkansas’s non-retained share of Grand Gulf. EntergyMississippi was granted rate relief for those purchases by the MPSC through its annual unit power cost rate mechanism.Availability AgreementThe Availability Agreement among System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and EntergyNew Orleans was entered into in 1974 in connection with the financing by System Energy of Grand Gulf. The Availability Agreementprovides that System Energy make available to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans allcapacity and energy available from System Energy’s share of Grand Gulf.Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans also agreed severally to pay SystemEnergy monthly for the right to receive capacity and energy from Grand Gulf in amounts that (when added to any amounts received bySystem Energy under the Unit Power Sales Agreement) would at least equal System Energy’s total operating expenses for Grand Gulf(including depreciation at a specified rate and expenses incurred in a permanent shutdown of Grand Gulf) and interest charges.The allocation percentages under the Availability Agreement are fixed as follows: Entergy Arkansas - 17.1%; Entergy Louisiana- 26.9%; Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%. The allocation percentages255Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyunder the Availability Agreement would remain in effect and would govern payments made under such agreement in the event of ashortfall of funds available to System Energy from other sources, including payments under the Unit Power Sales Agreement.System Energy has assigned its rights to payments and advances from Entergy Arkansas, Entergy Louisiana, EntergyMississippi, and Entergy New Orleans under the Availability Agreement as security for its one outstanding series of first mortgagebonds. In these assignments, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further agreed that,in the event they were prohibited by governmental action from making payments under the Availability Agreement (for example, if theFERC reduced or disallowed such payments as constituting excessive rates), they would then make subordinated advances to SystemEnergy in the same amounts and at the same times as the prohibited payments. System Energy would not be allowed to repay thesesubordinated advances so long as it remained in default under the related indebtedness or in other similar circumstances.Each of the assignment agreements relating to the Availability Agreement provides that Entergy Arkansas, Entergy Louisiana,Entergy Mississippi, and Entergy New Orleans will make payments directly to System Energy. However, if there is an event of default,those payments must be made directly to the holders of indebtedness that are the beneficiaries of such assignment agreements. Thepayments must be made pro rata according to the amount of the respective obligations secured.The obligations of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to make paymentsunder the Availability Agreement are subject to the receipt and continued effectiveness of all necessary regulatory approvals. Sales ofcapacity and energy under the Availability Agreement would require that the Availability Agreement be submitted to the FERC forapproval with respect to the terms of such sale. No such filing with the FERC has been made because sales of capacity and energy fromGrand Gulf are being made pursuant to the Unit Power Sales Agreement. If, for any reason, sales of capacity and energy are made inthe future pursuant to the Availability Agreement, the jurisdictional portions of the Availability Agreement would be submitted to theFERC for approval.Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement to System Energy haveexceeded the amounts payable under the Availability Agreement and, therefore, no payments under the Availability Agreement haveever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and SystemEnergy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims ordemands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof)equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreementpayments because their Availability Agreement obligations exceed their Unit Power Sales Agreement obligations.The Availability Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, withoutfurther consent of any assignees or other creditors.Capital Funds AgreementSystem Energy and Entergy Corporation have entered into the Capital Funds Agreement, whereby Entergy Corporation hasagreed to supply System Energy with sufficient capital to (i) maintain System Energy’s equity capital at an amount equal to a minimumof 35% of its total capitalization (excluding short-term debt) and (ii) permit the continued commercial operation of Grand Gulf and payin full all indebtedness for borrowed money of System Energy when due.Entergy Corporation has entered into various supplements to the Capital Funds Agreement. System Energy has assigned itsrights under such a supplement as security for its one outstanding series of first mortgage bonds. The supplement provides thatpermitted indebtedness for borrowed money incurred by System Energy in connection with the financing of Grand Gulf may besecured by System Energy’s rights under the Capital Funds Agreement on a pro rata basis (except for the Specific Payments, as definedbelow). In addition, in the supplements to the Capital Funds256Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyAgreement relating to the specific indebtedness being secured, Entergy Corporation has agreed to make cash capital contributionsdirectly to System Energy sufficient to enable System Energy to make payments when due on such indebtedness (Specific Payments).However, if there is an event of default, Entergy Corporation must make those payments directly to the holders of indebtednessbenefiting from the supplemental agreements. The payments (other than the Specific Payments) must be made pro rata according to theamount of the respective obligations benefiting from the supplemental agreements.The Capital Funds Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, uponobtaining the consent, if required, of those holders of System Energy’s indebtedness then outstanding who have received theassignments of the Capital Funds Agreement. No such consent would be required to terminate the Capital Funds Agreement or thesupplement thereto at this time.Service CompaniesEntergy Services, a limited liability company wholly-owned by Entergy Corporation, provides management, administrative,accounting, legal, engineering, and other services primarily to the Utility operating companies, but also provides services to EntergyWholesale Commodities. Entergy Operations is also wholly-owned by Entergy Corporation and provides nuclear management,operations and maintenance services under contract for ANO, River Bend, Waterford 3, and Grand Gulf, subject to the owner oversightof Entergy Arkansas, Entergy Louisiana, and System Energy, respectively. Entergy Services and Entergy Operations provide theirservices to the Utility operating companies and System Energy on an “at cost” basis, pursuant to cost allocation methodologies for theseservice agreements that were approved by the FERC.Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy TexasEffective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utilitycompanies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retailjurisdiction of the LPSC, Entergy Gulf States Louisiana. Entergy Texas owns all Entergy Gulf States, Inc. distribution and transmissionassets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States,Inc.’s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plantslocated in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas. Entergy Louisiana, assuccessor in interest to Entergy Gulf States Louisiana, owns all of the remaining assets that were owned by Entergy Gulf States, Inc. Ona book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana andapproximately 41.9% were allocated to Entergy Texas.Entergy Texas purchases from Entergy Louisiana pursuant to a life-of-unit purchased power agreement a 42.5% share ofcapacity and energy from the 70% of River Bend subject to retail regulation. Entergy Texas was allocated a share of River Bend’snuclear and environmental liabilities that is identical to the share of the plant’s output purchased by Entergy Texas under the purchasedpower agreement. In connection with the termination of the System Agreement effective August 31, 2016, the purchased poweragreements that were put in place for certain legacy units at the time of the jurisdictional separation were also terminated at that time.See Note 2 to the financial statements for additional discussion of the purchased power agreements.Entergy Louisiana and Entergy Gulf States Louisiana Business CombinationOn October 1, 2015, the businesses formerly conducted by Entergy Louisiana (Old Entergy Louisiana) and Entergy Gulf StatesLouisiana (Old Entergy Gulf States Louisiana) were combined into a single public utility. In order to effect the business combination,under the Texas Business Organizations Code (TXBOC), Old Entergy Louisiana allocated substantially all of its assets to a newsubsidiary, Entergy Louisiana Power, LLC, a Texas limited liability company (New Entergy Louisiana), and New Entergy Louisianaassumed the liabilities of Old Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Under the TXBOC, OldEntergy Gulf States Louisiana allocated257Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energysubstantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States Louisiana assumedthe liabilities of Old Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. New Entergy Gulf StatesLouisiana then merged into New Entergy Louisiana with New Entergy Louisiana surviving the merger. Thereupon, Old EntergyLouisiana changed its name from “Entergy Louisiana, LLC” to “EL Investment Company, LLC” and New Entergy Louisiana changedits name from “Entergy Louisiana Power, LLC” to “Entergy Louisiana, LLC” (Entergy Louisiana). With the completion of the businesscombination, Entergy Louisiana holds substantially all of the assets, and has assumed the liabilities, of Old Entergy Louisiana and OldEntergy Gulf States Louisiana. See Note 2 to the financial statements for additional discussion of the business combination.Entergy New Orleans Internal RestructuringIn November 2017, pursuant to the agreement in principle, Entergy New Orleans, Inc. undertook a multi-step restructuring,including the following:•Entergy New Orleans, Inc. redeemed its outstanding preferred stock at a price of approximately $21 million, which included acall premium of approximately $819,000, plus any accumulated and unpaid dividends.•Entergy New Orleans, Inc. converted from a Louisiana corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans, Inc. allocated substantially all of its assets to anew subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), andEntergy New Orleans Power assumed substantially all of the liabilities of Entergy New Orleans, Inc. in a transaction regarded asa merger under the TXBOC. Entergy New Orleans, Inc. remained in existence and held the membership interests in EntergyNew Orleans Power.•Entergy New Orleans, Inc. contributed the membership interests in Entergy New Orleans Power to an affiliate (Entergy UtilityHolding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of thecontribution, Entergy New Orleans Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.In December 2017, Entergy New Orleans, Inc. changed its name to Entergy Utility Group, Inc., and Entergy New Orleans Power thenchanged its name to Entergy New Orleans, LLC. Entergy New Orleans, LLC holds substantially all of the assets, and has assumedsubstantially all of the liabilities, of Entergy New Orleans, Inc. The restructuring was accounted for as a transaction between entitiesunder common control.Entergy Arkansas Internal RestructuringIn November 2018, Entergy Arkansas undertook a multi-step restructuring, including the following:•Entergy Arkansas, Inc. redeemed its outstanding preferred stock at the aggregate redemption price of approximately $32.7million.•Entergy Arkansas, Inc. converted from an Arkansas corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy Arkansas, Inc. allocated substantially all of its assets to a newsubsidiary, Entergy Arkansas Power, LLC, a Texas limited liability company (Entergy Arkansas Power), and Entergy ArkansasPower assumed substantially all of the liabilities of Entergy Arkansas, Inc., in a transaction regarded as a merger under theTXBOC. Entergy Arkansas, Inc. remained in existence and held the membership interests in Entergy Arkansas Power.•Entergy Arkansas, Inc. contributed the membership interests in Entergy Arkansas Power to an affiliate (Entergy Utility HoldingCompany, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution,Entergy Arkansas Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC. In December 2018, Entergy Arkansas, Inc. changed its name to Entergy Utility Property, Inc., and Entergy Arkansas Power thenchanged its name to Entergy Arkansas, LLC. Entergy Arkansas, LLC holds substantially all of the assets,258Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyand assumed substantially all of the liabilities, of Entergy Arkansas, Inc. The transaction was accounted for as a transaction betweenentities under common control.Entergy Mississippi Internal RestructuringIn November 2018, Entergy Mississippi undertook a multi-step restructuring, including the following:•Entergy Mississippi, Inc. redeemed its outstanding preferred stock, at the aggregate redemption price of approximately $21.2million.•Entergy Mississippi, Inc. converted from a Mississippi corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy Mississippi, Inc. allocated substantially all of its assets to anew subsidiary, Entergy Mississippi Power and Light, LLC, a Texas limited liability company (Entergy Mississippi Power andLight), and Entergy Mississippi Power and Light assumed substantially all of the liabilities of Entergy Mississippi, Inc., in atransaction regarded as a merger under the TXBOC. Entergy Mississippi, Inc. remained in existence and held the membershipinterests in Entergy Mississippi Power and Light.•Entergy Mississippi, Inc. contributed the membership interests in Entergy Mississippi Power and Light to an affiliate (EntergyUtility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of thecontribution, Entergy Mississippi Power and Light is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.In December 2018, Entergy Mississippi, Inc. changed its name to Entergy Utility Enterprises, Inc., and Entergy Mississippi Power andLight then changed its name to Entergy Mississippi, LLC. Entergy Mississippi, LLC holds substantially all of the assets, and assumedsubstantially all of the liabilities, of Entergy Mississippi, Inc. The restructuring was accounted for as a transaction between entities undercommon control.Entergy Wholesale CommoditiesEntergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants, located inthe northern United States and the sale of the electric power produced by its operating plants to wholesale customers. EntergyWholesale Commodities revenues are primarily derived from sales of energy and generation capacity from these plants. EntergyWholesale Commodities also provides operations and management services, including decommissioning services, to nuclear powerplants owned by other utilities in the United States. Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.See “Entergy Wholesale Commodities Exit from the Merchant Power Business” in Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for further discussion of the operation and planned shutdown or sale of each of theEntergy Wholesale Commodities nuclear power plants.259Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyPropertyNuclear Generating StationsEntergy Wholesale Commodities includes the ownership of the following nuclear power plants:Power Plant Market In ServiceYear Acquired Location Capacity - Reactor Type LicenseExpirationDatePilgrim (a) ISO-NE 1972 July 1999 Plymouth, MA 688 MW - Boiling Water 2032 (a)Indian Point 3 (b) NYISO 1976 Nov. 2000 Buchanan, NY 1,041 MW - Pressurized Water 2025 (b)Indian Point 2 (b) NYISO 1974 Sept. 2001 Buchanan, NY 1,028 MW - Pressurized Water 2024 (b)Vermont Yankee (c) ISO-NE 1972 July 2002 Vernon, VT 605 MW - Boiling Water 2032 (c)Palisades (d) MISO 1971 Apr. 2007 Covert, MI 811 MW - Pressurized Water 2031 (d)(a)The Pilgrim plant is expected to cease operations on May 31, 2019, at the end of its current fuel cycle.(b)The Indian Point 2 and Indian Point 3 plants are expected to cease operation by April 30, 2020 and April 30, 2021, respectively.(c)On December 29, 2014, the Vermont Yankee plant ceased power production. In January 2019, the Vermont Yankee plant wassold to NorthStar.(d)The Palisades plant is expected to cease operations on May 31, 2022.See “Entergy Wholesale Commodities Exit from the Merchant Power Business” in Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of the operation and planned shutdown or sale of each of the EntergyWholesale Commodities nuclear power plants. Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point inMichigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants,respectively. These facilities are in various stages of the decommissioning process, and Big Rock Point is also under contract to be soldwith the Palisades plant.Non-nuclear Generating StationsEntergy Wholesale Commodities includes the ownership, or interests in joint ventures that own, the following non-nuclearpower plants:Plant Location Ownership Net OwnedCapacity (a) TypeIndependence Unit 2; 842 MW Newark, AR 14% 121 MW(b) CoalRS Cogen; 425 MW (c) Lake Charles, LA 50% 213 MW Gas/SteamNelson 6; 550 MW Westlake, LA 11% 60 MW(b) Coal(a)“Net Owned Capacity” refers to the nameplate rating on the generating unit.(b)The owned MW capacity is the portion of the plant capacity owned by Entergy Wholesale Commodities. For a complete listingof Entergy’s jointly-owned generating stations, refer to “Jointly-Owned Generating Stations” in Note 1 to the financialstatements.(c)Indirectly owned through interests in unconsolidated joint ventures.260Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyIndependent System OperatorsThe Pilgrim plant falls under the authority of the Independent System Operator New England (ISO-NE) and the Indian Pointplants fall under the authority of the New York Independent System Operator (NYISO). The Palisades plant falls under the authority ofthe MISO. The primary purpose of ISO-NE, NYISO, and MISO is to direct the operations of the major generation and transmissionfacilities in their respective regions; ensure grid reliability; administer and monitor wholesale electricity markets; and plan for theirrespective region’s energy needs.Energy and Capacity SalesAs a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to itscustomers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead orspot markets. Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specifiedreserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forwardphysical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sellsboth capacity and energy. While the terminology and payment mechanics vary in these contracts, each of these types of contractsrequires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. See “Market and Credit RiskSensitive Instruments” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for additionalinformation regarding these contracts.As part of the purchase of the Palisades plant in 2007, Entergy executed a 15-year PPA with the seller, Consumers Energy, for100% of the plant’s output, excluding any future uprates. Under the purchased power agreement, Consumers Energy receives the valueof any new environmental credits for the first ten years of the agreement. Palisades and Consumers Energy will share on a 50/50 basisthe value of any new environmental credits for years 11 through 15 of the agreement. The environmental credits are defined as benefitsfrom a change in law that causes capability of the plant as of the purchase date to become a tradable attribute (e.g., emission credit,renewable energy credit, environmental credit, “green” credit, etc.) or otherwise to have a market value. Entergy intends to shut downthe Palisades nuclear power plant permanently on May 31, 2022.CustomersEntergy Wholesale Commodities’ customers for the sale of both energy and capacity from its nuclear plants include retail powerproviders, utilities, electric power co-operatives, power trading organizations, and other power generation companies. These customersinclude Consolidated Edison and Consumers Energy, companies from which Entergy purchased plants, and ISO-NE, NYISO, andMISO. Substantially all of the credit exposure associated with the planned energy output under contract for Entergy WholesaleCommodities nuclear plants is with counterparties or their guarantors that have public investment grade credit ratings.CompetitionThe ISO-NE and NYISO markets are highly competitive. Entergy Wholesale Commodities has numerous competitors in NewEngland and New York, including generation companies affiliated with regulated utilities, other independent power producers,municipal and co-operative generators, owners of co-generation plants and wholesale power marketers. Entergy WholesaleCommodities is an independent power producer, which means it generates power for sale to third parties at day ahead or spot marketprices to the extent that the power is not sold under a fixed price contract. Municipal and co-operative generators also generate powerbut use most of it to deliver power to their municipal or co-operative power customers. Owners of co-generation plants produce powerprimarily for their own consumption. Wholesale power marketers do not own generation; rather they buy power from generators orother market participants and resell it to retail providers or other market participants. Competition in the New England and New Yorkpower markets is affected by, among other factors, the amount of generation and transmission capacity in261Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energythese markets. MISO does not have a centralized clearing capacity market, but load serving entities do meet the majority of theircapacity needs through bilateral contracts and self-supply with a smaller portion coming through voluntary MISO auctions. Themajority of Palisades’ current output is contracted to Consumers Energy through 2022. Entergy Wholesale Commodities does notexpect to be materially affected by competition in the MISO market in the near term.SeasonalityEntergy Wholesale Commodities’ revenues and operating income are subject to fluctuations during the year due to seasonalfactors, weather conditions, and contract pricing. Refueling outages are generally in the spring and fall, and cause volumetric decreasesduring those seasons. When outdoor and cooling water temperatures are low, generally during colder months, Entergy WholesaleCommodities nuclear power plants operate more efficiently, and consequently, generate more electricity. Many of Entergy WholesaleCommodities’ contracts provide for shaped pricing over the course of the year. As a result of these factors, Entergy WholesaleCommodities’ revenues are typically higher in the first and third quarters than in the second and fourth quarters.Fuel SupplyNuclear FuelSee “Fuel Supply - Nuclear Fuel” in the Utility portion of Part I, Item 1 for a discussion of the nuclear fuel cycle and markets.Entergy Nuclear Fuels Company, a wholly-owned subsidiary, is responsible for contracts to acquire nuclear materials, except for fuelfabrication, for Entergy Wholesale Commodities nuclear power plants, while Entergy Nuclear Operations, Inc. acts as the agent for thepurchase of nuclear fuel assembly fabrication services. All contracts for the disposal of spent nuclear fuel are between the DOE andeach of the nuclear power plant owners.Other Business ActivitiesEntergy Nuclear Power Marketing, LLC (ENPM) was formed in 2005 to centralize the power marketing function for EntergyWholesale Commodities nuclear plants. Upon its formation, ENPM entered into long-term power purchase agreements with the EntergyWholesale Commodities subsidiaries that own nuclear power plants (generating subsidiaries). As part of a series of agreements, ENPMagreed to assume and/or otherwise service the existing power purchase agreements that were in effect between the generatingsubsidiaries and their customers. ENPM’s functions include origination of new energy and capacity transactions and generationscheduling.Entergy Nuclear, Inc. can pursue service agreements with other nuclear power plant owners who seek the advantages ofEntergy’s scale and expertise but do not necessarily want to sell their assets. Services provided by either Entergy Nuclear, Inc. or otherEntergy Wholesale Commodities subsidiaries include engineering, operations and maintenance, fuel procurement, management andsupervision, technical support and training, administrative support, and other managerial or technical services required to operate,maintain, and decommission nuclear electric power facilities. Entergy Nuclear, Inc. provided decommissioning services for the MaineYankee nuclear power plant.TLG Services, a subsidiary of Entergy Nuclear, Inc., offers decommissioning, engineering, and related services to nuclearpower plant owners.Entergy provides plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska.In 2010 an Entergy subsidiary signed an agreement to extend the management support services to Cooper Nuclear Station by 15 years,through January 2029.262Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyRegulation of Entergy’s BusinessFederal Power ActThe Federal Power Act provides the FERC the authority to regulate:•the transmission and wholesale sale of electric energy in interstate commerce;•the reliability of the high voltage interstate transmission system through reliability standards;•sale or acquisition of certain assets;•securities issuances;•the licensing of certain hydroelectric projects;•certain other activities, including accounting policies and practices of electric and gas utilities; and•changes in control of FERC jurisdictional entities or rate schedules.The Federal Power Act gives the FERC jurisdiction over the rates charged by System Energy for Grand Gulf capacity andenergy provided to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans and over the rates charged byEntergy Arkansas and Entergy Louisiana to unaffiliated wholesale customers. The FERC also regulates wholesale power sales betweenthe Utility operating companies. In addition, the FERC regulates the MISO RTO, an independent entity that maintains functional controlover the combined transmission systems of its members and administers wholesale energy, capacity, and ancillary services markets formarket participants in the MISO region, including the Utility operating companies. FERC regulation of the MISO RTO includesregulation of the design and implementation of the wholesale markets administered by the MISO RTO, as well as the rates, terms, andconditions of open access transmission service over the member systems and the allocation of costs associated with transmissionupgrades.Entergy Arkansas holds a FERC license that expires in 2053 for two hydroelectric projects totaling 70 MW of capacity.State RegulationUtilityEntergy Arkansas is subject to regulation by the APSC as to the following:•utility service;•retail rates;•fuel cost recovery;•reasonable and adequate service;•leasing;•the acquisition, sale, or lease of any public utility plant or property constituting an operating unit or system;•depreciation rates;•certificates of convenience and necessity and certificates of environmental compatibility and public need; and•the issuance and sale of certain securities.Additionally, Entergy Arkansas serves a limited number of retail customers in Tennessee. Pursuant to legislation enacted in Tennessee,Entergy Arkansas is subject to complaints before the Tennessee Regulatory Authority only if it fails to treat its retail customers inTennessee in the same manner as its retail customers in Arkansas. Additionally, Entergy Arkansas maintains limited facilities inMissouri but does not provide retail electric service to customers in Missouri. Although Entergy Arkansas obtained a certificate withrespect to its Missouri facilities, Entergy Arkansas is not subject to the retail rate or regulatory scheme in Missouri.263Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyEntergy Louisiana’s electric and gas business is subject to regulation by the LPSC as to the following:•utility service;•retail rates and charges;•standards of service;•certification of generating facilities and certain transmission projects;•certification of power or capacity purchase contracts;•audit of the fuel adjustment charge, environmental adjustment charge, avoided cost payment to Qualifying Facilities, energyefficiency rider, and purchased gas adjustment charge;•integrated resource planning;•utility mergers and acquisitions and other changes of control; and•depreciation and other matters.Entergy Mississippi is subject to regulation by the MPSC as to the following:•utility service;•service areas;•facilities;•certification of generating facilities and certain transmission projects;•retail rates;•fuel cost recovery;•depreciation rates; and•mergers and changes of control.Entergy Mississippi is also subject to regulation by the APSC as to the certificate of environmental compatibility and public needfor the Independence Station, which is located in Arkansas.Entergy New Orleans is subject to regulation by the City Council as to the following:•utility service;•retail rates and charges;•standards of service;•depreciation and other matters;•integrated resource planning;•audit of fuel adjustment charge, environmental adjustment charge, and purchased gas adjustment charge;•issuance and sale of certain securities; and•mergers and changes of control.To the extent authorized by governing legislation, Entergy Texas is subject to the original jurisdiction of the municipalauthorities of a number of incorporated cities in Texas with appellate jurisdiction over such matters residing in the PUCT. EntergyTexas is also subject to regulation by the PUCT as to the following:•retail rates and service in unincorporated areas of its service territory, and in municipalities that have ceded jurisdiction to thePUCT;•customer service standards;•certification of certain transmission and generation projects; and•extensions of service into new areas.264Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyRegulation of the Nuclear Power IndustryAtomic Energy Act of 1954 and Energy Reorganization Act of 1974Under the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974, the operation of nuclear plants is heavilyregulated by the NRC, which has broad power to impose licensing and safety-related requirements. The NRC has broad authority toimpose civil penalties or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance isachieved. Entergy Arkansas, Entergy Louisiana, and System Energy, as owners of all or portions of ANO, River Bend and Waterford 3,and Grand Gulf, respectively, and Entergy Operations, as the licensee and operator of these units, are subject to the jurisdiction of theNRC. Entergy subsidiaries in the Entergy Wholesale Commodities segment are subject to the NRC’s jurisdiction as the owners andoperators of Pilgrim, Indian Point Energy Center, and Palisades. Substantial capital expenditures, increased operating expenses, and/orhigher decommissioning costs at Entergy’s nuclear plants because of revised safety requirements of the NRC could be required in thefuture.Nuclear Waste Policy Act of 1982Spent Nuclear FuelUnder the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage facilities for, and todispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors. Entergy’snuclear owner/licensee subsidiaries have been charged fees for the estimated future disposal costs of spent nuclear fuel in accordancewith the Nuclear Waste Policy Act of 1982. The affected Entergy companies entered into contracts with the DOE, whereby the DOE isto furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generationprior to that date. Entergy Arkansas is the only one of the Utility operating companies that generated electric power with nuclear fuelprior to that date and has a recorded liability as of December 31, 2018 of $186.9 million for the one-time fee. Entergy acceptedassignment of the Pilgrim, FitzPatrick and Indian Point 3, Indian Point 1 and Indian Point 2, Vermont Yankee, Palisades, and Big RockPoint spent fuel disposal contracts with the DOE held by their previous owners. The FitzPatrick spent fuel disposal contract wasassigned to Exelon as part of the sale of the plant, completed in March 2017. The previous owners have paid or retained liability for thefees for all generation prior to the purchase dates of those plants. The fees payable to the DOE may be adjusted in the future to assurefull recovery. Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be propercomponents of nuclear fuel expense. Provisions to recover such costs have been or will be made in applications to regulatoryauthorities for the Utility plants. Entergy’s total spent fuel fees to date, including the one-time fee liability of Entergy Arkansas, havesurpassed $1.6 billion (exclusive of amounts relating to Entergy plants that were paid or are owed by prior owners of those plants).The permanent spent fuel repository in the U.S. has been legislated to be Yucca Mountain, Nevada. The DOE is required by lawto proceed with the licensing (the DOE filed the license application in June 2008) and, after the license is granted by the NRC, proceedwith the repository construction and commencement of receipt of spent fuel. Because the DOE has not begun accepting spent fuel, it isin non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts. The DOE continues todelay meeting its obligation. Specific steps were taken to discontinue the Yucca Mountain project, including a motion to the NRC towithdraw the license application with prejudice and the establishment of a commission to develop recommendations for alternativespent fuel storage solutions. In August 2013 the U.S. Court of Appeals for the D.C. Circuit ordered the NRC to continue with the YuccaMountain license review, but only to the extent of funds previously appropriated by Congress for that purpose and not yet used.Although the NRC completed the safety evaluation report for the license review in 2015, the previously appropriated funds are notsufficient to complete the review, including required hearings. The government has taken no effective action to date related to therecommendations of the appointed spent fuel study commission. Accordingly, large uncertainty remains regarding the time frame underwhich the DOE will begin to accept spent fuel from Entergy’s facilities for storage or disposal. As a result, continuing futureexpenditures will be required to increase spent fuel storage capacity at Entergy’s nuclear sites.265Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyFollowing the defunding of the Yucca Mountain spent fuel repository program, the National Association of Regulatory UtilityCommissioners and others sued the government seeking cessation of collection of the one mill per net kWh generated and sold afterApril 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset thefee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C. Circuit. Thepetition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014. Management cannot predict thepotential timing or magnitude of future spent fuel fee revisions that may occur.As a result of the DOE’s failure to begin disposal of spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of1982 and the spent fuel disposal contracts, Entergy’s nuclear owner/licensee subsidiaries have incurred and will continue to incurdamages. These subsidiaries have been, and continue to be, involved in litigation to recover the damages caused by the DOE’s delay inperformance. Through 2018, Entergy’s subsidiaries won and collected on judgments against the government totaling over $500 million.In April 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $29 million in favor of Entergy Arkansasand against the DOE in the second round ANO damages case. Also in April 2015 the U.S. Court of Federal Claims issued a judgment inthe amount of $44 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case. In June2015, Entergy Arkansas and System Energy appealed to the U.S. Court of Appeals for the Federal Circuit portions of those decisionsrelating to cask loading costs. In April 2016 the Federal Circuit issued a decision in both appeals in favor of Entergy Arkansas andSystem Energy, and remanded the cases back to the U.S. Court of Federal Claims. In June 2016 the U.S. Court of Federal Claims issueda final judgment in the amount of $49 million in favor of System Energy and against the DOE in the second round Grand Gulf damagescase, and Entergy received the payment from the U.S. Treasury in August 2016. In July 2016 the U.S. Court of Federal Claims issued afinal judgment in the amount of $31 million in favor of Entergy Arkansas and against the DOE in the second round ANO damagescase, and Entergy received payment from the U.S. Treasury in October 2016. In December 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $81 million in favor of Entergy NuclearIndian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case, and Entergy received thepayment from the U.S. Treasury in June 2016.In January 2016 the U.S. Court of Federal Claims issued a judgment in the amount of $49 million in favor of Entergy Louisianaand against the DOE in the first round Waterford 3 damages case. In April 2016, Entergy Louisiana appealed to the U.S. Court ofAppeals for the Federal Circuit the portion of that decision relating to cask loading costs. After the ANO and Grand Gulf appeal wasrendered, the U.S. Court of Appeals for the Federal Circuit remanded the Waterford 3 case back to the U.S. Court of Federal Claims fordecision in accordance with the U.S. Court of Appeals ruling on cask loading costs. In August 2016 the U.S. Court of Federal Claimsissued a final judgment in the Waterford 3 case in the amount of $53 million, and Entergy Louisiana received the payment from theU.S. Treasury in November 2016.In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of EntergyLouisiana and against the DOE in the first round River Bend damages case, reserving the issue of cask loading costs pending resolutionof the appeal on the same issues in the Entergy Arkansas and System Energy cases. Entergy Louisiana received payment from the U.S.Treasury in August 2016. In September 2016 the U.S. Court of Federal Claims issued a further judgment in the River Bend case in theamount of $5 million. Entergy Louisiana received the payment from the U.S. Treasury in January 2017. In May 2017 the U.S. Court ofFederal Claims issued a final judgment in the first round River Bend damages case for $0.6 million, awarding certain cask loading coststhat had not previously been adjudicated by the court. In May 2016, Entergy Nuclear Vermont Yankee and the DOE entered into a stipulated agreement and the U.S. Court of FederalClaims issued a judgment in the amount of $19 million in favor of Entergy Nuclear Vermont Yankee266Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyand against the DOE in the second round Vermont Yankee damages case. Entergy received payment from the U.S. Treasury in June2016.In September 2016 the U.S. Court of Federal Claims issued a final judgment in the Entergy Nuclear Palisades case in the amountof $14 million. Entergy Nuclear Palisades received payment from the U.S. Treasury in January 2017.In October 2016 the U.S. Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case inthe amount of $34 million. Entergy Nuclear Indian Point 2 received payment from the U.S. Treasury in January 2017.In September 2018 the DOE submitted an offer of judgment to resolve claims in the second round of the Entergy NuclearGeneration Company case involving Pilgrim. The $62 million offer was accepted by Entergy Nuclear Generation Company, and theU.S. Court of Federal Claims issued a judgment in that amount in favor of Entergy Nuclear Generation Company. Entergy receivedpayment from the U.S. Treasury in October 2018.Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, andcannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.Pending DOE acceptance and disposal of spent nuclear fuel, the owners of nuclear plants are providing their own spent fuelstorage. Storage capability additions using dry casks began operations at Palisades in 1993, at ANO in 1996, at FitzPatrick in 2002, atRiver Bend in 2005, at Grand Gulf in 2006, at Indian Point and Vermont Yankee in 2008, at Waterford 3 in 2011, and at Pilgrim in2015. These facilities will be expanded as needed. Nuclear Plant DecommissioningEntergy Arkansas, Entergy Louisiana, and System Energy are entitled to recover from customers through electric rates theestimated decommissioning costs for ANO, Waterford 3, and Grand Gulf, respectively. In addition, Entergy Louisiana and EntergyTexas are entitled to recover from customers through electric rates the estimated decommissioning costs for the portion of River Bendsubject to retail rate regulation. The collections are deposited in trust funds that can only be used in accordance with NRC and otherapplicable regulatory requirements. Entergy periodically reviews and updates the estimated decommissioning costs to reflect inflationand changes in regulatory requirements and technology, and then makes applications to the regulatory authorities to reflect, in rates, thechanges in projected decommissioning costs.In July 2010 the LPSC approved increased decommissioning collections for Waterford 3 and the Louisiana regulated share ofRiver Bend and in December 2010 the PUCT approved increased decommissioning collections for the Texas share of River Bend toaddress previously identified funding shortfalls. This LPSC decision contemplated that the level of decommissioning collections couldbe revisited should the NRC grant license extensions for both Waterford 3 and River Bend, which has now occurred. In December 2016the APSC ordered continued collections for decommissioning for ANO 2, while finding that ANO 1’s decommissioning was adequatelyfunded without continued collections. In December 2017 the APSC ordered continued collections for decommissioning for ANO 2, andagain found that ANO 1’s decommissioning was adequately funded without continued collections. In September 2016 the NRC issueda 20-year operating license renewal for Grand Gulf. In a 2017 filing at the FERC, System Energy stated that with the renewed operatinglicense, Grand Gulf’s decommissioning trust was sufficiently funded, and proposed (among other things) to cease decommissioningcollections for Grand Gulf effective October 1, 2017. The FERC accepted the proposal subject to refund, and appointed a settlementjudge to oversee settlement negotiations in the case. Entergy currently believes its decommissioning funding will be sufficient for itsnuclear plants subject to retail rate regulation, although decommissioning cost inflation and trust fund performance will ultimatelydetermine the adequacy of the funding amounts.267Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyIn January 2019, Entergy sold 100% of the membership interest in Entergy Nuclear Vermont Yankee to a subsidiary ofNorthStar. As a result of the sale, NorthStar assumed ownership of Vermont Yankee and its decommissioning and site restoration trusts,together with complete responsibility for the facility’s decommissioning and site restoration. See Note 9 to the financial statements forfurther discussion of Vermont Yankee decommissioning costs and see “Entergy Wholesale Commodities Exit from the MerchantPower Business” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion ofthe NorthStar transaction.For the Indian Point 3 and FitzPatrick plants purchased in 2000 from NYPA, NYPA retained the decommissioning trust fundsand the decommissioning liabilities with the right to require the Entergy subsidiaries to assume each of the decommissioning liabilitiesprovided that it assigns the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. In August 2016,Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilitiesfor the Indian Point 3 and FitzPatrick plants to Entergy, which was completed in January 2017. In March 2017, Entergy sold theFitzPatrick plant to Exelon, and as part of the transaction, the FitzPatrick decommissioning trust fund, along with the decommissioningobligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of thetransaction. See Note 14 to the financial statements for discussion of the FitzPatrick sale.In March 2018 filings with the NRC were made for certain Entergy subsidiaries’ nuclear plants reporting on decommissioningfunding. Those reports showed that decommissioning funding for each of those nuclear plants met the NRC’s financial assurance andplanning requirements.Additional information with respect to Entergy’s decommissioning costs and decommissioning trust funds is found in Note 9and Note 16 to the financial statements.Price-Anderson ActThe Price-Anderson Act requires that reactor licensees purchase and maintain the maximum amount of nuclear liabilityinsurance available and participate in an industry assessment program called Secondary Financial Protection in order to protect thepublic in the event of a nuclear power plant accident. The costs of this insurance are borne by the nuclear power industry. Congressamended and renewed the Price-Anderson Act in 2005 for a term through 2025. The Price-Anderson Act limits the contingent liabilityfor a single nuclear incident to a maximum assessment of approximately $137.6 million per reactor (with 99 nuclear industry reactorscurrently participating). In the case of a nuclear event in which Entergy Arkansas, Entergy Louisiana, System Energy, or an EntergyWholesale Commodities company is liable, protection is afforded through a combination of private insurance and the SecondaryFinancial Protection program. In addition to this, insurance for property damage, costs of replacement power, and other risks relating tonuclear generating units is also purchased. The Price-Anderson Act and insurance applicable to the nuclear programs of Entergy arediscussed in more detail in Note 8 to the financial statements.NRC Reactor Oversight ProcessThe NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for itssafety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing twodistinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee.The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licenseeresponse column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and“multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities.Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general,progressively increasing levels of associated costs. ANO 1, ANO 2, Waterford 3, River Bend, Indian Point 2, Indian Point 3, andPalisades are in Column 1. Grand Gulf is in Column 2. Pilgrim is in Column 4 and was subject to an extensive, but limited, set ofrequired NRC inspections that were completed in 2018 with a finding by the NRC in January 2019 that the corrective actions requiredto address the concerns that led to placement in Column 4 had268Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energybeen completed and that Pilgrim had demonstrated sustained improvement. See Note 8 to the financial statements for further discussionof the placement of Pilgrim in Column 4 of the NRC’s matrix.Environmental RegulationEntergy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over airquality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Managementbelieves that Entergy’s businesses are in substantial compliance with environmental regulations currently applicable to its facilities andoperations, with reference to possible exceptions noted below. Because environmental regulations are subject to change, futurecompliance requirements and costs cannot be precisely estimated. Except to the extent discussed below, at this time compliance withfederal, state, and local provisions regulating the discharge of materials into the environment, or otherwise protecting the environment,is incorporated into the routine cost structure of Entergy’s businesses and is not expected to have a material effect on their competitiveposition, results of operations, cash flows, or financial position.Clean Air Act and Subsequent AmendmentsThe Clean Air Act and its amendments establish several programs that currently or in the future may affect Entergy’s fossil-fueled generation facilities and, to a lesser extent, certain operations at nuclear and other facilities. Individual states also operate similarindependent state programs or delegated federal programs that may include requirements more stringent than federal regulatoryrequirements. These programs include:•New source review and preconstruction permits for new sources of criteria air pollutants, greenhouse gases, and significantmodifications to existing facilities;•Acid rain program for control of sulfur dioxide (SO2) and nitrogen oxides (NOx);•Nonattainment area programs for control of criteria air pollutants, which could include fee assessments for air pollutant emissionsources under Section 185 of the Clean Air Act if attainment is not reached in a timely manner;•Hazardous air pollutant emissions reduction programs;•Interstate Air Transport;•Operating permit programs and enforcement of these and other Clean Air Act programs;•Regional Haze programs; and•New and existing source standards for greenhouse gas and other air emissions.New Source Review (NSR)Preconstruction permits are required for new facilities and for existing facilities that undergo a modification that results in asignificant net emissions increase and is not classified as routine repair, maintenance, or replacement. Units that undergo certain non-routine modifications must obtain a permit modification and may be required to install additional air pollution control technologies.Entergy has an established process for identifying modifications requiring additional permitting approval and follows the regulationsand associated guidance provided by the states and the federal government with regard to the determination of routine repair,maintenance, and replacement. Several years ago, however, the EPA implemented an enforcement initiative, aimed primarily at coalplants, to identify modifications that it does not consider routine for which the unit did not obtain a modified permit. Various courts andthe EPA have been inconsistent in their judgments regarding modifications that are considered routine and on other legal issues thataffect this program.In February 2011, Entergy received a request from the EPA for several categories of information concerning capital andmaintenance projects at the White Bluff and Independence facilities, both located in Arkansas, in order to determine compliance withthe Clean Air Act, including NSR requirements and air permits issued by the Arkansas Department of Environmental Quality. In August2011, Entergy’s Nelson facility, located in Louisiana, received a similar request for information from the EPA. In September 2015 anadditional request for similar information was269Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyreceived for the White Bluff facility. Entergy responded to all requests. None of these EPA requests for information alleged that thefacilities were in violation of law.In January 2018 and February 2018, Entergy Arkansas, Entergy Mississippi, Entergy Power, and other co-owners received 60-day notice of intent to sue letters from the Sierra Club and the National Parks Conservation Association concerning allegations ofviolations of new source review and permitting provisions of the Clean Air Act at the Independence and White Bluff coal-burning units,respectively. In November 2018, following extensive negotiations, Entergy Arkansas, Entergy Mississippi, and Entergy Power entered aproposed settlement resolving those claims as well as other issues facing Entergy Arkansas’s fossil generation plants. The settlement,which formally resolves a complaint filed by the Sierra Club and the National Parks Conservation Association, is subject to approval bythe U.S. District Court for the District of Arkansas. For further information about the settlement, see “Regional Haze” discussed below. Ozone NonattainmentEntergy Texas operates one fossil-fueled generating facility (Lewis Creek) and is in the process of permitting and constructingone fossil-fueled facility (Montgomery County Power Station) in a geographic area that is not in attainment with the applicable nationalambient air quality standards (NAAQS) for ozone. The nonattainment area that affects Entergy Texas is the Houston-Galveston-Brazoria area. Areas in nonattainment are classified as “marginal,” “moderate,” “serious,” or “severe.” When an area fails to meet theambient air standard, the EPA requires state regulatory authorities to prepare state implementation plans meant to cause progress towardbringing the area into attainment with applicable standards.The Houston-Galveston-Brazoria area was originally classified as “moderate” nonattainment under the 1997 8-hour ozonestandard with an attainment date of June 15, 2010. In June 2007 the Texas governor petitioned the EPA to reclassify Houston-Galveston-Brazoria from “moderate” to “severe” and the EPA granted the request in October 2008. In February 2015 the TexasCommission on Environmental Quality (TCEQ) submitted a request to the EPA for a finding that the Houston-Galveston-Brazoria areais in attainment with the 1997 8-hour ozone standard. The EPA issued this finding in December 2015. In April 2015 the EPA revokedthe 1997 ozone NAAQS, and in May 2016 the EPA issued a proposed rule approving a substitute for the Houston-Galveston-Brazoriaarea. This redesignation indicated that the area has attained the revoked 1997 8-hour ozone NAAQS due to permanent and enforceableemission reductions and that it will maintain that NAAQS for 10 years from the date of the approval. Final approval, which waseffective in December 2016, resulted in the area no longer being subject to any remaining anti-backsliding or nonattainment new sourcereview requirements associated with the revoked 1997 NAAQS. In February 2018 the U.S. Court of Appeals for the D.C. Circuit opinedthat the EPA violated the Clean Air Act by revoking the 1997 standard and by creating the process that allowed states to avoid certainanti-backsliding provisions of the Act. Opponents filed a legal challenge to the December 2016 redesignation based on the February2018 D.C. Circuit decision. The lawsuit has created much uncertainty and the TCEQ recently submitted a request to the EPA that theHouston-Galveston-Brazoria area be re-designated to attainment for the revoked 1997 standards.In March 2008 the EPA revised the eight-hour NAAQS for ozone, creating the potential for additional counties and parishes inwhich Entergy operates to be placed in nonattainment status. In April 2012 the EPA released its final nonattainment designations forthe 2008 ozone NAAQS. In Entergy’s utility service area, the Houston-Galveston-Brazoria, Texas; Baton Rouge, Louisiana; andMemphis, Tennessee/Mississippi/Arkansas areas were designated as in “marginal” nonattainment. In August 2015 and January 2016,the EPA proposed determinations that the Baton Rouge and Memphis areas had attained the 2008 standard. In May 2016 the EPAfinalized those determinations and extended the Houston-Galveston-Brazoria area’s attainment date for the 2008 ozone standard to July20, 2016 and reclassified the Baton Rouge area as attainment for ozone under the 2008 8-hour ozone standard. In December 2016 theEPA determined that the Houston-Galveston-Brazoria area had failed to attain the 2008 ozone standard by the 2016 attainment date.This finding reclassified the Houston-Galveston-Brazoria area from marginal to “moderate” and set the attainment deadline as July 20,2018. In May 2018 the EPA published a proposed rule approving the Houston-Galveston-Brazoria attainment demonstration (aforward-looking model projecting attainment) for the 2008 8-hour ozone standard.270Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyHowever, in November 2018, the EPA signed a proposed rule determining that the area had failed to attain the 2008 standard by theJuly 20, 2018 attainment deadline. This determination will reclassify the Houston-Galveston-Brazoria area from “moderate” to“serious” and set the attainment deadline as July 20, 2021. Upon issuance of the final rule, the reclassification will become effective 30days after publication in the Federal Register.In October 2015 the EPA issued a final rule again lowering the primary and secondary NAAQS for ozone, this time to a level of70 parts per billion. States were required to assess their attainment status and recommend designations to the EPA. In May 2018 theEPA designated Montgomery County, Texas, which is in the Houston-Galveston-Brazoria area, and in which Entergy’s Lewis Creekplant operates, as marginal non-attainment. The final designations were effective in August 2018. Entergy will continue to work withstate environmental agencies on appropriate methods for assessing attainment and nonattainment with the new standard and, wherenecessary, in planning for compliance. The State of Texas is required to develop plans intended to return the area to a condition ofattainment by August 2021.Potential SO2 NonattainmentThe EPA issued a final rule in June 2010 adopting an SO2 1-hour national ambient air quality standard of 75 parts per billion. The EPA designations for counties in attainment and nonattainment were originally due in June 2012, but the EPA indicated that itwould delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violations of the newstandard. In August 2013 the EPA issued final designations for these areas. In Entergy’s utility service territory, only St. Bernard Parishin Louisiana is designated as nonattainment for the SO2 1-hour national ambient air quality standard of 75 parts per billion. Entergydoes not have a generation asset in that parish. In July 2016 the EPA finalized another round of designations for areas with newlymonitored violations of the 2010 standard and those with stationary sources that emit over a threshold amount of SO2. Counties andparishes in which Entergy owns and operates fossil generating facilities that were included in this round of designations includeIndependence County and Jefferson County, Arkansas and Calcasieu Parish, Louisiana. Independence County and Calcasieu Parishwere designated “unclassifiable,” and Jefferson County was designated “unclassifiable/attainment.” In August 2017 the EPA issued aletter indicating that East Baton Rouge and St. Charles parishes would be designated by December 31, 2020 as monitors were installedto determine compliance. In January 2018 the EPA published a final rule designating a third round of attainment and nonattainmentareas. Evangeline Parish, Louisiana, was designated nonattainment. Entergy does not have a generation asset in that parish. Additionalcapital projects or operational changes may be required to continue operating Entergy facilities in areas eventually designated as innonattainment of the standard or designated as contributing to nonattainment areas. In May 2018 the EPA released a proposed rule thatwould retain the standard at 75 parts per billion, which was set in 2010. In November 2018 the EPA proposed to designateIndependence County as “unclassifiable/attainment.” Final EPA action is pending.Hazardous Air PollutantsThe EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which had a compliance date,with a widely granted one-year extension, of April 2016. The required controls have been installed and are operational at all affectedEntergy units. In December 2018 the EPA signed a proposed rule that finds that it is not “appropriate and necessary” to regulatehazardous air pollutants from electric steam generating units under the provisions of section 112(n) of the Clean Air Act. This is areversal of the EPA’s previous finding requiring such regulation. However, the proposal does not seek to revise the MATS rule at thistime. Entergy will continue to monitor this situation.Cross-State Air PollutionIn March 2005 the EPA finalized the Clean Air Interstate Rule (CAIR), which was intended to reduce SO2 and NOx emissionsfrom electric generation plants in order to improve air quality in twenty-nine eastern states. The rule required a combination of capitalinvestment to install pollution control equipment and increased operating costs through the purchase of emission allowances. Entergybegan implementation in 2007, including installation of controls at several facilities and the development of an emission allowanceprocurement strategy.271Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyBased on several court challenges, CAIR and its subsequent versions, now known as the Cross State Air Pollution Rule(CSAPR), have been remanded to and modified by the EPA on multiple occasions. In July 2015 the D.C. Circuit invalidated theallowance budgets created by the EPA for several states, including Texas, and remanded that portion of the rule to the EPA for furtheraction. The court did not stay or vacate the rule in the interim. CSAPR remains in effect.The CSAPR Phase 1 implementation became effective January 1, 2015. Entergy has developed a compliance plan that could,over time, include both installation of controls at certain facilities and an emission allowance procurement strategy.In September 2016 the EPA finalized the CSAPR Update Rule to address interstate transport for the 2008 ozone NAAQS.Starting in 2017 the final rule requires reductions in summer nitrogen oxides (NOx) emissions. Several states, including Arkansas andTexas, filed a challenge to the Update Rule, which remains pending.Regional HazeIn June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a requirementto install SO2 and NOx pollution control technology as Best Available Retrofit Control Technology (BART) to continue operatingcertain of Entergy’s fossil generation units. The rule leaves certain CAVR determinations to the states. In Arkansas, the Arkansas Department of Environmental Quality prepared a state implementation plan (SIP) for Arkansasfacilities to implement its obligations under the CAVR. In April 2012 the EPA finalized a decision addressing the Arkansas RegionalHaze SIP, in which it disapproved a large portion of the Arkansas plan, including the emission limits for NOx and SO2 at WhiteBluff. In April 2015 the EPA published a proposed federal implementation plan (FIP) for Arkansas, taking comment on requiringinstallation of scrubbers and low NOx burners to continue operating both units at the White Bluff plant and both units at theIndependence plant and NOx controls to continue operating the Lake Catherine plant. Entergy filed comments by the deadline inAugust 2015. Among other comments, including opposition to the EPA’s proposed controls on the Independence units, Entergyproposed to meet more stringent SO2 and NOx limits at both White Bluff and Independence within three years of the effective date ofthe final FIP and to cease the use of coal at the White Bluff units at a later date.In September 2016 the EPA published the final Arkansas Regional Haze FIP. In most respects, the EPA finalized its originalproposal but shortened the time for compliance for installation of the NOx controls. The FIP required an emission limitation consistentwith SO2 scrubbers at both White Bluff and Independence by October 2021 and NOx controls by April 2018. The EPA declined toadopt Entergy’s proposals related to ceasing coal use as an alternative to SO2 scrubbers for White Bluff SO2 BART. In November 2016,Entergy and other interested parties, including the State of Arkansas, filed petitions for administrative reconsideration and stay at theEPA as well as petitions for judicial review in the U.S. Court of Appeals for the Eighth Circuit. The Eighth Circuit granted the staypending settlement discussions and pending the State’s development of a SIP that, if approved by the EPA, would replace the FIP. Thestate has proposed its replacement SIP in two parts: Part I considers NOx requirements, and Part II considers SO2 requirements. The EPAapproved the Part I NOx SIP in January 2018. The Part I SIP requires that Entergy address NOx impacts on visibility via compliance withthe CSAPR ozone-season emission trading program. Arkansas has finalized a Part II SIP which is under review by the EPA and iscurrently pending a state administrative appeal. In November 2018 the EPA proposed to finalize the Part II SIP without any substantivechanges. Additionally, on December 31, 2018, the ALJ issued a Recommended Decision granting the Arkansas Department ofEnvironmental Quality’s and Entergy’s Motions for Summary Judgment, which will resolve the administrative appeal if adopted by theArkansas Pollution Control and Ecology Commission. The final Part II SIP requires that Entergy achieve SO2 emission reductions viathe use of low-sulfur coal at both White Bluff and Independence within three years. The Part II SIP also requires that Entergy cease touse coal at White Bluff by December 31, 2028 and notes the current planning assumption that Entergy’s Independence units will ceaseto burn coal by December 31, 2030.272Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyIn January 2018 and February 2018, Entergy Arkansas, Entergy Mississippi, Entergy Power, and other co-owners received 60-day notice of intent to sue letters from the Sierra Club and the National Parks Conservation Association concerning allegations ofviolations of new source review and permitting provisions of the Clean Air Act at the Independence and White Bluff coal-burning units,respectively. In November 2018, following extensive negotiations, Entergy Arkansas, Entergy Mississippi, and Entergy Power entered aproposed settlement resolving those claims and reducing the risk that Entergy Arkansas, as operator of Independence and White Bluff,might be compelled under the Clean Air Act’s regional haze program to install costly emissions control technologies. Consistent withthe terms of the settlement and in many cases also the Part II SIP, Entergy Arkansas, along with co-owners, will begin using only low-sulfur coal at Independence and White Bluff by mid-2021; cease to use coal at White Bluff and Independence by the end of 2028 and2030, respectively; cease operation of the remaining gas unit at Lake Catherine by the end of 2027; reserve the option to develop newgenerating sources at each plant site; and commit to install or propose to regulators at least 800 MWs of renewable generation by theend of 2027, with at least half installed or proposed by the end of 2022 (which includes two existing Entergy Arkansas projects) andwith all qualifying co-owner projects counting toward satisfaction of the obligation. Under the settlement, the Sierra Club and theNational Parks Conservation Association also waive certain potential existing claims under federal and state environmental law withrespect to specified generating plants. The settlement, which formally resolves a complaint filed by the Sierra Club and the NationalParks Conservation Association, is subject to approval by the U.S. District Court for the District of Arkansas. The EPA, which isallowed to comment on such a settlement agreement, has stated that it has no objections to the settlement. The Arkansas AttorneyGeneral and the Arkansas Affordable Entergy Coalition have filed motions to intervene. The court has not acted on the interventionrequests. The Arkansas Attorney General also filed an application before the APSC in December 2018 seeking an investigation into theeffects of the settlement, the Arkansas Affordable Energy Coalition filed to support the investigation, and Entergy Arkansas filed amotion to dismiss the application. Briefing is ongoing.In Louisiana, Entergy worked with the Louisiana Department of Environmental Quality (LDEQ) and the EPA to revise theLouisiana SIP for regional haze, which was disapproved in part in 2012. The LDEQ submitted a revised SIP in February 2017. In May2017 the EPA proposed to approve a majority of the revisions. In September 2017 the EPA issued a proposed SIP approval for theNelson plant, requiring an emission limitation consistent with the use of low-sulfur coal, with a compliance date three years from theeffective date of the final EPA approval. The EPA’s final approval decision was issued in December 2017 and is on appeal to the U.S.Court of Appeals for the Fifth Circuit.New and Existing Source Performance Standards for Greenhouse Gas EmissionsAs a part of a climate plan announced in June 2013, the EPA was directed to (i) reissue proposed carbon pollution standards fornew power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollutionstandards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014;(iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirementthat states submit to the EPA the implementation plans required under Section 111(d) of the Clean Air Act and its implementingregulations by no later than June 30, 2016. In January 2014 the EPA issued the proposed New Source Performance Standards rule fornew sources. In June 2014 the EPA issued proposed standards for existing power plants. Entergy was actively engaged in therulemaking process, and submitted comments to the EPA in December 2014. The EPA issued the final rules for both new and existingsources in August 2015, and they were published in the Federal Register in October 2015. The existing source rule, also called theClean Power Plan, requires states to develop plans for compliance with the EPA’s emission standards. In February 2016 the U.S.Supreme Court issued a stay halting the effectiveness of the rule until the rule is reviewed by the D.C. Circuit and by the U.S. SupremeCourt, if further review is granted. In March 2017 the current administration issued an executive order entitled “Promoting EnergyIndependence and Economic Growth” instructing the EPA to review and then to suspend, revise, or rescind the Clean Power Plan, ifappropriate. The EPA subsequently asked the D.C. Circuit to hold the challenges to the Clean Power Plan and the greenhouse gas newsource performance standards in abeyance and signed a notice of withdrawal of the proposed federal plan, model trading rules, and theClean Energy Incentive Program. The court placed the litigation in abeyance in April 2017. The EPA273Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyAdministrator also sent a letter to the affected governors explaining that states are not currently required to meet Clean Power Plandeadlines, some of which have passed. In October 2017 the EPA proposed a new rule that would repeal the Clean Power Plan on thegrounds that it exceeds the EPA’s statutory authority under the Clean Air Act. In December 2017 the EPA issued an advanced notice ofproposed rulemaking regarding section 111(d), seeking comment on the form and content of a replacement for the Clean Power Plan, ifone is promulgated. In August 2018 the EPA published its proposal to replace the Clean Power Plan. The Affordable Clean Energy(ACE) Rule, which in its current form focuses on existing coal-fired electric generating units, proposes to determine that heat rateimprovements are the best system of emission reductions. The rule also proposes revisions to the New Source Review program toprevent that program from being a barrier to installing heat rate improvement projects under ACE. Additionally, the rule provides statesmore discretion in determining how the best system for emission reductions applies to individual units, including technical feasibilityand the remaining useful life of the facility. Comments on the proposal were due in October 2018. Entergy will continue to be engagedin this rulemaking process.Potential Legislative, Regulatory, and Judicial DevelopmentsIn addition to the specific instances described above, there are a number of legislative and regulatory initiatives concerning airemissions, as well as other media, that are under consideration at the federal, state, and local level. Because of the nature of Entergy’sbusiness, the imposition of any of these initiatives could affect Entergy’s operations. Entergy continues to monitor these initiatives andactivities in order to analyze their potential operational and cost implications. These initiatives include:•designation by the EPA and state environmental agencies of areas that are not in attainment with national ambient air qualitystandards;•introduction of bills in Congress and development of regulations by the EPA proposing further limits on NOx, SO2, mercury,and carbon dioxide and other air emissions. New legislation or regulations applicable to stationary sources could take the formof market-based cap-and-trade programs, direct requirements for the installation of air emission controls onto air emissionsources, or other or combined regulatory programs;•efforts in Congress or at the EPA to establish a federal carbon dioxide emission tax, control structure or unit performancestandards;•revisions to the estimates of the Social Cost of Carbon and its use for regulatory impact analysis of Federal laws and regulations;•implementation of the Regional Greenhouse Gas Initiative by several states in the northeastern United States and similar actionsin other regions of the United States;•efforts on the state and federal level to codify renewable portfolio standards, a clean energy standard, or a similar mechanismrequiring utilities to produce or purchase a certain percentage of their power from defined renewable energy sources or energysources with lower emissions;•efforts to develop more stringent state water quality standards, effluent limitations for Entergy’s industry sector, stormwaterrunoff control regulations, and cooling water intake structure requirements;•efforts to restrict the previously-approved continued use of oil-filled equipment containing certain levels of PCBs;•efforts by certain external groups to encourage reporting and disclosure of carbon dioxide emissions and risk;•the listing of additional species as threatened or endangered, the protection of critical habitat for these species, anddevelopments in the legal protection of eagles and migratory birds; and•the regulation of the management, disposal, and beneficial reuse of coal combustion residuals.Entergy continues to support national legislation that would increase planning certainty for electric utilities while addressingcarbon dioxide emissions in a responsible and flexible manner. By virtue of its proportionally large investment in low-emitting gas-fired and nuclear generation technologies, Entergy has a low overall carbon dioxide emission “intensity,” or rate of carbon dioxideemitted per megawatt-hour of electricity generated. In anticipation of the imposition of carbon dioxide emission limits on the electricindustry in the future, Entergy initiated actions designed to reduce its exposure to potential new governmental requirements related tocarbon dioxide emissions. These voluntary actions included establishment of a formal program to stabilize owned power plant carbondioxide emissions at 2000274Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energylevels through 2005, and Entergy succeeded in reducing emissions below 2000 levels. In 2006, Entergy started including emissionsfrom controllable power purchases as well as its ownership share of generation. Entergy established a second formal voluntaryprogram to stabilize power plant carbon dioxide emissions and emissions from controllable power purchases, cumulatively over theperiod, at 20% below 2000 levels through 2010. In 2011, Entergy extended this commitment through 2020. Total carbon dioxideemissions representing Entergy’s ownership share of power plants and controllable power purchases in the United States wereapproximately 43.7 million tons in 2018 and 39.9 tons in 2017. Entergy participates in the M.J. Bradley & Associates’ Annual Benchmarking Air Emissions Report, an annual analysis of the100 largest U.S. electric power producers. The report is available on the M.J. Bradley website. Entergy’s annual greenhouse gasemissions inventory is also third-party verified, and that certification is made available on the American Carbon Registry website.Entergy participates annually in the Dow Jones Sustainability Index and in 2018 was listed on the North American Index. Entergy hasbeen listed on the World or North American Index, or both, for seventeen consecutive years.Clean Water ActThe 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basisfor the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge ofpollutants from point sources to waters of the United States. The Clean Water Act requires virtually all discharges of pollutants towaters of the United States to be permitted. Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, andsection 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.NPDES Permits and Section 401 Water Quality CertificationsNPDES permits are subject to renewal every five years. Consequently, Entergy is currently in various stages of the dataevaluation and discharge permitting process for its power plants. 316(b) Cooling Water Intake StructuresThe EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing coolingwater intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implementtechnology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts. Entergy,other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challengedvarious aspects of the rule. After litigation, the EPA issued a new final 316(b) rule in August 2014. Entergy is implementing acompliance plan for each affected facility in accordance with the requirements of the final rule.Entergy filed a petition for review of the final rule as a co-petitioner with the Utility Water Act Group. The U.S. Court ofAppeals for the Second Circuit heard oral argument in September 2017 and rendered its decision in July 2018. The U.S. Court ofAppeals upheld the rule in its entirety. Environmental petitioners petitioned the Second Circuit for a panel rehearing or rehearing enbanc, which was denied.Federal Jurisdiction of Waters of the United StatesIn September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federalClean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of adraft scientific report on the “connectivity” of waters that the agency said would inform the rulemaking. This report was finalized inJanuary 2015. The final rule was published in the Federal Register in June 2015. The rule could significantly increase the number andtypes of waters included in the EPA’s and the U.S.275Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyArmy Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’soperations. The final rule was challenged in various federal courts by several parties, including most states. In February 2017 thecurrent administration issued an executive order instructing the EPA and the U.S. Army Corps of Engineers to review the Waters of theUnited States rule and to revise or rescind, as appropriate. The 2015 rule now is stayed throughout Entergy’s utility service territory byactions of the United States District Courts. In December 2018 the EPA released a prepublication copy of its revised definition ofWaters of the United States which proposes to narrow the scope of the Clean Water Act jurisdiction, as compared to the 2015 rule.Comments will be due 60 days after publication in the Federal Register.Groundwater at Certain Nuclear SitesThe NRC requires nuclear power plants to monitor and report regularly the presence of radioactive material in theenvironment. Entergy joined other nuclear utilities and the Nuclear Energy Institute in 2006 to develop a voluntary groundwatermonitoring and protection program. This initiative began after detection of very low levels of radioactive material, primarily tritium, ingroundwater at several plants in the United States. Tritium is a radioactive form of hydrogen that occurs naturally and is also abyproduct of nuclear plant operations. In addition to tritium, other radionuclides have been found in site groundwater at nuclear plants.As part of the groundwater monitoring and protection program, Entergy has: (1) performed reviews of plant groundwatercharacteristics (hydrology) and historical records of past events on site that may have potentially impacted groundwater; (2)implemented fleet procedures on how to handle events that could impact groundwater; and (3) installed groundwater monitoring wellsand began periodic sampling. The program also includes protocols for notifying local officials if contamination is found. To date,radionuclides such as tritium have been detected at Arkansas Nuclear One, Indian Point, Palisades, Pilgrim, Grand Gulf, and RiverBend. Each of these sites has installed groundwater monitoring wells and implemented a program for testing groundwater at the sitesfor the presence of tritium and other radionuclides. Based on current information, the concentrations and locations of radionuclidesdetected at these plants pose no threat to public health or safety, but each site continues to evaluate the results from its groundwatermonitoring program.In February 2016, Entergy disclosed that elevated tritium levels had been detected in samples from several monitoring wells thatare part of Indian Point’s groundwater monitoring program. Investigation of the source of elevated tritium determined that the sourcewas related to a temporary system to process water in preparation for the regularly scheduled refueling outage at Indian Point 2. Thesystem was secured and is no longer in use and additional measures have been taken to prevent reoccurrence should the system beneeded again. In June 2016, Indian Point detected trace amounts of cobalt 58 in a single well. This was associated with the draining anddisassembly of a temporary heat exchanger operated in support of the Indian Point 2 outage. Oversight by the NRC and otherfederal/state government bodies continues. The NRC has issued a green notice of violation related to the adequacy of Entergy’s controlsto prevent the introduction of radioactivity into the site groundwater. Entergy completed corrective actions and is working with the NRCon the closure of the notice of violation.Comprehensive Environmental Response, Compensation, and Liability Act of 1980The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA), authorizes theEPA to mandate clean-up by, or to collect reimbursement of clean-up costs from, owners or operators of sites at which hazardoussubstances may be or have been released. Certain private parties also may use CERCLA to recover response costs. Parties thattransported hazardous substances to these sites or arranged for the disposal of the substances are also deemed liable byCERCLA. CERCLA has been interpreted to impose strict, joint and several liability on responsible parties. Many states have adoptedprograms similar to CERCLA. Entergy subsidiaries in the Utility and Entergy Wholesale Commodities businesses have sent wastematerials to various disposal sites over the years, and releases have occurred at Entergy facilities including nuclear facilities that havebeen or will be sold to decommissioning companies. In addition, environmental laws now regulate certain of Entergy’s operatingprocedures and maintenance practices that historically were not subject to regulation. Some disposal sites used by276Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyEntergy subsidiaries have been the subject of governmental action under CERCLA or similar state programs, resulting in site clean-upactivities. Entergy subsidiaries have participated to various degrees in accordance with their respective potential liabilities in such siteclean-ups and have developed experience with clean-up costs. The affected Entergy subsidiaries have established provisions for theliabilities for such environmental clean-up and restoration activities. Details of potentially material CERCLA and similar state programliabilities are discussed in the “Other Environmental Matters” section below.Coal Combustion ResidualsIn June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contained two primary regulatoryoptions: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called“special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills orsurface impoundments as non-hazardous wastes under Subtitle D of RCRA. Under both options, CCRs that are beneficially reused incertain processes would remain excluded from hazardous waste regulation. In April 2015 the EPA published the final CCR rule with thematerial being regulated under the second scenario presented above - as non-hazardous wastes regulated under RCRA Subtitle D.The final regulations create new compliance requirements including modified storage, new notification and reporting practices,product disposal considerations, and CCR unit closure criteria. Entergy believes that on-site disposal options will be available at itsfacilities, to the extent needed for CCR that cannot be transferred for beneficial reuse. As of December 31, 2018, Entergy has recordedasset retirement obligations related to CCR management of $18.4 million.In December 2016 the Water Infrastructure Improvements for the Nation Act (WIIN Act) was signed into law, which authorizesstates to regulate coal ash rather than leaving primary enforcement to citizen suit actions. States may submit to the EPA proposals for apermit program. In September 2017 the EPA agreed to reconsider certain provisions of the CCR rule in light of the WIIN Act. In March2018 the EPA published its proposed revisions to the CCR rule with comments due at the end of April 2018. In July 2018 the EPAreleased its initial revisions extending certain deadlines and incorporating some risk-based standards. The EPA is expected to releaseadditional revisions in another rulemaking. In August 2018 the D.C. Circuit vacated several provisions of the CCR rule on the basis thatthey were inconsistent with the Resource Conservation and Recovery Act and remanded the matter to the EPA to conduct furtherrulemaking.Pursuant to the EPA Rule, Entergy operates groundwater monitoring systems surrounding its coal combustion residual landfillslocated at White Bluff, Independence, and Nelson. Monitoring to date has detected concentrations of certain listed constituents in thearea, but has not indicated that these constituents originated at the active landfill cells. Reporting has occurred as required, and detectionmonitoring will continue as the rule requires. In late-2017, Entergy determined that certain in-ground wastewater treatment systemrecycle ponds at its White Bluff and Independence facilities require management under the new EPA regulations. In order to meet theseregulations, one of two recycle ponds at White Bluff commenced closure in October 2018. Additionally, the second recycle pond atWhite Bluff is planned for closure on or before October 31, 2020. Any potential requirements for corrective action or operationalchanges under the new EPA rule continue to be assessed. Notably, ongoing litigation has resulted in the EPA’s continuing review of therule. Consequently, the nature and cost of additional corrective action requirements may depend, in part, on the outcome of the EPA’sreview.Other Environmental MattersEntergy Louisiana and Entergy TexasEntergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, currently is involved in the second phase of theremedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana. A manufactured gas plant (MGP) isbelieved to have operated at this site from approximately 1916 to 1931. Coal tar, a277Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyby-product of the distillation process employed at MGPs, apparently was routed to a portion of the property for disposal. The same areaalso has been used as a landfill. In 1999, Entergy Gulf States, Inc. signed a second administrative consent order with the EPA toperform a removal action at the site. In 2002 approximately 7,400 tons of contaminated soil and debris were excavated and disposed offrom an area within the service center. In 2003 a cap was constructed over the remedial area to prevent the migration of contaminationto the surface. In August 2005 an administrative order was issued by the EPA requiring that a 10-year groundwater study be conductedat this site. The groundwater monitoring study commenced in January 2006 and is continuing. The EPA released the second Five YearReview in 2015. The EPA indicated that the current remediation technique was insufficient and that Entergy would need to utilize otherremediation technologies on the site. In July 2015, Entergy submitted a Focused Feasibility Study to the EPA outlining the potentialremedies and suggesting installation of a waterloo barrier. The estimated cost for this remedy is approximately $2 million. Entergy isawaiting comments and direction from the EPA on the Focused Feasibility Study and potential remedy selection. In early 2017 the EPAindicated that the new remedial method, a waterloo barrier, may not be necessary and requested revisions to the Focused FeasibilityStudy. The EPA plans to provide comments on the revised 2017 Focused Feasibility Study in the next Five Year Review in 2020.Entergy is continuing discussions with the EPA regarding the ongoing actions at the site.Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy TexasThe Texas Commission on Environmental Quality (TCEQ) notified Entergy Arkansas, Entergy Louisiana, Entergy New Orleans,and Entergy Texas that the TCEQ believes those entities are potentially responsible parties (PRPs) concerning contamination existing atthe San Angelo Electric Service Company (SESCO) facility in San Angelo, Texas. The facility operated as a transformer repair andscrapping facility from the 1930s until 2003. Both soil and groundwater contamination exists at the site. Entergy subsidiaries senttransformers to this facility. Entergy Arkansas, Entergy Louisiana, and Entergy Texas responded to an information request from theTCEQ. Entergy Louisiana and Entergy Texas joined a group of PRPs responding to site conditions in cooperation with the State ofTexas, creating cost allocation models based on review of SESCO documents and employee interviews, and investigating contributionactions against other PRPs. Entergy Louisiana and Entergy Texas have agreed to contribute to the remediation of contaminated soil andgroundwater at the site in a measure proportionate to those companies’ involvement at the site. Current estimates, although variabledepending on ultimate remediation design and performance, indicate that Entergy’s total share of remediation costs likely will beapproximately $1.5 million to $2 million. Remediation activities continue at the site.Entergy TexasIn December 2016 a transformer inside the Hartburg, Texas Substation had an internal fault resulting in a release ofapproximately 15,000 gallons of non-PCB mineral oil. Cleanup ensued immediately; however, rain caused much of the oil to spreadacross the substation yard and into a nearby wetland. The Texas Commission on Environmental Quality (TCEQ) and the NationalResponse Center were immediately notified, and the TCEQ responded to the site approximately two hours after the cleanup wasinitiated. The remediation liability is estimated at $2.2 million; however, this number could fluctuate depending on the remediationextent and wetland mitigation requirements. In July 2017, Entergy entered into the Voluntary Cleanup Program with the TCEQ.Additional direction is expected from the TCEQ regarding final remediation requirements for the site. In November 2017, additionalsoil sampling was completed in the wetland area and, in February 2018, a site summary report of findings was submitted to the TCEQ.The TCEQ responded in June 2018 and has requested an ecological exclusion criteria checklist/Tier II screening-level ecological riskassessment, and additional site assessment, additional soil samples, groundwater samples, and some additional diagrams and maps.Entergy has developed and is implementing a response plan addressing the TCEQ’s requests.LitigationEntergy uses legal and appropriate means to contest litigation threatened or filed against it, but certain states in which Entergyoperates have proven to be unusually litigious environments. Judges and juries in Louisiana, Mississippi, and Texas have demonstrateda willingness to grant large verdicts, including punitive damages, to plaintiffs278Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System Energyin personal injury, property damage, and business tort cases. The litigation environment in these states poses a significant business riskto Entergy.Ratepayer and Fuel Cost Recovery Lawsuits (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, EntergyNew Orleans, and Entergy Texas)Mississippi Attorney General ComplaintSee Note 2 to the financial statements for a discussion of this proceeding. Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)See Note 8 to the financial statements for a discussion of this litigation.Employment and Labor-related Proceedings (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, EntergyNew Orleans, Entergy Texas, and System Energy)See Note 8 to the financial statements for a discussion of these proceedings.EmployeesEmployees are an integral part of Entergy’s commitment to serving customers. As of December 31, 2018, Entergy subsidiariesemployed 13,688 people.Utility: Entergy Arkansas1,258Entergy Louisiana1,656Entergy Mississippi713Entergy New Orleans278Entergy Texas600System Energy—Entergy Operations3,479Entergy Services3,525Entergy Nuclear Operations2,127Other subsidiaries52Total Entergy13,688Approximately 4,700 employees are represented by the International Brotherhood of Electrical Workers, the Utility WorkersUnion of America, the International Brotherhood of Teamsters, the United Government Security Officers of America, and theInternational Union, Security, Police, and Fire Professionals of America.Availability of SEC filings and other information on Entergy’s websiteEntergy electronically files reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q,current reports on Form 8-K, proxies, and amendments to such reports. The SEC maintains an internet site that contains reports, proxyand information statements, and other information regarding registrants that file electronically with the SEC at http://www.sec.gov.Copies of the reports that Entergy files with the SEC can be obtained at the SEC’s website.279Table of ContentsPart I Item 1Entergy Corporation, Utility operating companies, and System EnergyEntergy uses its website, http://www.entergy.com, as a routine channel for distribution of important information, including newsreleases, analyst presentations and financial information. Filings made with the SEC are posted and available without charge onEntergy’s website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. These filingsinclude annual and quarterly reports on Forms 10-K and 10-Q (including related filings in XBRL format) and current reports on Form8-K; proxy statements; and any amendments to those reports or statements. All such postings and filings are available on Entergy’sInvestor Relations website free of charge. Entergy is providing the address to its internet site solely for the information of investors anddoes not intend the address to be an active link. The contents of the website are not incorporated into this report.280Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyRISK FACTORSInvestors should review carefully the following risk factors and the other information in this Form 10-K. The risks that Entergyfaces are not limited to those in this section. There may be additional risks and uncertainties (either currently unknown or not currentlybelieved to be material) that could adversely affect Entergy’s financial condition, results of operations, and liquidity. See“FORWARD-LOOKING INFORMATION.”Utility Regulatory Risks(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas,and System Energy)The terms and conditions of service, including electric and gas rates, of the Utility operating companies and System Energyare determined through regulatory approval proceedings that can be lengthy and subject to appeal that could result in delays ineffecting rate changes and uncertainty as to ultimate results. The rates that the Utility operating companies and System Energy charge reflect their capital expenditures, operations andmaintenance costs, allowed rates of return, financing costs, and related costs of service. These rates significantly influence the financialcondition, results of operations, and liquidity of Entergy and each of the Utility operating companies and System Energy. These ratesare determined in regulatory proceedings and are subject to periodic regulatory review and adjustment, including adjustment upon theinitiative of a regulator or affected stakeholders.In addition, regulators may initiate proceedings to investigate the prudence of costs in the Utility operating companies’ baserates and examine, among other things, the reasonableness or prudence of the companies’ operation and maintenance practices, level ofexpenditures (including storm costs and costs associated with capital projects), allowed rates of return and rate base, proposed resourceacquisitions, and previously incurred capital expenditures that the operating companies seek to place in rates. The regulators maydisallow costs subject to their jurisdiction found not to have been prudently incurred or found not to have been incurred in compliancewith applicable tariffs, creating some risk to the ultimate recovery of those costs. Regulatory proceedings relating to rates and othermatters typically involve multiple parties seeking to limit or reduce rates. Traditional base rate proceedings, as opposed to formula rateplans, generally have long timelines, are primarily based on historical costs, and may or may not be limited in scope or duration bystatute. The length of these base rate proceedings can cause the Utility operating companies and System Energy to experienceregulatory lag in recovering costs through rates. Decisions are typically subject to appeal, potentially leading to additional uncertaintyassociated with rate case proceedings. The base rates of Entergy Texas are established largely in traditional base rate case proceedings. Apart from base rateproceedings, Entergy Texas has also filed to use rate riders to recover the revenue requirements associated with certain authorizedhistorical costs. For example, Entergy Texas has recovered distribution-related capital investments through the distribution costrecovery factor rider mechanism, transmission-related capital investments and certain non-fuel MISO charges through the transmissioncost recovery factor rider mechanism, and MISO fuel and energy-related costs through the fixed fuel factor mechanism. Entergy Texasis also required to make a filing every three years, at a minimum, reconciling its fuel and purchased power costs and fuel factorrevenues. In the course of this reconciliation, the PUCT determines whether eligible fuel and fuel-related expenses and revenues arenecessary and reasonable, and makes a prudence finding for each of the fuel-related contracts for the reconciliation period.Between base rate cases, Entergy Arkansas and Entergy Mississippi are able to adjust base rates annually through formula rateplans that utilize a forward test year (Entergy Arkansas) or forward-looking features (Entergy Mississippi). In response to EntergyArkansas’s application for a general change in rates in 2015, the APSC approved the formula rate plan tariff proposed by EntergyArkansas including its use of a projected year test period and an initial five-year term. The initial five-year term expires in 2021 unlessEntergy Arkansas requests, and the APSC approves, the extension of the formula rate plan tariff for an additional five years through2026. In the event that Entergy Arkansas’s formula rate plan is terminated or is not extended beyond the initial term, Entergy Arkansascould file an281Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energyapplication for a general change in rates that may include a request for continued regulation under a formula rate review mechanism. IfEntergy Mississippi’s formula rate plan is terminated, it would revert to the more traditional rate case environment or seek approval of anew formula rate plan. Entergy Arkansas and Entergy Mississippi recover fuel and purchased energy and certain non-fuel costs throughother APSC-approved and MPSC-approved tariffs, respectively.Entergy Louisiana historically sets electric base rates annually through a formula rate plan using an historic test year. The formof the formula rate plan, on a combined basis, was approved in connection with the business combination of Entergy Louisiana andEntergy Gulf States Louisiana and largely followed the formula rate plans that were approved by the LPSC in connection with the fullelectric base rate cases filed by those companies in February 2013. The formula rate plan has been extended through the test year 2019;certain modifications were made in that extension, including a decrease to the allowed return on equity and the addition of atransmission cost recovery mechanism. The formula rate plan continues to include exceptions from the rate cap and sharingrequirements for certain large capital investment projects, including acquisition or construction of generating facilities and purchasepower agreements approved by the LPSC and as noted, for certain transmission investment, among other items. MISO fuel and energy-related costs are recoverable in Entergy Louisiana’s fuel adjustment clause. In the event that the electric formula rate plan is notrenewed or extended, Entergy Louisiana would revert to the more traditional rate case environment.Entergy New Orleans previously operated under a formula rate plan that ended with the 2011 test year. Currently, based on asettlement agreement approved by the City Council, with limited exceptions, no action may be taken with respect to Entergy NewOrleans’s base rates until rates are implemented in connection with the most recent base rate case that is filed regarding its electric andgas operations. Entergy New Orleans filed its most recent rate case in September 2018 and expects a decision by the City Council laterin 2019, with rates to become effective as of August 2019.The rates of System Energy are established by the FERC, and the costs allowed to be charged pursuant to these rates are, in turn,passed through to the participating Utility operating companies through the Unit Power Sales Agreement, which allows monthlyadjustments to reflect the current operating costs of, and investment in, Grand Gulf. The Unit Power Sales Agreement is currently thesubject of several litigation proceedings at the FERC, including a challenge with respect to System Energy’s authorized return on equityand capital structure. See Note 2 to the financial statements for further discussion of the proceedings.The Utility operating companies and System Energy, and the energy industry as a whole, have experienced a period of risingcosts and investments, and an upward trend in spending, especially with respect to infrastructure investments, which is likely tocontinue in the foreseeable future and could result in more frequent rate cases and requests for, and the continuation of, cost recoverymechanisms. For information regarding rate case proceedings and formula rate plans applicable to the Utility operating companies, seeNote 2 to the financial statements.The Utility operating companies recover fuel, purchased power, and associated costs through rate mechanisms that aresubject to risks of delay or disallowance in regulatory proceedings.The Utility operating companies recover their fuel, purchased power, and associated costs from their customers through ratemechanisms subject to periodic regulatory review and adjustment. Because regulatory review can result in the disallowance of incurredcosts found not to have been prudently incurred, including the cost of replacement power purchased when generators experienceoutages, with the possibility of refunds to ratepayers, there exists some risk to the ultimate recovery of those costs. Regulators may alsoinitiate proceedings to investigate the continued usage or the adequacy and operation of the fuel and purchased power recovery clausesof the Utility operating companies and, therefore, there can be no assurance that existing recovery mechanisms will remain unchangedor in effect at all.The Utility operating companies’ cash flows can be negatively affected by the time delays between when gas, power, or othercommodities are purchased and the ultimate recovery from customers of the costs in rates. On occasion, when the level of incurredcosts for fuel and purchased power rises very dramatically, some of the Utility operating282Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energycompanies may agree to defer recovery of a portion of that period’s fuel and purchased power costs for recovery at a later date, whichcould increase the near-term working capital and borrowing requirements of those companies. For a description of fuel and purchasedpower recovery mechanisms and information regarding the regulatory proceedings for fuel and purchased power costs recovery, seeNote 2 to the financial statements. There remains uncertainty regarding the effect of the termination of the System Agreement on the Utility operating companies.The Utility operating companies historically engaged in the coordinated planning, construction, and operation of generatingresources and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that had been approved bythe FERC. The System Agreement terminated in its entirety on August 31, 2016.There remains uncertainty regarding the long-term effect of the termination of the System Agreement on the Utility operatingcompanies because of the significant effect of the agreement on the generation and transmission functions of the Utility operatingcompanies and the significant period of time (over 30 years) that it had been in existence. In the absence of the System Agreement,there remains uncertainty around the effectiveness of governance processes and the potential absence of federal authority to resolvecertain issues among the Utility operating companies and their retail regulators.In addition, although the System Agreement terminated in its entirety in August 2016, there are a number of outstanding SystemAgreement proceedings at the FERC that may require future adjustments, including challenges to the level and timing of paymentsmade by Entergy Arkansas under the System Agreement. The outcome and timing of these FERC proceedings and resulting recoveryand impact on rates cannot be predicted at this time.For further information regarding the regulatory proceedings relating to the System Agreement, see Note 2 to the financialstatements.The Utility operating companies are subject to economic risks associated with participation in the MISO markets and theallocation of transmission upgrade costs. The operation of the Utility operating companies’ transmission system pursuant to the MISORTO tariff and their participation in the MISO RTO’s wholesale markets may be adversely affected by regulatory or market designchanges, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.On December 19, 2013, the Utility operating companies integrated into the MISO RTO. MISO maintains functional control overthe combined transmission systems of its members and administers wholesale energy and ancillary services markets for marketparticipants in the MISO region, including the Utility operating companies. The Utility operating companies sell capacity, energy, andancillary services on a bilateral basis to certain wholesale customers and offer available electricity production of their generatingfacilities into the MISO day-ahead and real-time energy markets pursuant to the MISO tariff and market rules. The Utility operatingcompanies are subject to economic risks associated with participation in the MISO markets. MISO tariff rules and system conditions,including transmission congestion, could affect the Utility operating companies’ ability to sell power in certain regions and/or theeconomic value of such sales, and MISO market rules may change in ways that cause additional risk.The Utility operating companies participate in the MISO regional transmission planning process and are subject to risksassociated with planning decisions that MISO makes in the exercise of control over the planning of the Utility operating companies’transmission assets that are under MISO’s functional control. The Utility operating companies pay transmission rates that reflect the costof transmission projects that the Utility operating companies do not own, which could increase cash or financing needs. MISO iscurrently evaluating through its stakeholder process potential changes in the transmission project criteria in MISO. These changes, ifadopted, could potentially result in a larger volume of competitively bid and regionally cost allocated transmission projects. In additionto the cash and financing-related risks arising from the potential additional cost allocation to the Utility operating companies from theseprojects, there is a risk that the Utility operating companies’ business and financial position could be harmed as a result of lostinvestment opportunities and other effects that flow from an increased number of competitive projects being approved283Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energyand constructed that are interconnected with their transmission systems. Further, the terms and conditions of the MISO tariff, includingprovisions related to the design and implementation of wholesale markets and the allocation of transmission upgrade costs, are subjectto regulation by the FERC. The operation of the Utility operating companies’ transmission system pursuant to the MISO tariff and theirparticipation in the MISO wholesale markets may be adversely affected by regulatory or market design changes, as well as liabilityunder, or any future inability to comply with, existing or future regulations or requirements. In addition, orders from each of the Utilityoperating companies’ respective retail regulators generally require that the Utility operating companies make periodic filings settingforth the results of analysis of the costs and benefits realized from MISO membership as well as the projected costs and benefits ofcontinued membership in MISO and/or requesting approval of their continued membership in MISO. These filings have been submittedperiodically by each of the Utility operating companies as required by their respective retail regulators, and the outcome of the resultingproceedings may affect the Utility operating companies’ continued membership in MISO.(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and EntergyTexas)A delay or failure in recovering amounts for storm restoration costs incurred as a result of severe weather could have materialeffects on Entergy and those Utility operating companies affected by severe weather.Entergy’s and its Utility operating companies’ results of operations, liquidity, and financial condition can be materially affectedby the destructive effects of severe weather. Severe weather can also result in significant outages for the customers of the Utilityoperating companies and, therefore, reduced revenues for the Utility operating companies during the period of the outages. A delay orfailure in recovering amounts for storm restoration costs incurred or revenues lost as a result of severe weather could have a materialeffect on Entergy and those Utility operating companies affected by severe weather.Nuclear Operating, Shutdown and Regulatory Risks(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities must consistently operatetheir nuclear power plants at high capacity factors in order to be successful, and lower capacity factors could materially affectEntergy’s and their results of operations, financial condition, and liquidity.Nuclear capacity factors significantly affect the results of operations of certain Utility operating companies, System Energy, andEntergy Wholesale Commodities. Nuclear plant operations involve substantial fixed operating costs. Consequently, to be successful, aplant owner must consistently operate its nuclear power plants at high capacity factors, consistent with safety requirements. For theUtility operating companies that own nuclear plants, lower capacity factors can increase production costs by requiring the affectedcompanies to generate additional energy, sometimes at higher costs, from their fossil facilities or purchase additional energy in the spotor forward markets in order to satisfy their supply needs. For the Entergy Wholesale Commodities nuclear plants, lower capacityfactors directly affect revenues and cash flow from operations. Entergy Wholesale Commodities’ forward sales are comprised ofvarious hedge products, many of which have some degree of operational-contingent price risk. Certain unit-contingent contractsguarantee specified minimum capacity factors. In the event plants with these contracts were operating below the guaranteed capacityfactors, Entergy would be subject to price risk for the undelivered power. Further, Entergy Wholesale Commodities’ nuclear forwardsales contracts can also be on a firm LD basis, which subjects Entergy to increasing price risk as capacity factors decrease. Many ofthese firm hedge products have damages risk.Certain of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities nuclear plant ownersperiodically shut down their nuclear power plants to replenish fuel. Plant maintenance and upgrades are often scheduled during suchrefueling outages. If refueling outages last longer than anticipated or if unplanned outages arise, Entergy’s and their results ofoperations, financial condition, and liquidity could be materially affected.284Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyOutages at nuclear power plants to replenish fuel require the plant to be “turned off.” Refueling outages generally are plannedto occur once every 18 to 24 months and average approximately 30 days in duration. Plant maintenance and upgrades are oftenscheduled during such planned outages, which often extends the planned outage duration. When refueling outages last longer thananticipated or a plant experiences unplanned outages, capacity factors decrease and maintenance costs may increase. Lower thanforecasted capacity factors may cause Entergy Wholesale Commodities to experience reduced revenues and may also create damagesrisk with certain hedge products as previously discussed.Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities face risks related to thepurchase of uranium fuel (and its conversion, enrichment, and fabrication). These risks could materially affect Entergy’s and theirresults of operations, financial condition and liquidity.Based upon currently planned fuel cycles, Entergy’s nuclear units have a diversified portfolio of contracts and inventory thatprovides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonablypredictable prices through 2019 and beyond. The nuclear fuel supply portfolio for the Entergy Wholesale Commodities segment isbeing adjusted to reflect reduced overall requirements related to the planned permanent shutdown of the Palisades, Pilgrim, Indian Point2 and Indian Point 3 plants over the next three years. Entergy’s ability to purchase nuclear fuel at reasonably predictable prices,however, depends upon the performance reliability of uranium miners. While there are a number of possible alternate suppliers thatmay be accessed to mitigate any supplier performance failure, the pricing of any such alternate uranium supply from the market will bedependent upon the market for uranium supply at that time. Entergy buys uranium from a diversified mix of sellers located in adiversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide thatsell into the U.S. Market prices for nuclear fuel have been extremely volatile from time to time in the past, and may be subject toincreased volatility due to the imposition of tariffs or shifting trade arrangements between countries. Although Entergy’s nuclear fuelcontract portfolio provides a degree of hedging against market risks for several years, costs for nuclear fuel in the future cannot bepredicted with certainty due to normal inherent market uncertainties, and price changes could materially affect the liquidity, financialcondition, and results of operations of certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities.Entergy’s ability to assure nuclear fuel supply also depends upon the performance and reliability of conversion, enrichment, andfabrication services providers. These service providers are fewer in number than uranium suppliers. For conversion and enrichmentservices, Entergy diversifies its supply by supplier and country and may take special measures to ensure a reliable supply of enricheduranium for fabrication into nuclear fuel. For fabrication services, each plant is dependent upon the performance of the fabricator of thatplant’s nuclear fuel; therefore, Entergy relies upon additional monitoring, inspection, and oversight of the fabrication process to assurereliability and quality of its nuclear fuel. Certain of the suppliers and service providers are located in or dependent upon countries, suchas Russia, in which deteriorating economic conditions or international sanctions could restrict the ability of such suppliers to continue tosupply fuel or provide such services. The inability of such suppliers or service providers to perform such obligations could materiallyaffect the liquidity, financial condition, and results of operations of certain of the Utility operating companies, System Energy, andEntergy Wholesale Commodities.Entergy Arkansas, Entergy Louisiana, System Energy, and the Entergy Wholesale Commodities business face the risk that theNRC will change or modify its regulations, suspend, or revoke their licenses, or increase oversight of their nuclear plants, which couldmaterially affect Entergy’s and their results of operations, financial condition, and liquidity.Under the Atomic Energy Act and Energy Reorganization Act, the NRC regulates the operation of nuclear power plants. TheNRC may modify, suspend, or revoke licenses, shut down a nuclear facility and impose civil penalties for failure to comply with theAtomic Energy Act, related regulations, or the terms of the licenses for nuclear facilities. Interested parties may also intervene whichcould result in prolonged proceedings. A change in the Atomic Energy Act, other applicable statutes, or the applicable regulations orlicenses, or the NRC’s interpretation thereof, may require285Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energya substantial increase in capital expenditures or may result in increased operating or decommissioning costs and could materially affectthe results of operations, liquidity, or financial condition of Entergy (through Entergy Wholesale Commodities), its Utility operatingcompanies, or System Energy. A change in the classification of a plant owned by one of these companies under the NRC’s ReactorOversight Process, which is the NRC’s program to collect information about plant performance, assess the information for its safetysignificance, and provide for appropriate licensee and NRC response, also could cause the owner of the plant to incur materialadditional costs as a result of the increased oversight activity and potential response costs associated with the change in classification.For additional information concerning the current classification of the plants owned by Entergy Arkansas, Entergy Louisiana, SystemEnergy, and the Entergy Wholesale Commodities business, see “Regulation of Entergy’s Business - Regulation of the Nuclear PowerIndustry - NRC Reactor Oversight Process” in Part I, Item 1 and Note 8 to the financial statements.Events at nuclear plants owned by one of these companies, as well as those owned by others, may lead to a change in laws orregulations or the terms of the applicable licenses, or the NRC’s interpretation thereof, or may cause the NRC to increase oversightactivity or initiate actions to modify, suspend, or revoke licenses, shut down a nuclear facility, or impose civil penalties. As a result, ifan incident were to occur at any nuclear generating unit, whether an Entergy nuclear generating unit or not, it could materially affect thefinancial condition, results of operations, and liquidity of Entergy, certain of the Utility operating companies, System Energy, orEntergy Wholesale Commodities. Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities are exposed to risks andcosts related to operating and maintaining their nuclear power plants, and their failure to maintain operational efficiency at theirnuclear power plants could materially affect Entergy’s and their results of operations, financial condition, and liquidity.The nuclear generating units owned by certain of the Utility operating companies, System Energy, and the Entergy WholesaleCommodities business began commercial operations in the 1970s-1980s. Older equipment may require more capital expenditures tokeep each of these nuclear power plants operating safely and efficiently. This equipment is also likely to require periodic upgradingand improvement. Any unexpected failure, including failure associated with breakdowns, forced outages, or any unanticipated capitalexpenditures, could result in increased costs, some of which costs may not be fully recoverable by the Utility operating companies andSystem Energy in regulatory proceedings should there be a determination of imprudence. Operations at any of the nuclear generatingunits owned and operated by Entergy’s subsidiaries could degrade to the point where the affected unit needs to be shut down oroperated at less than full capacity. If this were to happen, identifying and correcting the causes may require significant time andexpense. A decision may be made to close a unit rather than incur the expense of restarting it or returning the unit to full capacity. Forthe Utility operating companies and System Energy, this could result in certain costs being stranded and potentially not fullyrecoverable in regulatory proceedings. For Entergy Wholesale Commodities, this could result in lost revenue and increased fuel andpurchased power expense to meet supply commitments and penalties for failure to perform under their contracts with customers. Inaddition, the operation and maintenance of Entergy’s nuclear facilities require the commitment of substantial human resources that canresult in increased costs.The nuclear industry continues to address susceptibility to the effects of stress corrosion cracking and other corrosionmechanisms on certain materials within plant systems. The issue is applicable at all nuclear units to varying degrees and is managed inaccordance with industry standard practices and guidelines that include in-service examinations, replacements, and mitigationstrategies. Developments in the industry or identification of issues at the nuclear units could require unanticipated remediation effortsthat cannot be quantified in advance.Moreover, Entergy is becoming more dependent on fewer suppliers for key parts of Entergy’s nuclear power plants that mayneed to be replaced or refurbished, and in some cases, parts are no longer available and have to be reverse-engineered forreplacement. In addition, certain major parts have long lead-times to manufacture if an unplanned replacement is needed. Thisdependence on a reduced number of suppliers and long lead-times on certain major parts for unplanned replacements could result indelays in obtaining qualified replacement parts and, therefore, greater expense for Entergy.286Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyThe costs associated with the storage of the spent nuclear fuel of certain of the Utility operating companies, System Energy,and the owners of the Entergy Wholesale Commodities nuclear power plants, as well as the costs of and their ability to fullydecommission their nuclear power plants, could be significantly affected by the timing of the opening of a spent nuclear fuel disposalfacility, as well as interim storage and transportation requirements.Certain of the Utility operating companies, System Energy and the owners of the Entergy Wholesale Commodities nuclearplants incur costs for the on-site storage of spent nuclear fuel. The approval of a license for a national repository for the disposal ofspent nuclear fuel, such as the one proposed for Yucca Mountain, Nevada, or any interim storage facility, and the timing of such facilityopening, will significantly affect the costs associated with on-site storage of spent nuclear fuel. For example, while the DOE is requiredby law to proceed with the licensing of Yucca Mountain and, after the license is granted by the NRC, to construct the repository andcommence the receipt of spent fuel, the NRC licensing of the Yucca Mountain repository is effectively at a standstill. These actions areprolonging the time before spent fuel is removed from Entergy’s plant sites. Because the DOE has not accomplished its objectives, it isin non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts, and Entergy has suedthe DOE for such breach. Furthermore, Entergy is uncertain as to when the DOE will commence acceptance of spent fuel from itsfacilities for storage or disposal. As a result, continuing future expenditures will be required to increase spent fuel storage capacity atthe companies’ nuclear sites and maintenance costs on existing storage facilities, including aging management of fuel storage casks,may increase. The costs of on-site storage are also affected by regulatory requirements for such storage. In addition, the availability ofa repository or other off-site storage facility for spent nuclear fuel may affect the ability to fully decommission the nuclear units and thecosts relating to decommissioning. For further information regarding spent fuel storage, see the “Critical Accounting Estimates –Nuclear Decommissioning Costs – Spent Fuel Disposal” section of Management’s Financial Discussion and Analysis for Entergy,Entergy Arkansas, Entergy Louisiana, and System Energy and Note 8 to the financial statements.Certain of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities nuclear plant owners maybe required to pay substantial retrospective premiums imposed under the Price-Anderson Act in the event of a nuclear incident, andlosses not covered by insurance could have a material effect on Entergy’s and their results of operations, financial condition, orliquidity.Accidents and other unforeseen problems at nuclear power plants have occurred both in the United States and elsewhere. ThePrice-Anderson Act limits each reactor owner’s public liability (off-site) for a single nuclear incident to the payment of retrospectivepremiums into a secondary insurance pool, which is referred to as Secondary Financial Protection, up to approximately $137.6 millionper reactor. With 99 reactors currently participating, this translates to a total public liability cap of approximately $14 billion perincident. The limit is subject to change to account for the effects of inflation, a change in the primary limit of insurance coverage, andchanges in the number of licensed reactors. As required by the Price-Anderson Act, the Utility operating companies, System Energy,and Entergy Wholesale Commodities carry the maximum available amount of primary nuclear off-site liability insurance with AmericanNuclear Insurers, which is $450 million for each operating site. Claims for any nuclear incident exceeding that amount are coveredunder Secondary Financial Protection. As a result, in the event of a nuclear incident that causes damages (off-site) in excess of theprimary insurance coverage, each owner of a nuclear plant reactor, including Entergy’s Utility operating companies, System Energy,and the Entergy Wholesale Commodities plant owners, regardless of fault or proximity to the incident, will be required to pay aretrospective premium, equal to its proportionate share of the loss in excess of the primary insurance level, up to a maximum ofapproximately $137.6 million per reactor per incident (Entergy’s maximum total contingent obligation per incident is $1.238billion). The retrospective premium payment is currently limited to approximately $21 million per year per incident per reactor until theaggregate public liability for each licensee is paid up to the $137.6 million cap.NEIL is a utility industry mutual insurance company, owned by its members, including the Utility operating companies, SystemEnergy, and the owners of the Entergy Wholesale Commodities plants. All member plants could be subject to an annual assessment(retrospective premium of up to 10 times current annual premium for all policies) should the NEIL surplus (reserve) be significantlydepleted due to insured losses. As of December 31, 2018, the maximum annual assessment amounts total $118 million for the Utilityplants. Retrospective premium insurance287Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energyavailable through NEIL’s reinsurance treaty can cover the potential assessments and the Entergy Wholesale Commodities plantscurrently maintain the retrospective premium insurance to cover those potential assessments.As an owner of nuclear power plants, Entergy participates in industry self-insurance programs and could be liable to fundclaims should a plant owned by a different company experience a major event. Any resulting liability from a nuclear accident mayexceed the applicable primary insurance coverage and require contribution of additional funds through the industry-wide program thatcould significantly affect the results of operations, financial condition, or liquidity of Entergy, certain of the Utility operatingcompanies, System Energy, or the Entergy Wholesale Commodities subsidiaries.The decommissioning trust fund assets for the nuclear power plants owned by the Utility operating companies, System Energyand the Entergy Wholesale Commodities nuclear plant owners may not be adequate to meet decommissioning obligations if marketperformance and other changes decrease the value of assets in the decommissioning trusts, if one or more of Entergy’s nuclear powerplants is retired earlier than the anticipated shutdown date, if the plants cost more to decommission than estimated, or if currentregulatory requirements change, which then could require significant additional funding. Owners of nuclear generating plants have an obligation to decommission those plants. Certain of the Utility operatingcompanies, System Energy, and owners of the Entergy Wholesale Commodities nuclear power plants maintain decommissioning trustfunds for this purpose. Certain of the Utility operating companies collect funds from their customers, which are deposited into the trustscovering the units operated for or on behalf of those companies. Those rate collections, as adjusted from time to time by rateregulators, are generally based upon operating license lives and trust fund balances as well as estimated trust fund earnings anddecommissioning costs. Assets in these trust funds are subject to market fluctuations, will yield uncertain returns that may fall belowprojected return rates, and may result in losses resulting from the recognition of impairments of the value of certain securities held inthese trust funds.Under NRC regulations, nuclear plant owners are permitted to project the NRC-required decommissioning amount, based on anNRC formula or a site-specific estimate, and the amount that will be available in each nuclear power plant’s decommissioning trustscombined with any other decommissioning financial assurances in place. The projections are made based on the operating licenseexpiration date and the mid-point of the subsequent decommissioning process, or the anticipated actual completion of decommissioningif a site-specific estimate is used. If the projected amount of each individual plant’s decommissioning trusts exceeds the NRC-requireddecommissioning amount, then its decommissioning obligations are considered to be funded in accordance with NRC regulations. Ifthe projected costs do not sufficiently reflect the actual costs required to decommission these nuclear power plants, or funding isotherwise inadequate, or if the formula, formula inputs, or site-specific estimate is changed to require increased funding, additionalresources or commitments would be required. Furthermore, depending upon the level of funding available in the trust funds, the NRCmay not permit the trust funds to be used to pay for related costs such as the management of spent nuclear fuel that are not included inthe NRC’s formula. The NRC may also require a plan for the provision of separate funding for spent fuel management costs. Inaddition to NRC requirements, there are other decommissioning-related obligations for certain of the Entergy Wholesale Commoditiesnuclear power plants, which management believes it will be able to satisfy.Further, federal or state regulatory changes, including mandated increases in decommissioning funding or changes in themethods or standards for decommissioning operations, may also increase the funding requirements of, or accelerate the timing forfunding of, the obligations related to the decommissioning of the Utility operating companies, System Energy, or Entergy WholesaleCommodities nuclear power plants or may restrict the decommissioning-related costs that can be paid from the decommissioningtrusts. As a result, under any of these circumstances, Entergy’s results of operations, liquidity, and financial condition could bematerially affected.An early plant shutdown (either generally or relative to current expectations), poor investment results or higher than anticipateddecommissioning costs (including as a result of changing regulatory requirements) could cause trust fund assets to be insufficient tomeet the decommissioning obligations, with the result that the Utility operating288Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energycompanies, System Energy or the Entergy Wholesale Commodities nuclear plant owners may be required to provide significantadditional funds or credit support to satisfy regulatory requirements for decommissioning, which, with respect to the Utility operatingcompanies, may not be recoverable from customers in a timely fashion or at all.For further information regarding nuclear decommissioning costs, management’s decision to exit the merchant power business,the impairment charges that resulted from such decision, and the planned sales of Pilgrim and Palisades (which will include the transferof each entity’s decommissioning trust), see the “Critical Accounting Estimates - Nuclear Decommissioning Costs” section ofManagement’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Louisiana, and System Energy, the “EntergyWholesale Commodities Exit from the Merchant Power Business” section of Management’s Financial Discussion and Analysis forEntergy Corporation and Subsidiaries, and Notes 9 and 14 to the financial statements.Changes in NRC regulations or other binding regulatory requirements may cause increased funding requirements for nuclearplant decommissioning trusts.NRC regulations require certain minimum financial assurance requirements for meeting obligations to decommission nuclearpower plants. Those financial assurance requirements may change from time to time, and certain changes may result in a materialincrease in the financial assurance required for decommissioning the Utility operating companies’, System Energy’s, and owners ofEntergy Wholesale Commodities nuclear power plants. Such changes could result in the need for additional contributions todecommissioning trusts, or the posting of parent guarantees, letters of credit, or other surety mechanisms. For further informationregarding nuclear decommissioning costs, see the “Critical Accounting Estimates – Nuclear Decommissioning Costs” section ofManagement’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Louisiana, and System Energy and Note 9 tothe financial statements.New or existing safety concerns regarding operating nuclear power plants and nuclear fuel could lead to restrictions upon theoperation and decommissioning of Entergy’s nuclear power plants.New and existing concerns are being expressed in public forums about the safety of nuclear generating units and nuclear fuel,in particular in the northern United States, which is where most of the current fleet of Entergy Wholesale Commodities nuclear powerplants is located. These concerns have led to, and may continue to lead to, various proposals to Federal regulators and governingbodies in some localities where Entergy’s subsidiaries own nuclear generating units for legislative and regulatory changes that mightlead to the shutdown of nuclear units, additional requirements or restrictions related to spent nuclear fuel on-site storage and eventualdisposal, or other adverse effects on owning, operating and decommissioning nuclear generating units. Entergy vigorously responds tothese concerns and proposals. If any of the existing proposals, or any proposals that may arise in the future with respect to legislativeand regulatory changes, become effective, they could have a material effect on Entergy’s results of operations, financial condition, andliquidity.(Entergy Corporation)Entergy Wholesale Commodities nuclear power plants are exposed to price risk.Entergy and its subsidiaries do not have a regulator-authorized rate of return on their capital investments in non-utilitybusinesses. As a result, the sale of capacity and energy from the Entergy Wholesale Commodities nuclear power plants, unlessotherwise contracted, is subject to the fluctuation of market power prices. In order to reduce future price risk to desired levels, EntergyWholesale Commodities utilizes contracts that are unit-contingent and Firm LD and various products such as forward sales, options, andcollars. As of December 31, 2018, Entergy Wholesale Commodities’ nuclear power generation plants had sold forward 98% in 2019,94% in 2020, 91% in 2021, and 66% in 2022 of its generation portfolio’s planned energy output, reflecting the planned shutdown orsale of the Entergy Wholesale Commodities nuclear power plants by mid-2022.289Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyMarket conditions such as product cost, market liquidity, and other portfolio considerations influence the product andcontractual mix. The obligations under unit-contingent agreements depend on a generating asset that is operating; if the generationasset is not operating, the seller generally is not liable for damages. For some unit-contingent obligations, however, there is also aguarantee of availability that provides for the payment to the power purchaser of contract damages, if incurred, in the event the unitowner fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specifiedavailability threshold. Firm LD sales transactions may be exposed to substantial operational price risk, a portion of which may becapped through the use of risk management products, to the extent that the plants do not run as expected and market prices exceedcontract prices.Market prices may fluctuate substantially, sometimes over relatively short periods of time, and at other times experiencesustained increases or decreases. Demand for electricity and its fuel stock can fluctuate dramatically, creating periods of substantialunder- or over-supply. During periods of over-supply, prices might be depressed. Also, from time to time there may be politicalpressure, or pressure from regulatory authorities with jurisdiction over wholesale and retail energy commodity and transportation rates,to impose price limitations, credit requirements, bidding rules and other mechanisms to address volatility and other issues in thesemarkets.The effects of sustained low natural gas prices and power market structure challenges have resulted in lower market prices forelectricity in the power regions where the Entergy Wholesale Commodities nuclear power plants are located. In addition, currently themarket design under which the plants operate does not adequately compensate merchant nuclear plants for their environmental and fueldiversity benefits in the region. These conditions were primary factors leading to Entergy’s decision to shut down (or sell) EntergyWholesale Commodities’ nuclear power plants before the end of their operating licenses (or requested operating licenses for IndianPoint 2 and Indian Point 3).The price that different counterparties offer for various products including forward sales is influenced both by market conditionsas well as the contract terms such as damage provisions, credit support requirements, and the number of available counterpartiesinterested in contracting for the desired forward period. Depending on differences between market factors at the time of contractingversus current conditions, Entergy Wholesale Commodities’ contract portfolio may have average contract prices above or below currentmarket prices, including at the expiration of the contracts, which may significantly affect Entergy Wholesale Commodities’ results ofoperations, financial condition, or liquidity. New hedges are generally layered into on a rolling forward basis, which tends to drivehedge over-performance to market in a falling price environment, and hedge underperformance to market in a rising price environment;however, hedge timing, product choice, and hedging costs will also affect these results. See the “Market and Credit Risk SensitiveInstruments” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries. Since EntergyWholesale Commodities has announced the closure (or sale) of its nuclear plants, Entergy Wholesale Commodities may enter into fewerforward sales contracts for output from such plants.Among the factors that could affect market prices for electricity and fuel, all of which are beyond Entergy’s control to asignificant degree, are:•prevailing market prices for natural gas, uranium (and its conversion, enrichment, and fabrication), coal, oil, and other fuelsused in electric generation plants, including associated transportation costs, and supplies of such commodities;•seasonality and realized weather deviations compared to normalized weather forecasts;•availability of competitively priced alternative energy sources and the requirements of a renewable portfolio standard;•changes in production and storage levels of natural gas, lignite, coal and crude oil, and refined products;•liquidity in the general wholesale electricity market, including the number of creditworthy counterparties available andinterested in entering into forward sales agreements for Entergy’s full hedging term;•the actions of external parties, such as the FERC and local independent system operators and other state or Federal energyregulatory bodies, that may impose price limitations and other mechanisms to address some of the volatility in the energymarkets;•electricity transmission, competing generation or fuel transportation constraints, inoperability, or inefficiencies;290Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energy•the general demand for electricity, which may be significantly affected by national and regional economic conditions;•weather conditions affecting demand for electricity or availability of hydroelectric power or fuel supplies;•the rate of growth in demand for electricity as a result of population changes, regional economic conditions, and theimplementation of conservation programs or distributed generation;•regulatory policies of state agencies that affect the willingness of Entergy Wholesale Commodities customers to enter into long-term contracts generally, and contracts for energy in particular;•increases in supplies due to actions of current Entergy Wholesale Commodities competitors or new market entrants, includingthe development of new generation facilities, expansion of existing generation facilities, the disaggregation of verticallyintegrated utilities, and improvements in transmission that allow additional supply to reach Entergy Wholesale Commodities’nuclear markets;•union and labor relations;•changes in Federal and state energy and environmental laws and regulations and other initiatives, such as the RegionalGreenhouse Gas Initiative, including but not limited to, the price impacts of proposed emission controls;•changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging andrisk management transactions to governmental regulation; and•natural disasters, terrorist actions, wars, embargoes, and other catastrophic events.The Entergy Wholesale Commodities business is subject to substantial governmental regulation and may be adversely affectedby legislative, regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or futureregulations or requirements.The Entergy Wholesale Commodities business is subject to extensive regulation under federal, state, and local laws. Compliancewith the requirements under these various regulatory regimes may cause the Entergy Wholesale Commodities business to incursignificant additional costs, and failure to comply with such requirements could result in the shutdown of the non-complying facility,the imposition of liens, fines and/or civil or criminal liability.Public utilities under the Federal Power Act are required to obtain FERC acceptance of their rate schedules for wholesale sales ofelectricity. Each of the owners of the Entergy Wholesale Commodities nuclear power plants that generates electricity, as well asEntergy Nuclear Power Marketing, LLC, is a “public utility” under the Federal Power Act by virtue of making wholesale sales ofelectric energy and/or owning wholesale electric transmission facilities. The FERC has granted these generating and power marketingcompanies the authority to sell electricity at market-based rates. The FERC’s orders that grant the Entergy Wholesale Commodities’generating and power marketing companies market-based rate authority reserve the right to revoke or revise that authority if the FERCsubsequently determines that the Entergy Wholesale Commodities business can exercise market power in transmission or generation,create barriers to entry, or engage in abusive affiliate transactions. In addition, the Entergy Wholesale Commodities’ market-based salesare subject to certain market behavior rules, and if any of its generating and power marketing companies were deemed to have violatedone of those rules, they would be subject to potential disgorgement of profits associated with the violation and/or suspension orrevocation of their market-based rate authority and potential penalties of up to $1 million per day per violation. If the EntergyWholesale Commodities’ generating or power marketing companies were to lose their market-based rate authority, such companieswould be required to obtain the FERC’s acceptance of a cost-of-service rate schedule and could become subject to the accounting,record-keeping, and reporting requirements that are imposed on utilities with cost-based rate schedules. This could have an adverseeffect on the rates the Entergy Wholesale Commodities business charges for power from its facilities.The Entergy Wholesale Commodities business is also affected by legislative and regulatory changes, as well as changes tomarket design, market rules, tariffs, cost allocations, and bidding rules imposed by the existing Independent System Operators. TheIndependent System Operators that oversee most of the wholesale power markets may impose, and in the future may continue toimpose, mitigation, including price limitations, offer caps and other mechanisms, to address some of the volatility and the potentialexercise of market power in these markets. These types of price limitations and other regulatory mechanisms may have an adverseeffect on the profitability of the Entergy Wholesale291Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyCommodities business’ generation facilities that sell energy and capacity into the wholesale power markets. Further, the New YorkIndependent System Operator could determine that the timing of the shutdown of the Indian Point units could be inconsistent with itsmarket power rules, and impose certain penalties that could affect Entergy Wholesale Commodities. For further information regardingfederal, state and local laws and regulation applicable to the Entergy Wholesale Commodities business, see the “Regulation ofEntergy’s Business” section in Part I, Item 1.The regulatory environment applicable to the electric power industry is subject to changes as a result of restructuring initiativesat both the state and federal levels. Entergy cannot predict the future design of the wholesale power markets or the ultimate effect thatthe changing regulatory environment will have on the Entergy Wholesale Commodities business. In addition, in some of these markets,interested parties have proposed material market design changes, including the elimination of a single clearing price mechanism, haveraised claims that the competitive marketplace is not working because energy prices in wholesale markets exceed the marginal cost ofoperating nuclear power plants, and have made proposals to re-regulate the markets, impose a generation tax, or require divestitures bygenerating companies to reduce their market share. Other proposals to re-regulate may be made and legislative or other attention to theelectric power market restructuring process may delay or reverse the deregulation process, which could require material changes tobusiness planning models. If competitive restructuring of the electric power markets is reversed, modified, discontinued, or delayed,the Entergy Wholesale Commodities business’ results of operations, financial condition, and liquidity could be materially affected.The power plants owned by the Entergy Wholesale Commodities business are subject to impairment charges in certaincircumstances, which could have a material effect on Entergy’s results of operations, financial condition or liquidity.Entergy reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate thatrecoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flowsexpected to result from the operations of such assets. Projected net cash flows depend on the expected operating life of the assets, thefuture operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future marketand price for energy and capacity over the remaining life of the assets. In particular, the assets of the Entergy Wholesale Commoditiesbusiness are subject to further impairment in connection with the closure or sale of its nuclear power plants. Moreover, prior to theclosure or sale of these plants, the failure of the Entergy Wholesale Commodities business to achieve forecasted operating results andcash flows, an unfavorable change in forecasted operating results or cash flows, a reduction in the expected remaining useful life of aunit, or a decline in observable industry market multiples could all result in potential additional impairment charges for the affectedassets.If Entergy concludes that any of its nuclear power plants is unlikely to operate through its planned shutdown date, whichconclusion would be based on a variety of factors, such a conclusion could result in a further impairment of part or all of the carryingvalue of the plant. Any impairment charge taken by Entergy with respect to its long-lived assets, including the power plants owned bythe Entergy Wholesale Commodities business, would likely be material in the quarter that the charge is taken and could otherwise havea material effect on Entergy’s results of operations, financial condition, or liquidity. For further information regarding evaluating long-lived assets for impairment, see the “Critical Accounting Estimates - Impairment of Long-lived Assets and Trust Fund Investments”section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries and for further discussion of theimpairment charges, see Note 14 to the financial statements.292Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyGeneral Business(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and EntergyTexas)Entergy and the Utility operating companies depend on access to the capital markets and, at times, may face potential liquidityconstraints, which could make it more difficult to handle future contingencies such as natural disasters or substantial increases in gasand fuel prices. Disruptions in the capital and credit markets may adversely affect Entergy’s and its subsidiaries’ ability to meetliquidity needs, access capital and operate and grow their businesses, and the cost of capital.Entergy’s business is capital intensive and dependent upon its ability to access capital at reasonable rates and other terms. Attimes there are also spikes in the price for natural gas and other commodities that increase the liquidity requirements of the Utilityoperating companies and Entergy Wholesale Commodities. In addition, Entergy’s and the Utility operating companies’ liquidity needscould significantly increase in the event of a hurricane or other weather-related or unforeseen disaster similar to that experienced inEntergy’s service territory with Hurricane Katrina and Hurricane Rita in 2005, Hurricane Gustav and Hurricane Ike in 2008, andHurricane Isaac in 2012. The occurrence of one or more contingencies, including a delay in regulatory recovery of fuel or purchasedpower costs or storm restoration costs, higher than expected pension contributions, an acceleration of payments or decreased creditlines, less cash flow from operations than expected, changes in regulation or governmental policy (including tax and trade policy), orother unknown events, could cause the financing needs of Entergy and its subsidiaries to increase. In addition, accessing the debtcapital markets more frequently in these situations may result in an increase in leverage. Material leverage increases could negativelyaffect the credit ratings of Entergy and the Utility operating companies, which in turn could negatively affect access to the capitalmarkets.The inability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets, could negativelyaffect Entergy and its subsidiaries’ ability to maintain and to expand their businesses. Events beyond Entergy’s control may createuncertainty that could increase its cost of capital or impair its ability to access the capital markets, including the ability to draw on itsbank credit facilities. Entergy and its subsidiaries are unable to predict the degree of success they will have in renewing orreplacing their credit facilities as they come up for renewal. Moreover, the size, terms, and covenants of any new credit facilities maynot be comparable to, and may be more restrictive than, existing facilities. If Entergy and its subsidiaries are unable to access the creditand capital markets on terms that are reasonable, they may have to delay raising capital, issue shorter-term securities and/or bear anunfavorable cost of capital, which, in turn, could impact their ability to grow their businesses, decrease earnings, significantly reducefinancial flexibility and/or limit Entergy Corporation’s ability to sustain its current common stock dividend level.(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas,and System Energy)A downgrade in Entergy Corporation’s or its subsidiaries’ credit ratings could negatively affect Entergy Corporation’s and itssubsidiaries’ ability to access capital and/or could require Entergy Corporation or its subsidiaries to post collateral, accelerate certainpayments, or repay certain indebtedness.There are a number of factors that rating agencies evaluate to arrive at credit ratings for each of Entergy Corporation and theRegistrant Subsidiaries, including each Registrant’s regulatory framework, ability to recover costs and earn returns, diversification andfinancial strength and liquidity. If one or more rating agencies downgrade Entergy Corporation’s, any of the Utility operatingcompanies’, or System Energy’s ratings, particularly below investment grade, borrowing costs would increase, the potential pool ofinvestors and funding sources would likely decrease, and cash or letter of credit collateral demands may be triggered by the terms of anumber of commodity contracts, leases, and other agreements.293Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyMost of Entergy Corporation’s and its subsidiaries’ large customers, suppliers, and counterparties require sufficientcreditworthiness to enter into transactions. If Entergy Corporation’s or its subsidiaries’ ratings decline, particularly below investmentgrade, or if certain counterparties believe Entergy Corporation or the Utility operating companies are losing creditworthiness anddemand adequate assurance under fuel, gas, and purchased power contracts, the counterparties may require posting of collateral in cashor letters of credit, prepayment for fuel, gas or purchased power or accelerated payment, or counterparties may decline business withEntergy Corporation or its subsidiaries. At December 31, 2018, based on power prices at that time, Entergy had liquidity exposure of$126 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $52 million of posted cashcollateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as ofDecember 31, 2018, Entergy would have been required to provide approximately $69 million of additional cash or letters of creditunder some of the agreements. As of December 31, 2018, the liquidity exposure associated with Entergy Wholesale Commoditiesassurance requirements, including return of previously posted collateral from counterparties, would increase by $310 million for a $1per MMBtu increase in gas prices in both the short- and long-term markets.Recent U.S. tax legislation may materially adversely affect Entergy’s financial condition, results of operations, and cash flows.The recently enacted Tax Cuts and Jobs Act of 2017 significantly changed the U.S. Internal Revenue Code, including taxationof U.S. corporations, by, among other things, reducing the federal corporate income tax rate, limiting interest deductions, and alteringthe expensing of capital expenditures. The legislation and interpretive guidance from the IRS are unclear in certain respects and willrequire further interpretations and implementing regulations by the IRS, as well as state tax authorities, and the legislation could besubject to potential amendments and technical corrections, any of which could lessen or increase certain impacts of the legislation.As further described in Note 3 to the financial statements, Entergy recorded a reduction of certain of its net deferred income taxassets (including the value of its net operating loss carryforwards) and regulatory liabilities, resulting in a charge against earnings in thefourth quarter 2017 of $526 million, including a $34 million net-of-tax reduction of regulatory liabilities, and Entergy and the Utilityoperating companies recorded a reduction of approximately $3.7 billion on a consolidated basis in certain of its net deferred taxliabilities and a corresponding increase in net regulatory liabilities. As a result of amortization of accumulated deferred income taxesand payment of such amounts to customers in 2018, Entergy’s net regulatory liability for income taxes balance is $2.1 billion as ofDecember 31, 2018. Depending on the outcome of IRS examinations or tax positions and elections that Entergy may make, Entergyand the Registrant Subsidiaries may be required to record additional charges or credits to income tax expense. Further, there may beother material effects resulting from the legislation that have not been identified.Entergy believes that interpretations and implementing regulations by the IRS, as well as potential amendments and technicalcorrections, could result in lessening the impacts of certain aspects of this legislation. If Entergy is unable to successfully pursueavenues to manage the effects of the new tax legislation, or if additional interpretations, regulations, amendments, or technicalcorrections exacerbate the effects of the legislation, the legislation could have a material effect on Entergy’s results of operations,financial condition, and cash flows.For further information regarding the effects of the Act, see the “Income Tax Legislation” section of Management’s FinancialDiscussion and Analysis for Entergy. Also, Note 3 to the financial statements contains additional discussion of the effect of the Act on2017 and 2018 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accountingfor the Act, and Note 2 to the financial statements discusses the regulatory proceedings that have considered the effects of the Act.Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negativelyimpact Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition and liquidity.294Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyEntergy and its subsidiaries make judgments regarding the potential tax effects of various transactions and results of operationsto estimate their obligations to taxing authorities. These tax obligations include income, franchise, real estate, sales and use, andemployment-related taxes. These judgments include provisions for potential adverse outcomes regarding tax positions that have beentaken. Entergy and its subsidiaries also estimate their ability to utilize tax benefits, including those in the form of carryforwards forwhich the benefits have already been reflected in the financial statements. Changes in federal, state, or local tax laws, adverse tax auditresults or adverse tax rulings on positions taken by Entergy and its subsidiaries could negatively affect Entergy’s, the Utility operatingcompanies’, and System Energy’s results of operations, financial condition, and liquidity. For further information regarding Entergy’sincome taxes, see Note 3 to the financial statements.Entergy and its subsidiaries’ ability to successfully complete strategic transactions, including merger, acquisition, divestiture,joint venture, restructuring or other strategic transactions, is subject to significant risks, including the risk that required regulatory orgovernmental approvals may not be obtained, risks relating to unknown or undisclosed problems or liabilities, and the risk that forthese or other reasons, Entergy and its subsidiaries may be unable to achieve some or all of the benefits that they anticipate from suchtransactions.From time to time, Entergy and its subsidiaries have pursued and may continue to pursue strategic transactions includingmerger, acquisition, divestiture, joint venture, restructuring or other strategic transactions. For example, Entergy announced that on July30, 2018, it entered into purchase and sale agreements with Holtec International to sell to a Holtec subsidiary (i) 100% of the equityinterests in Entergy Nuclear Generation Company, the owner of the Pilgrim Nuclear Power Station, and (ii) 100% of the equity interestsin Entergy Nuclear Palisades, LLC, the owner of the Palisades Nuclear Power Plant and the Big Rock Point Site. In addition, as part ofEntergy’s plan to exit the merchant power business, it plans to shut down its remaining merchant nuclear power plants by mid-2022.Last, as further described in the “Capital Expenditure Plans and Other Uses of Capital” section of Management’s FinancialDiscussion and Analysis for Entergy, a significant portion of Entergy’s utility business over the next several years includes theconstruction and /or purchase of a variety of generating units. These transactions and plans are or may become subject to regulatoryapproval and other material conditions or contingencies. The failure to complete these transactions or plans or any future strategictransaction successfully or on a timely basis could have an adverse effect on Entergy’s financial condition, results of operations and themarket’s perception of Entergy’s ability to execute its strategy. Further, these transactions, and any completed or future strategictransactions, involve substantial risks, including the following:•the disposition of a business or asset may involve continued financial involvement in the divested business, such asthrough continuing equity ownership, transition service agreements, guarantees, indemnities, or other current orcontingent financial obligations;•Entergy may encounter difficulty in finding buyers or executing alternative exit strategies on acceptable terms in a timelymanner when it decides to sell an asset or a business, which could delay the accomplishment of its strategic objectives.Alternatively, Entergy may dispose of a business or asset at a price or on terms that are less than what it had anticipated,or with the exclusion of assets that must be divested or run off separately;•the disposition of a business could result in impairments and related write-offs of the carrying values of the relevant assets;•acquired businesses or assets may not produce revenues, earnings or cash flow at anticipated levels;•acquired businesses or assets could have environmental, permitting or other problems for which contractual protectionsprove inadequate;•Entergy and/or its subsidiaries may assume liabilities that were not disclosed to them, that exceed their estimates, or forwhich their rights to indemnification from the seller are limited;•the disposition of a business, including Entergy’s planned exit from the merchant power business, could divertmanagement’s attention from other business concerns;•Entergy and/or its subsidiaries may be unable to obtain the necessary regulatory or governmental approvals to close atransaction, such approvals may be granted subject to terms that are unacceptable295Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energyto them, or Entergy or its subsidiaries otherwise may be unable to achieve anticipated regulatory treatment of any suchtransaction or acquired business or assets; and•Entergy or its subsidiaries otherwise may be unable to achieve the full strategic and financial benefits that they anticipatefrom the transaction, or such benefits may be delayed or may not occur at all.Entergy may not be successful in managing these or any other significant risks that it may encounter in acquiring or divesting abusiness, or engaging in other strategic transactions, which could have a material effect on its business.The construction of, and capital improvements to, power generation facilities involve substantial risks. Should construction orcapital improvement efforts be unsuccessful, the financial condition, results of operations, or liquidity of Entergy and the Utilityoperating companies could be materially affected.Entergy’s and the Utility operating companies’ ability to complete construction of power generation facilities, or make othercapital improvements, in a timely manner and within budget is contingent upon many variables and subject to substantial risks. Thesevariables include, but are not limited to, project management expertise and escalating costs for materials, labor, and environmentalcompliance. Delays in obtaining permits, shortages in materials and qualified labor, suppliers and contractors not performing asrequired under their contracts, changes in the scope and timing of projects, poor quality initial cost estimates from contractors, theinability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel costs, or materials costs, downwardchanges in the economy, changes in law or regulation, including environmental compliance requirements, and other events beyond thecontrol of the Utility operating companies or the Entergy Wholesale Commodities business may occur that may materially affect theschedule, cost, and performance of these projects. If these projects or other capital improvements are significantly delayed or becomesubject to cost overruns or cancellation, Entergy and the Utility operating companies could incur additional costs and terminationpayments, or face increased risk of potential write-off of the investment in the project. In addition, the Utility operating companiescould be exposed to higher costs and market volatility, which could affect cash flow and cost recovery, should their respectiveregulators decline to approve the construction of new generation needed to meet the reliability needs of customers at the lowestreasonable cost.For further information regarding capital expenditure plans and other uses of capital in connection with the potentialconstruction and/or purchase of additional generation supply sources within the Utility operating companies’ service territory, and as tothe Entergy Wholesale Commodities business, see the “Capital Expenditure Plans and Other Uses of Capital” section ofManagement’s Financial Discussion and Analysis for Entergy and each of the Registrant Subsidiaries.The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business may incur substantial coststo fulfill their obligations related to environmental and other matters.The businesses in which the Utility operating companies, System Energy, and the Entergy Wholesale Commodities businessoperate are subject to extensive environmental regulation by local, state, and federal authorities. These laws and regulations affect themanner in which the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business conduct theiroperations and make capital expenditures. These laws and regulations also affect how the Utility operating companies, System Energy,and the Entergy Wholesale Commodities business manage air emissions, discharges to water, wetlands impacts, solid and hazardouswaste storage and disposal, cooling and service water intake, the protection of threatened and endangered species, certain migratorybirds and eagles, hazardous materials transportation, and similar matters. Federal, state, and local authorities continually revise theselaws and regulations, and the laws and regulations are subject to judicial interpretation and to the permitting and enforcement discretionvested in the implementing agencies. Developing and implementing plans for facility compliance with these requirements can lead tocapital, personnel, and operation and maintenance expenditures. Violations of these requirements can subject the Utility operatingcompanies, System Energy, and the Entergy Wholesale Commodities business to enforcement actions, capital expenditures to bringexisting facilities into compliance, additional operating costs or operating restrictions to achieve compliance, remediation and clean-upcosts, civil penalties, and exposure to third parties’ claims for alleged health or property damages or for violations of applicable296Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energypermits or standards. In addition, the Utility operating companies, System Energy, and the Entergy Wholesale Commodities businesspotentially are subject to liability under these laws for the costs of remediation of environmental contamination of property now orformerly owned or operated by the Utility operating companies, System Energy, and Entergy Wholesale Commodities and of propertycontaminated by hazardous substances they generate. The Utility operating companies are currently involved in proceedings relating tosites where hazardous substances have been released and may be subject to additional proceedings in the future. The Utility operatingcompanies, System Energy, and the Entergy Wholesale Commodities business have incurred and expect to incur significant costsrelated to environmental compliance.Emissions of nitrogen and sulfur oxides, mercury, particulates, greenhouse gases, and other regulated air emissions fromgenerating plants are potentially subject to increased regulation, controls and mitigation expenses. In addition, existing air regulationsand programs promulgated by the EPA often are challenged legally, or are revised or withdrawn by the EPA, sometimes resulting inlarge-scale changes to anticipated regulatory regimes and the resulting need to shift course, both operationally and economically,depending on the nature of the changes. Risks relating to global climate change, initiatives to compel greenhouse gas emissionreductions, and water availability issues are discussed below.Entergy and its subsidiaries may not be able to obtain or maintain all required environmental regulatory approvals. If there is adelay in obtaining any required environmental regulatory approvals, or if Entergy and its subsidiaries fail to obtain, maintain, or complywith any such approval, the operation of its facilities could be stopped or become subject to additional costs. For further informationregarding environmental regulation and environmental matters, see the “Regulation of Entergy’s Business – EnvironmentalRegulation” section of Part I, Item 1.The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business may incur substantial costsrelated to reliability standards.Entergy’s business is subject to extensive and mandatory reliability standards. Such standards, which are established by theNorth American Electric Reliability Corporation (NERC), the SERC Reliability Corporation (SERC), and other regional enforcemententities, are approved by the FERC and frequently are reviewed, amended, and supplemented. Failure to comply with such standardscould result in the imposition of fines or civil penalties, and potential exposure to third party claims for alleged violations of suchstandards. The standards, as well as the laws and regulations that govern them, are subject to judicial interpretation and to theenforcement discretion vested in the implementing agencies. In addition to exposure to civil penalties and fines, the Utility operatingcompanies have incurred and expect to incur significant costs related to compliance with new and existing reliability standards,including costs associated with the Utility operating companies’ transmission system and generation assets. In addition, the retailregulators of the Utility operating companies may seek to impose standards governing the reliable operation of the Utility operatingcompanies’ distribution systems, including penalties if these standards are not met. The changes to the reliability standards applicable tothe electric power industry are ongoing, and Entergy cannot predict the ultimate effect that the reliability standards will have on itsUtility and Entergy Wholesale Commodities businesses.(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and EntergyTexas)Weather, economic conditions, technological developments, and other factors may have a material impact on electricity andgas usage and otherwise materially affect the Utility operating companies’ results of operations.Temperatures above normal levels in the summer tend to increase electric cooling demand and revenues, and temperaturesbelow normal levels in the winter tend to increase electric and gas heating demand and revenues. As a corollary, moderatetemperatures in either season tend to decrease usage of energy and resulting revenues. Seasonal pricing differentials, coupled withhigher consumption levels, typically cause the Utility operating companies to report higher revenues in the third quarter of the fiscalyear than in the other quarters. Extreme weather conditions or storms, however, may stress the Utility operating companies’ generationfacilities and transmission and distribution297Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energysystems, resulting in increased maintenance and capital costs (and potential increased financing needs), limits on their ability to meetpeak customer demand, increased regulatory oversight, and lower customer satisfaction. These extreme conditions could have amaterial effect on the Utility operating companies’ financial condition, results of operations, and liquidity.Entergy’s electricity sales volumes are affected by a number of factors, including economic conditions, weather, customer billsizes (large bills tend to induce conservation), trends in energy efficiency, new technologies and self-generation alternatives, includingthe willingness and ability of large industrial customers to develop co-generation facilities that greatly reduce their demand fromEntergy. Some of these factors are inherently cyclical or temporary in nature, such as the weather or economic conditions, and rarelyhave a long-lasting effect on Entergy’s operating results. Others, such as the increasing adoption of energy efficient appliances, newbuilding codes, distributed energy resources, energy storage, demand side management and new technologies such as rooftop solar arehaving a more permanent effect of reducing sales growth rates from historical norms. As a result of these emerging efficiencies andtechnologies, the Utility operating companies may lose customers or experience lower usage per customer in the residential andcommercial classes, and further advances have the potential to limit sales growth in the future. The Utility operating companies alsomay face competition from other companies offering products and services to Entergy’s customers based on new or emergingtechnologies. In addition, electricity sales to industrial customers, in particular, benefit from steady economic growth and favorablecommodity prices; however, they are sensitive to changes in conditions in the markets in which its customers operate. Any negativechange in any of these or other factors has the potential to result in slower sales growth or sales declines and increased bad debtexpense, which could materially affect Entergy’s and the Utility operating companies’ results of operations, financial condition, andliquidity.The effects of climate change and environmental and regulatory obligations intended to compel greenhouse gas emissionreductions or increase renewable energy requirements or to place a price on greenhouse gas emissions could materially affect thefinancial condition, results of operations, and liquidity of Entergy, the Utility operating companies, System Energy, and the EntergyWholesale Commodities business.In an effort to address climate change concerns, some federal, state, and local authorities are calling for additional laws andregulations aimed at known or suspected causes of climate change. For example, in response to the United States Supreme Court’s2007 decision holding that the EPA has authority to regulate emissions of CO2 and other “greenhouse gases” under the Clean Air Act,the EPA, various environmental interest groups, and other organizations focused considerable attention on CO2 emissions from powergeneration facilities and their potential role in climate change. In 2010, the EPA promulgated its first regulations controllinggreenhouse gas emissions from certain vehicles and from new and significantly modified stationary sources of emissions, includingelectric generating units. During 2012 and 2014, the EPA proposed CO2 emission standards for new and existing sources. The EPAfinalized these standards in 2015; however, in subsequent years the EPA has proposed to repeal and replace certain of thoseregulations. As examples of state action, in the Northeast, the Regional Greenhouse Gas Initiative establishes a cap on CO2 emissionsfrom electric power plants and requires generators to purchase emission permits to cover their CO2 emissions, and a similar program hasbeen developed in California. The impact that continued changes in the governmental response to climate change risk will have onexisting and pending environmental laws and regulations related to greenhouse gas emissions is currently unclear.Developing and implementing plans for compliance with greenhouse gas emissions reduction or renewable energy requirementscan lead to additional capital, personnel, and operation and maintenance expenditures and could significantly affect the economicposition of existing facilities and proposed projects; moreover, long-term planning to meet environmental requirements can benegatively impacted and costs may increase to the extent laws and regulations change prior to full implementation. These requirementscould, in turn, lead to changes in the planning or operations of balancing authorities or organized markets in areas where the Utilityoperating companies, System Energy, or Entergy Wholesale Commodities do business. Violations of such requirements may subjectEntergy Wholesale Commodities and the Utility operating companies to enforcement actions, capital expenditures to bring existingfacilities into compliance, additional operating costs or operating restrictions to achieve compliance, civil penalties, and exposure tothird parties’ claims for alleged health or property damages or for violations of applicable permits or standards. To298Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energythe extent Entergy believes any of these costs are recoverable in rates, however, additional material rate increases for customers couldbe resisted by Entergy’s regulators and, in extreme cases, Entergy’s regulators might deny or defer timely recovery of thesecosts. Future changes in environmental regulation governing the emission of CO2 and other greenhouse gases or mix of generationsources could make some of Entergy’s electric generating units uneconomical to maintain or operate, and could increase the difficultythat Entergy and its subsidiaries have with obtaining or maintaining required environmental regulatory approvals, which could alsomaterially affect the financial condition, results of operations and liquidity of Entergy and its subsidiaries. In addition, lawsuits haveoccurred or are reasonably expected against emitters of greenhouse gases alleging that these companies are liable for personal injuriesand property damage caused by climate change. These lawsuits may seek injunctive relief, monetary compensation, and punitivedamages.In addition to the regulatory and financial risks associated with climate change discussed above, potential physical risks fromclimate change include an increase in sea level, wind and storm surge damages, wildfires, wetland and barrier island erosion, risks offlooding and changes in weather conditions, (such as increases in precipitation, drought, or changes in average temperatures), andpotential increased impacts of extreme weather conditions or storms. Entergy subsidiaries own assets in, and serve, communities thatare at risk from sea level rise, changes in weather conditions, storms, and loss of the protection offered by coastal wetlands. Asignificant portion of the nation’s oil and gas infrastructure is located in these areas and susceptible to storm damage that could beaggravated by the physical impacts of climate change, which could give rise to fuel supply interruptions and price spikes. Entergy andits subsidiaries also face the risk that climate change could impact the availability and quality of water supply necessary for operations.These and other physical changes could result in changes in customer demand, increased costs associated with repairing andmaintaining generation facilities and transmission and distribution systems resulting in increased maintenance and capital costs (andpotential increased financing needs), limits on the Entergy System’s ability to meet peak customer demand, more frequent and longerlasting outages, increased regulatory oversight, and lower customer satisfaction. Also, to the extent that climate change adverselyimpacts the economic health of a region or results in energy conservation or demand side management programs, it may adverselyimpact customer demand and revenues. Such physical or operational risks could have a material effect on Entergy’s, EntergyWholesale Commodities’, System Energy’s, and the Utility operating companies’ financial condition, results of operations, andliquidity.Continued and future availability and quality of water for cooling, process, and sanitary uses could materially affect thefinancial condition, results of operations, and liquidity of the Utility operating companies, System Energy, and the Entergy WholesaleCommodities business.Water is a vital natural resource that is also critical to the Utility operating companies’, System Energy’s, and Entergy WholesaleCommodities’ business operations. Entergy’s facilities use water for cooling, boiler make-up, sanitary uses, potable supply, and manyother uses. Entergy’s Utility operating companies also own and/or operate hydroelectric facilities. Accordingly, water availability andquality are critical to Entergy’s business operations. Impacts to water availability or quality could negatively impact both operationsand revenues.Entergy secures water through various mechanisms (ground water wells, surface waters intakes, municipal supply, etc.) andoperates under the provisions and conditions set forth by the provider and/or regulatory authorities. Entergy also obtains and operatesin substantial compliance with water discharge permits issued under various provisions of the Clean Water Act and/or state waterpollution control provisions. Regulations and authorizations for both water intake and use and for waste discharge can become morestringent in times of water shortages, low flows in rivers, low lake levels, low groundwater aquifer volumes, and similarconditions. The increased use of water by industry, agriculture, and the population at large, population growth, and the potentialimpacts of climate change on water resources may cause water use restrictions that affect Entergy and its subsidiaries.299Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyEntergy and its subsidiaries may not be adequately hedged against changes in commodity prices, which could materially affectEntergy’s and its subsidiaries’ results of operations, financial condition, and liquidity.To manage near-term financial exposure related to commodity price fluctuations, Entergy and its subsidiaries, including theUtility operating companies and the Entergy Wholesale Commodities business, may enter into contracts to hedge portions of theirpurchase and sale commitments, fuel requirements, and inventories of natural gas, uranium and its conversion and enrichment, coal,refined products, and other commodities, within established risk management guidelines. As part of this strategy, Entergy and itssubsidiaries may utilize fixed- and variable-price forward physical purchase and sales contracts, futures, financial swaps, and optioncontracts traded in the over-the-counter markets or on exchanges. However, Entergy and its subsidiaries normally cover only a portionof the exposure of their assets and positions to market price volatility, and the coverage will vary over time. In addition, Entergy alsoelects to leave certain volumes during certain years unhedged. To the extent Entergy and its subsidiaries have unhedged positions,fluctuating commodity prices can materially affect Entergy’s and its subsidiaries’ results of operations and financial position.Although Entergy and its subsidiaries devote a considerable effort to these risk management strategies, they cannot eliminate allthe risks associated with these activities. As a result of these and other factors, Entergy and its subsidiaries cannot predict with precisionthe impact that risk management decisions may have on their business, results of operations, or financial position.Entergy’s over-the-counter financial derivatives are subject to rules implementing the Dodd-Frank Wall Street Reform andConsumer Protection Act that are designed to promote transparency, mitigate systemic risk and protect against market abuse. Entergycannot predict the impact any proposed or not fully-implemented final rules will have on its ability to hedge its commodity price risk oron over-the-counter derivatives markets as a whole, but such rules and regulations could have a material effect on Entergy's riskexposure, as well as reduce market liquidity and further increase the cost of hedging activities.Entergy has guaranteed or indemnified the performance of a portion of the obligations relating to hedging and risk managementactivities. Reductions in Entergy’s or its subsidiaries’ credit quality or changes in the market prices of energy commodities couldincrease the cash or letter of credit collateral required to be posted in connection with hedging and risk management activities, whichcould materially affect Entergy’s or its subsidiaries’ liquidity and financial position.The Utility operating companies and the Entergy Wholesale Commodities business are exposed to the risk that counterpartiesmay not meet their obligations, which may materially affect the Utility operating companies and Entergy Wholesale Commodities.The hedging and risk management practices of the Utility operating companies and the Entergy Wholesale Commoditiesbusiness are exposed to the risk that counterparties that owe Entergy and its subsidiaries money, energy, or other commodities will notperform their obligations. Currently, some hedging agreements contain provisions that require the counterparties to provide creditsupport to secure all or part of their obligations to Entergy or its subsidiaries. If the counterparties to these arrangements fail to perform,Entergy or its subsidiaries may enforce and recover the proceeds from the credit support provided and acquire alternative hedgingarrangements, which credit support may not always be adequate to cover the related obligations. In such event, Entergy and itssubsidiaries might incur losses in addition to amounts, if any, already paid to the counterparties. In addition, the credit commitments ofEntergy’s lenders under its bank facilities may not be honored for a variety of reasons, including unexpected periods of financialdistress affecting such lenders, which could materially affect the adequacy of its liquidity sources.Market performance and other changes may decrease the value of benefit plan assets, which then could require additionalfunding and result in increased benefit plan costs.300Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyThe performance of the capital markets affects the values of the assets held in trust under Entergy’s pension and postretirementbenefit plans. A decline in the market value of the assets may increase the funding requirements relating to Entergy’s benefit planliabilities and also result in higher benefit costs. As the value of the assets decreases, the “expected return on assets” component ofbenefit costs decreases, resulting in higher benefits costs. Additionally, asset losses are incorporated into benefit costs over time, thusincreasing benefits costs. Volatility in the capital markets has affected the market value of these assets, which may affect Entergy’splanned levels of contributions in the future. Additionally, changes in interest rates affect the liabilities under Entergy’s pension andpostretirement benefit plans; as interest rates decrease, the liabilities increase, potentially requiring additional funding and recognition ofhigher liability carrying costs. The funding requirements of the obligations related to the pension benefit plans can also increase as aresult of changes in, among other factors, retirement rates, life expectancy assumptions, or Federal regulations. For further informationregarding Entergy’s pension and other postretirement benefit plans, refer to the “Critical Accounting Estimates – Qualified Pensionand Other Postretirement Benefits” section of Management’s Financial Discussion and Analysis for Entergy and each of its RegistrantSubsidiaries and Note 11 to the financial statements.The litigation environment in the states in which certain Entergy subsidiaries operate poses a significant risk to thosebusinesses.Entergy and its subsidiaries are involved in the ordinary course of business in a number of lawsuits involving employment,commercial, asbestos, hazardous material and ratepayer matters, and injuries and damages issues, among other matters. The states inwhich the Utility operating companies operate, in particular Louisiana, Mississippi, and Texas, have proven to be unusually litigiousenvironments. Judges and juries in these states have demonstrated a willingness to grant large verdicts, including punitive damages, toplaintiffs in personal injury, property damage, and business tort cases. Entergy and its subsidiaries use legal and appropriate means tocontest litigation threatened or filed against them, but the litigation environment in these states poses a significant business risk.Domestic or international terrorist attacks, cyber attacks, and failures or breaches of Entergy’s and its subsidiaries’ or theirsuppliers’ technology systems may adversely affect Entergy’s results of operations.As an operator of critical infrastructure, Entergy and its subsidiaries face heightened risk of an act or threat of terrorism andcyber attacks, by domestic or foreign actors, whether as a direct act against one of Entergy’s generation, transmission or distributionfacilities, or operations centers, or infrastructure and information technology systems used to manage, monitor, and transport power tocustomers and perform day-to-day business functions. In addition, Entergy has increased its use of and reliance on the Internet inconnection with its initiatives, including smart-grid-related projects. The Internet is inherently vulnerable and subject to disability orfailure due to malicious activity, viruses, and other types of security events that would heighten the risk of a cyber attack. An actual actcould affect Entergy’s ability to operate, including its ability to operate the information technology systems and network infrastructureon which it relies to conduct its business. While malware was discovered on Entergy’s business network in 2018, and was remediatedon a timely basis, it did not affect Entergy’s operational systems, generation plants (including nuclear), or transmission and distributionnetworks, nor did it have a material effect on Entergy’s business operations. Additionally, within Entergy’s industry, there have beenattacks on energy infrastructure. Although it appears that the impact of such attacks on operations has been minimal to date, there maybe more attacks in the future and the impact of such attacks may be significant. This risk may be enhanced by the efforts of cyber actorsassociated with governments that have carried out campaigns of cyber-enabled theft targeting global technology service providers andtheir customers. The Utility operating companies also face heightened risk of an act or threat by cyber criminals intent on accessingpersonal information for the purpose of committing identity theft, taking company-sensitive data, or disrupting their ability to operate.Entergy and its subsidiaries operate in a highly regulated industry that requires the continued operation of sophisticatedinformation technology systems and network infrastructure in accordance with mandatory and prescriptive reliability and securitystandards. Despite the implementation of multiple layers of security by Entergy and its subsidiaries, technology systems remainvulnerable to potential existing and new threats that could lead to301Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System Energyunauthorized access to or loss of availability of critical systems essential to the reliable operation of Entergy’s electric system.Moreover, the functionality of Entergy’s technology systems depends on both its and third-party systems to which Entergy is connecteddirectly or indirectly (such as systems belonging to suppliers, vendors and contractors, including cloud-service providers supportingbusiness operations). While Entergy has processes in place to assess systems of certain of these suppliers, vendors and contractors,Entergy does not ultimately control the adequacy of their defenses against cyber and other attacks, but has implemented oversightmeasures to assess maturity and manage third-party risk. If Entergy’s or its subsidiaries’ technology systems were compromised andunable to detect or recover in a timely fashion to a normal state of operations, Entergy or its subsidiaries may be unable to performcritical business functions that are essential to the company’s well-being and the health, safety, and security needs of its customers. Inaddition, an attack on its information technology infrastructure may result in a loss of its confidential, sensitive, and proprietaryinformation, including personal information of its customers, employees, vendors, and others in Entergy’s care. Any such attacks, failures or breaches could have a material effect on Entergy’s and the Utility operating companies’ business,financial condition, results of operations or reputation. Insurance may not be adequate to cover losses that might arise in connectionwith these events. The risk of such attacks, failures, or breaches may cause Entergy and the Utility operating companies to incurincreased capital and operating costs to implement increased security for its power generation, transmission, and distribution assets andother facilities, such as additional physical facility security and security personnel, and for systems to protect its information technologyand network infrastructure systems. Such events may also expose Entergy to an increased risk of litigation (and associated damages andfines).(Entergy New Orleans)The effect of higher purchased gas cost charges to customers taking gas service may adversely affect Entergy New Orleans’sresults of operations and liquidity.Gas rates charged to retail gas customers are comprised primarily of purchased gas cost charges, which provide no return orprofit to Entergy New Orleans, and distribution charges, which provide a return or profit to the utility. Distribution charges are affectedby the amount of gas sold to customers. Purchased gas cost charges, which comprise most of a customer’s bill and may be adjustedmonthly, represent gas commodity costs that Entergy New Orleans recovers from its customers. Entergy New Orleans’s cash flows canbe affected by differences between the time period when gas is purchased and the time when ultimate recovery from customersoccurs. When purchased gas cost charges increase substantially reflecting higher gas procurement costs incurred by Entergy NewOrleans, customer usage may decrease, especially in weaker economic times, resulting in lower distribution charges for Entergy NewOrleans, which could adversely affect results of operations.(System Energy)System Energy owns and, through an affiliate, operates a single nuclear generating facility, and it is dependent on affiliatedcompanies for all of its revenues.System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its90% ownership/leasehold interest in Grand Gulf. Charges under the Unit Power Sales Agreement are paid by the Utility operatingcompanies as consideration for their respective entitlements to receive capacity and energy. The useful economic life of Grand Gulf isfinite and is limited by the terms of its operating license, which expires in November 2044. System Energy’s financial conditiondepends both on the receipt of payments from the Utility operating companies under the Unit Power Sales Agreement and on thecontinued commercial operation of Grand Gulf. The Unit Power Sales Agreement is currently the subject of several litigationproceedings at the FERC, including a challenge with respect to System Energy’s authorized return on equity and capital structure. SeeNote 2 to the financial statements for further discussion of the proceedings.302Table of ContentsPart I Item 1A & 1BEntergy Corporation, Utility operating companies, and System EnergyFor information regarding the Unit Power Sales Agreement, the sale and leaseback transactions and certain other agreementsrelating to the Entergy System companies’ support of System Energy (including the Capital Funds Agreement), see Notes 8 and 10 tothe financial statements and the “Utility - System Energy and Related Agreements” section of Part I, Item 1.(Entergy Corporation)As a holding company, Entergy Corporation depends on cash distributions from its subsidiaries to meet its debt service andother financial obligations and to pay dividends on its common stock.Entergy Corporation is a holding company with no material revenue generating operations of its own or material assets otherthan the stock of its subsidiaries. Accordingly, all of its operations are conducted by its subsidiaries. Entergy Corporation’s ability tosatisfy its financial obligations, including the payment of interest and principal on its outstanding debt, and to pay dividends on itscommon stock depends on the payment to it of dividends or distributions by its subsidiaries. The payments of dividends ordistributions to Entergy Corporation by its subsidiaries in turn depend on their results of operations and cash flows and other itemsaffecting retained earnings, and on any applicable legal, regulatory, or contractual limitations on subsidiaries’ ability to pay suchdividends or distributions. Provisions in the articles of incorporation of certain of Entergy Corporation’s subsidiaries restrict thepayment of cash dividends to Entergy Corporation. For further information regarding dividend or distribution restrictions to EntergyCorporation, see Note 7 to the financial statements.303Table of Contents(Page left blank intentionally)304Table of Contents ENTERGY ARKANSAS, LLC AND SUBSIDIARIESMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISInternal RestructuringIn November 2017, Entergy Arkansas filed an application with the APSC seeking authorization to undertake a restructuring thatwould result in the transfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimatelybe owned by an existing Entergy subsidiary holding company. Entergy Arkansas also filed a notice with the Missouri Public ServiceCommission in December 2017 out of an abundance of caution, although Entergy Arkansas does not serve any retail customers inMissouri. In April 2018 the Missouri Public Service Commission approved Entergy Arkansas’s filing. In July 2018, Entergy Arkansasfiled a settlement, reached by all parties in the APSC proceeding, resolving all issues. The APSC approved the settlement agreement andrestructuring in August 2018. Pursuant to the settlement agreement, Entergy Arkansas will credit retail customers $39.6 million over sixyears, beginning in 2019. Entergy Arkansas also received the required FERC and NRC approvals.In November 2018, Entergy Arkansas undertook a multi-step restructuring, including the following:•Entergy Arkansas, Inc. redeemed its outstanding preferred stock at the aggregate redemption price of approximately $32.7million.•Entergy Arkansas, Inc. converted from an Arkansas corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy Arkansas, Inc. allocated substantially all of its assets to a newsubsidiary, Entergy Arkansas Power, LLC, a Texas limited liability company (Entergy Arkansas Power), and Entergy ArkansasPower assumed substantially all of the liabilities of Entergy Arkansas, Inc., in a transaction regarded as a merger under theTXBOC. Entergy Arkansas, Inc. remained in existence and held the membership interests in Entergy Arkansas Power.•Entergy Arkansas, Inc. contributed the membership interests in Entergy Arkansas Power to an affiliate (Entergy Utility HoldingCompany, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution,Entergy Arkansas Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC. In December 2018, Entergy Arkansas, Inc. changed its name to Entergy Utility Property, Inc., and Entergy Arkansas Power thenchanged its name to Entergy Arkansas, LLC. Entergy Arkansas, LLC holds substantially all of the assets, and assumed substantially allof the liabilities, of Entergy Arkansas, Inc. The transaction was accounted for as a transaction between entities under common control.Results of OperationsNet Income2018 Compared to 2017Net income increased $112.9 million primarily due to a lower effective income tax rate and higher net revenue, each afterexcluding the effect of the return of unprotected excess accumulated deferred income taxes to customers which is offset in incometaxes, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and lowerother income.2017 Compared to 2016Net income decreased $27.4 million primarily due to higher nuclear refueling outage expenses, higher depreciation andamortization expenses, higher taxes other than income taxes, and higher interest expense, partially offset by higher other income.305Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisNet Revenue2018 Compared to 2017Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue$1,522.6Return of unprotected excess accumulated deferredincome taxes to customers(367.7)Formula rate plan regulatory provision(35.1)Retail electric price84.8Volume/weather86.5Other14.72018 net revenue$1,305.8The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotectedexcess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. There is no effect on net income asthe reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements for furtherdiscussion of regulatory activity regarding the Tax Cuts and Jobs Act.The formula rate plan regulatory provision is due to a provision recorded in the fourth quarter 2018 in connection with the 2019formula rate plan filing that will be made in July 2019 associated with 2018. The provision is the estimate of the historical year nettingadjustment that will be included in the 2019 filing to reflect the change in formula rate plan revenues associated with actual 2018 resultswhen compared to the allowed rate of return on common equity. See Note 2 to the financial statements for a discussion of the formularate plan. The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle ofJanuary 2018 and an increase in the energy efficiency rider effective January 2018, each as approved by the APSC. See Note 2 to thefinancial statements for further discussion of the formula rate plan filing. The volume/weather variance is primarily due to an increase of 1,637 GWh, or 8%, in billed electricity usage, including theeffect of more favorable weather on residential and commercial sales and an increase in industrial usage. The increase in industrialusage is primarily due to a new customer in the primary metals industry and an increase in demand from mid-size to small customers. 2017 Compared to 2016Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2017 to2016.306Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and Analysis Amount (In Millions) 2016 net revenue$1,520.5Retail electric price33.8Opportunity sales5.6Asset retirement obligation(14.8)Volume/weather(29.0)Other6.52017 net revenue$1,522.6The retail electric price variance is primarily due to the implementation of formula rate plan rates effective with the first billingcycle of January 2017 and an increase in base rates effective February 24, 2016, each as approved by the APSC. A significant portionof the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016. The increase waspartially offset by decreases in the energy efficiency rider, as approved by the APSC, effective April 2016 and January 2017. See Note2 to the financial statements for further discussion of the rate case and formula rate plan filings. See Note 14 to the financial statementsfor further discussion of the Union Power Station purchase.The opportunity sales variance results from the estimated net revenue effect of the 2017 and 2016 FERC orders in theopportunity sales proceeding attributable to wholesale customers. See Note 2 to the financial statements for further discussion of theopportunity sales proceeding.The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for thedifference between asset retirement obligation-related expenses and decommissioning trust fund earnings plus asset retirementobligation-related costs collected in revenue. The variance is primarily caused by a decrease in regulatory credits because of an increasein decommissioning trust fund earnings, including portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds. The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales duringthe billed and unbilled sales periods. The decrease was partially offset by an increase of 733 GWh, or 11%, in industrial usage primarilydue to a new customer in the primary metals industry.Other Income Statement Variances2018 Compared to 2017Other operation and maintenance expenses increased primarily due to:•an increase of $16 million in energy efficiency costs;•an increase of $10.4 million in fossil-fueled generation expenses primarily due to higher long-term service agreement costs andhigher labor costs in 2018 as compared to 2017;•an increase of $4.4 million in information technology expenses primarily due to higher labor costs and higher contract costs;and•an increase of $4 million as a result of the amount of transmission costs allocated by MISO.The increase was partially offset by higher nuclear insurance refunds of $6.5 million and the receipts of stator-related settlements of$6.2 million in 2018.Depreciation and amortization expenses increased primarily due to additions to plant in service.307Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisOther income decreased primarily due to changes in decommissioning trust fund investment activity, including portfoliorebalancings for the decommissioning trust funds in 2018 and 2017.2017 Compared to 2016Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recentoutages compared to previous outages.Other operation and maintenance expenses increased primarily due to:•the deferral in the first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima complianceand $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to thefinancial statements for further discussion of the rate case settlement;•an increase of $9.5 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs andhigher labor costs, including contract labor;•an increase of $5.9 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in2017 as compared to 2016; and•the effect of recording in July 2016 the final court decision in a lawsuit against the DOE related to spent nuclear fuel storagecosts. The damages awarded included the reimbursement of $5.5 million of spent nuclear fuel storage costs previously recordedas other operation and maintenance expense. See Note 8 to the financial statements for further discussion of Entergy Arkansas’sspent nuclear fuel litigation.The increase was partially offset by:•a decrease of $16 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs comparedto the prior year, partially offset by higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet itsoperational goals. The decrease in regulatory compliance costs is primarily related to NRC inspection activities in 2016 as aresult of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of theNRC’s reactor oversight process action matrix. See Note 8 to the financial statements for a discussion of the ANO stator incidentand subsequent NRC reviews;•a decrease of $11.5 million in energy efficiency expenses primarily due to the timing of recovery from customers; and•a decrease of $5.2 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs,partially offset by an overall higher scope of work including plant outages in 2017 as compared to 2016.Taxes other than income taxes increased primarily due to an increase in ad valorem taxes primarily due to higher assessmentsand higher millage rates and an increase in local franchise taxes primarily due to higher billing factors.Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Block 2 of theUnion Power Station purchased in March 2016. See Note 14 to the financial statements for further discussion of the Union PowerStation purchase.Other income increased primarily due to higher realized gains in 2017 compared to 2016 on the decommissioning trust fundinvestments, including portfolio rebalancings for the decommissioning trust funds.Interest expense increased primarily due to:•an increase of $3.3 million in estimated interest expense recorded in connection with the opportunity sales proceeding. See Note2 to the financial statements for further discussion of the opportunity sales proceeding;308Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and Analysisand•the issuance in May 2017 of $220 million of 3.5% Series first mortgage bonds and the issuance in June 2016 of $55 million of3.5% Series first mortgage bonds, partially offset by the redemption in July 2016 of $60 million of 6.38% Series first mortgagebonds and the redemption in February 2016 of $175 million of 5.66% Series first mortgage bonds. See Note 5 to the financialstatements for further discussion of long-term debt.Income TaxesThe effective income tax rates for 2018, 2017, and 2016 were 669.7%, 40.1%, and 39.2%, respectively. The difference in theeffective income tax rate versus the federal statutory rate of 21% for 2018 was primarily due to the amortization of excess accumulateddeferred income taxes. See Note 3 to the financial statements for a reconciliation of the federal statutory rates of 21% for 2018 and 35%for 2017 and 2016 to the effective income tax rates.Income Tax LegislationSee the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion andAnalysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to thefinancial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of operations and financialposition, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statementsdiscusses the regulatory proceedings that have considered the effects of the Act.Liquidity and Capital ResourcesCash FlowCash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Thousands)Cash and cash equivalents at beginning of period$6,216 $20,509 $9,135 Net cash provided by (used in): Operating activities211,825 555,556 676,511Investing activities(688,727) (829,312) (947,995)Financing activities470,805 259,463 282,858Net increase (decrease) in cash and cash equivalents(6,097) (14,293) 11,374 Cash and cash equivalents at end of period$119 $6,216 $20,509Operating ActivitiesNet cash flow provided by operating activities decreased $343.7 million in 2018 primarily due to:•the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements forfurther discussion of regulatory activity regarding the Tax Cuts and Jobs Act;•payments of $135 million to the other Utility operating companies as a result of a compliance filing made in response to theFERC’s October 2018 order in the opportunity sales proceeding. See Note 2 to the financial statements for further discussion ofthe opportunity sales proceeding; and309Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and Analysis•income tax payments of $44.4 million in 2018 compared to income tax refunds of $8.1 million in 2017. Entergy Arkansas hadincome tax payments in 2018 and income tax refunds in 2017 in accordance with an intercompany income tax allocationagreement. The income tax payments in 2018 primarily resulted from the settlement of the 2012-2013 audit. The income taxrefunds in 2017 resulted from the utilization of Entergy Arkansas’s net operating losses.The decrease was partially offset by:•the timing of recovery of fuel and purchased power costs;•the effect of favorable weather on billed sales;•the timing of collection of receivables from customers; and•a decrease of $15.6 million in pension contributions in 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION ANDANALYSIS - Critical Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualifiedpension and other postretirement benefits funding.Net cash flow provided by operating activities decreased $121 million in 2017 primarily due to income tax refunds of $8.1million in 2017 compared to income tax refunds of $135.7 million in 2016. Entergy Arkansas had income tax refunds in 2016 and2017 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from theutilization of Entergy Arkansas’s net operating losses. The 2016 income tax refunds resulted primarily from adjustments associated withthe settlement of the 2010-2011 IRS audit. See Note 3 to the financial statements for a discussion of the income tax audit.Investing ActivitiesNet cash flow used in investing activities decreased $140.6 million in 2018 primarily due to:•a decrease of $62.4 million in nuclear construction expenditures primarily due to a lower scope of work performed on variousnuclear projects in 2018 as compared to 2017;•a decrease of $55.8 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in thetiming and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cashpayments during the nuclear fuel cycle; and•a decrease of $23.5 million in fossil-fueled generation construction expenditures primarily due to the timing of outages and alower scope of work performed on various projects in 2018 as compared to 2017.Net cash flow used in investing activities decreased $118.7 million in 2017 primarily due to the purchase of Power Block 2 ofthe Union Power Station in March 2016 for approximately $237 million and a decrease of $35.5 million in transmission constructionexpenditures primarily due to a lower scope of work performed in 2017 as compared to 2016. See Note 14 to the financial statementsfor further discussion of the Union Power Station purchase.The decrease was partially offset by:•an increase of $50.4 million in nuclear construction expenditures primarily due to a higher scope of work performed on variousnuclear projects in 2017 as compared to 2016;•an increase of $37.7 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in thetiming and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cashpayments during the nuclear fuel cycle;•an increase of $32.9 million in information technology construction expenditures primarily due to increased spending onsubstation technology upgrades;•an increase of $22.3 million in fossil-fueled generation construction expenditures primarily due to a higher scope of workperformed on various projects in 2017 as compared to 2016; and•an increase of $11.2 million due to increased spending on advanced metering infrastructure.310Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisFinancing ActivitiesEntergy Arkansas’s cash provided by financing activities increased $211.3 million in 2018 primarily due to:•a $350 million capital contribution from Entergy Corporation in May 2018 in anticipation of the return of unprotected excessaccumulated deferred income taxes to customers and upcoming planned capital investments;•the repayment, in 2017, of Entergy Arkansas nuclear fuel company variable interest entity’s $60 million of 2.62% Series Knotes;•the repayment, in 2017, of $54.7 million of 1.55% pollution control revenue bonds;•net long-term borrowings of $34.7 million in 2018 on the Entergy Arkansas nuclear fuel company variable interest entity creditfacility; and•the issuance of $250 million of 4.0% Series first mortgage bonds in May 2018 as compared to the issuance of $220 million of3.5% Series first mortgage bonds in May 2017.The increase was partially offset by:•net repayments of short-term borrowings of $50 million on the Entergy Arkansas nuclear fuel company variable interest entitycredit facility in 2018 as compared to net short-term borrowings of $50 million on the Entergy Arkansas nuclear fuel companyvariable interest entity credit facility in 2017;•money pool activity;•an increase of $76.8 million in common equity distributions paid in 2018 primarily to maintain Entergy Arkansas’s target capitalstructure; and•the redemption of $31 million of preferred stock in 2018 in connection with the internal restructuring. See Note 2 to thefinancial statements for further discussion of the internal restructuring and Note 6 to the financial statements for details ofpreferred stock activity.Increases in Entergy Arkansas’s payable to the money pool are a source of cash flow, and Entergy Arkansas’s payable to themoney pool increased by $16.6 million in 2018 compared to increasing by $114.9 million in 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Net cash flow provided by financing activities decreased $23.4 million in 2017 primarily due to:•a $200 million capital contribution received from Entergy Corporation in March 2016 primarily in anticipation of EntergyArkansas’s purchase of Power Block 2 of the Union Power Station;•the net issuance of $119.1 million of long-term debt in 2017 compared to the net issuance of $189.1 million of long-term debtin 2016; and•$15 million in common stock dividends paid in 2017 primarily to maintain Entergy Arkansas’s target capital structure. Therewere no common stock dividends paid in 2016 in anticipation of the purchase of Power Block 2 of the Union Power Station.The decrease was partially offset by:•money pool activity;•the redemptions of $75 million of 6.45% Series preferred stock and $10 million of 6.08% Series preferred stock in 2016; and•net short-term borrowings of $50 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in2017 compared to net repayments of $11.7 million in 2016.Increases in Entergy Arkansas’s payable to the money pool are a source of cash flow, and Entergy Arkansas’s payable to themoney pool increased by $114.9 million in 2017 compared to decreasing by $1.5 million in 2016.311Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisSee Note 5 to the financial statements for further details of long-term debt.Capital StructureEntergy Arkansas’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for EntergyArkansas is primarily due to the $350 million capital contribution from Entergy Corporation in 2018. December 31, 2018 December 31, 2017Debt to capital52.0% 55.5%Effect of excluding the securitization bonds(0.2%) (0.3%)Debt to capital, excluding securitization bonds (a)51.8% 55.2%Effect of subtracting cash—% —%Net debt to net capital, excluding securitization bonds (a)51.8% 55.2%(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas.Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including thecurrently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists ofcapital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratios excluding securitization bonds in analyzing itsfinancial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Arkansas’s financialcondition because the securitization bonds are non-recourse to Entergy Arkansas, as more fully described in Note 5 to the financialstatements. Entergy Arkansas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financialcondition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial conditionbecause net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalentson hand.Entergy Arkansas seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost ofcapital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operatingcash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a distribution, or both,in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to supportplanned investments, Entergy Arkansas may issue incremental debt or reduce distributions, or both, to maintain its targeted capitalstructure. In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure iffinanced entirely with debt and reducing distributions, Entergy Arkansas may receive equity contributions to maintain the targetedcapital structure.Uses of CapitalEntergy Arkansas requires capital resources for:•construction and other capital investments;•debt maturities or retirements;•working capital purposes, including the financing of fuel and purchased power costs; and•distribution and interest payments.312Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisFollowing are the amounts of Entergy Arkansas’s planned construction and other capital investments. 2019 2020 2021 (In Millions)Planned construction and capital investment: Generation$210 $220 $385Transmission145 95 65Distribution245 270 290Utility Support130 100 75Total$730 $685 $815Following are the amounts of Entergy Arkansas’s existing debt and lease obligations (includes estimated interest payments) andother purchase obligations. 2019 2020-2021 2022-2023 after 2023 Total (In Millions)Long-term debt (a)$136 $780 $489 $4,128 $5,533Operating leases$20 $26 $17 $24 $87Purchase obligations (b)$525 $966 $619 $3,800 $5,910(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. For Entergy Arkansas, almost all of the total consists of unconditional fuel and purchased power obligations,including its obligations under the Unit Power Sales Agreement, which are discussed in Note 8 to the financial statements.In addition to the contractual obligations given above, Entergy Arkansas currently expects to contribute approximately $27.1 million toits qualified pension plans and approximately $501 thousand to its other postretirement health care and life insurance plans in 2019,although the 2019 required pension contributions will be known with more certainty when the January 1, 2019 valuations arecompleted, which is expected by April 1, 2019. See “Critical Accounting Estimates – Qualified Pension and Other PostretirementBenefits” below for a discussion of qualified pension and other postretirement benefits funding.Also in addition to the contractual obligations, Entergy Arkansas has $124.8 million of unrecognized tax benefits and interestnet of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties inthe timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regardingunrecognized tax benefits.In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Arkansasincludes specific investments, such as transmission projects to enhance reliability, reduce congestion, and enable economic growth;distribution spending to enhance reliability and improve service to customers, including advanced meters and related investments;resource planning, including potential generation projects; system improvements; investments in ANO 1 and 2; software and security;and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on theongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility,economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides moreinformation on long-term debt maturities in Note 5 to the financial statements.As a wholly-owned subsidiary of Entergy Utility Holding Company, LLC, Entergy Arkansas pays distributions from its earningsat a percentage determined monthly.313Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisAdvanced Metering Infrastructure (AMI)In September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’sdeployment of AMI is in the public interest. Entergy Arkansas proposed to replace existing meters with advanced meters that enabletwo-way data communication; design and build a secure and reliable network to support such communications; and implement supportsystems. AMI is intended to serve as the foundation of Entergy Arkansas’s modernized power grid. The filing included an estimate ofimplementation costs for AMI of $208 million. The filing identified a number of quantified and unquantified benefits, and EntergyArkansas provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominal net benefit to customersof $406 million. Entergy Arkansas also sought to continue to include in rate base the remaining book value of existing meters, whichwas approximately $57 million at December 31, 2015, that will be retired as part of the AMI deployment and also to depreciate thoseassets using current depreciation rates. Entergy Arkansas proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Deployment of the communications network began in 2018. Entergy Arkansasproposed to include the AMI deployment costs and the quantified benefits in future formula rate plan filings, and the 2018 costs wereapproved in the 2017 formula rate plan filing. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. TheAPSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas AttorneyGeneral’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations inthe event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas filed rebuttal testimony in June 2017, substantiallyaccepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motionto approve a unanimous settlement agreement. In October 2017 the APSC issued an order finding that Entergy Arkansas’s AMIdeployment is in the public interest and approving the settlement agreement subject to a minor modification. Entergy Arkansas expectsto recover the undepreciated balance of its existing meters through a regulatory asset to be amortized over 15 years.Sources of CapitalEntergy Arkansas’s sources to meet its capital requirements include:•internally generated funds;•cash on hand;•debt or preferred membership interest issuances;•capital contributions; and•bank financing under new or existing facilities.Entergy Arkansas may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interestrates are favorable.All debt and common and preferred membership interest issuances by Entergy Arkansas require prior regulatoryapproval. Debt issuances are also subject to issuance tests set forth in Entergy Arkansas’s bond indentures and otheragreements. Entergy Arkansas has sufficient capacity under these tests to meet its foreseeable capital needs.Entergy Arkansas’s payables to the money pool were as follows as of December 31 for each of the following years.2018 2017 2016 2015(In Thousands)$182,738 $166,137 $51,232 $52,742See Note 4 to the financial statements for a description of the money pool.314Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisEntergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in September 2023. Entergy Arkansasalso has a $20 million credit facility scheduled to expire in April 2019. The $150 million credit facility includes fronting commitmentsfor the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of December 31, 2018, there were nocash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to anuncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of December 31, 2018, a $1million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financialstatements for further discussion of the credit facilities.The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduledto expire in September 2021. As of December 31, 2018, $59.6 million in loans were outstanding under the Entergy Arkansas nuclearfuel company variable interest entity credit facility. See Note 4 to the financial statements for further discussion of the nuclear fuelcompany variable interest entity credit facility.Entergy Arkansas obtained authorization from the FERC through November 2020 for short-term borrowings not to exceed anaggregate amount of $250 million at any time outstanding and borrowings by its nuclear fuel company variable interest entity. See Note4 to the financial statements for further discussion of Entergy Arkansas’s short-term borrowing limits. The long-term securitiesissuances of Entergy Arkansas are limited to amounts authorized by the FERC. The APSC has concurrent jurisdiction over EntergyArkansas’s first mortgage bond/secured issuances. Entergy Arkansas has obtained long-term financing authorization from the FERCthat extends through November 2020. Entergy Arkansas has obtained first mortgage bond/secured financing authorization from theAPSC that extends through December 2020.State and Local Rate Regulation and Fuel-Cost RecoveryRetail Rates2015 Base Rate Filing In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notified theAPSC of Entergy Arkansas’s intent to implement a forward test year formula rate plan pursuant to Arkansas legislation passed in 2015,and requested a retail rate increase of $268.4 million, with a net increase in revenue of $167 million. The filing requested a 10.2%return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors in the rate case filedwith the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 millionwith a net increase in revenue of approximately $133 million; an authorized return on common equity of 9.75%; and a formula rateplan tariff that provides a +/- 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rateincrease is related to Entergy Arkansas’s acquisition in March 2016 of Union Power Station Power Block 2 for a base purchase price of$237 million. The settlement agreement also provided for amortization over a 10-year period of $7.7 million of previously-incurredcosts related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barriercompliance. In February 2016 the APSC approved the settlement with one exception that reduced the retail rate increase proposed inthe settlement by $5 million. The settling parties agreed to the APSC modifications in February 2016. The new rates were effectiveFebruary 24, 2016 and began billing with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliancefiling regarding the new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016,to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. The interim base rateadjustment surcharge was designed to recover a total of $21.1 million over the nine-month period from April 2016 through December2016.315Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and Analysis2016 Formula Rate Plan FilingIn July 2016, Entergy Arkansas filed with the APSC its 2016 formula rate plan filing showing Entergy Arkansas’s projectedearned return on common equity for the twelve months ended December 31, 2017 test period to be below the formula rate planbandwidth. The filing requested a $67.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return oncommon equity of 9.75%. In October 2016, Entergy Arkansas filed with the APSC revised formula rate plan attachments with anupdated request for a $54.4 million revenue requirement increase based on acceptance of certain adjustments and recommendationsmade by the APSC staff and other intervenors, as well as three additional adjustments identified as appropriate by Entergy Arkansas. InNovember 2016 a hearing was held and the APSC issued an order directing the parties to brief certain issues. In December 2016 theAPSC approved a settlement agreement and the $54.4 million revenue requirement increase with approximately $25 million of the$54.4 million revenue requirement subject to possible future adjustment and refund to customers with interest. The APSC requestedsupplemental information for some of Entergy Arkansas’s requested nuclear expenditures. In December 2016 the APSC approvedEntergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle of January 2017. InApril 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit the supplementalinformation requested by the APSC in conjunction with its 2017 formula rate plan filing, which was subsequently made in July 2017and is discussed below. In May 2017 the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplementalinformation on a concurrent schedule with the 2017 formula rate plan filing. In October 2017, Entergy Arkansas and the parties to theproceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the proceeding and providing forrecovery of the 2017 and 2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and recovery of the2017 and 2018 nuclear costs.2017 Formula Rate Plan FilingIn July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projectedearned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate planbandwidth. The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return oncommon equity of 9.75%. Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and theprojected annual revenue requirement increase exceeded the four percent, resulting in a proposed increase for the 2017 formula rateplan of $70.9 million. In October 2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments that projected a$126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staffand other intervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on arevision to the four percent constraint calculation. In October 2017, Entergy Arkansas and the parties to the proceeding filed a jointmotion to approve a unanimous settlement agreement resolving all issues in the proceeding and providing for recovery of the 2017 and2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and the $71.1 million revenue requirementincrease, as well as Entergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle ofJanuary 2018.2018 Formula Rate Plan FilingIn July 2018, Entergy Arkansas filed with the APSC its 2018 formula rate plan filing to set its formula rate for the 2019 calendaryear. The filing shows Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2019test period to be below the formula rate plan bandwidth. Additionally, the filing includes the first netting adjustment under the currentformula rate plan for the historical test year 2017, reflecting the change in formula rate plan revenues associated with actual 2017results when compared to the allowed rate of return on equity. The filing includes a projected $73.4 million revenue deficiency for 2019and a $95.6 million revenue deficiency for the 2017 historical test year, for a total revenue requirement of $169 million for this filing.By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annualrevenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeds the constraint, the resulting increase islimited to four percent of total revenue, which originally was $65.4 million but was increased to $66.7316Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and Analysismillion based upon the APSC staff’s updated calculation of 2018 revenue, which included additional actual revenues for 2018. InOctober 2018, Entergy Arkansas and the parties to the proceeding filed joint motions to approve a partial settlement agreement as tocertain factual issues and agreed to brief contested legal issues. In November 2018 the APSC held a hearing and was briefed on acertain contested legal issue. In December 2018 the APSC issued a decision related to the initial legal brief, approved the partialsettlement agreement and $66.7 million revenue requirement increase, as well as Entergy Arkansas’s formula rate plan, with updatedrates going into effect for the first billing cycle of January 2019. An additional schedule was issued by the APSC for briefing othercontested issues, the outcome of which did not affect the 2018 filing but could affect future Entergy Arkansas formula rate plan filings.That briefing was completed in February 2019, and the APSC has not indicated when a decision on those issues can be expected.Similar to the 2018 filing, the formula rate plan filing that will be made in 2019 to set the formula rates for the 2020 calendaryear will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017 formula rateplan filing to actual 2018 costs and sales data. In the fourth quarter 2018 Entergy Arkansas recorded a provision of $35.1 million thatreflects the estimate of the historical year netting adjustment that will be included in the 2019 filing to reflect the change in formula rateplan revenues associated with actual 2018 results when compared to the allowed rate of return on equity. Production Cost Allocation RiderThe APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated toEntergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System Agreement Cost EqualizationProceedings” section in Note 2 to the financial statements. In May 2016, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflectedrecovery of the production cost allocation rider true-up adjustment of the 2014 and 2015 unrecovered retail balance in the amount of$1.9 million. Additionally, the redetermined rates reflected the recovery of a $1.9 million System Agreement bandwidth remedypayment resulting from a compliance filing pursuant to the FERC’s December 2015 order related to test year 2009 production costs.The rates for the 2016 production cost allocation rider update were effective July 2016 through June 2017.In May 2017, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflecteda credit amount of $0.3 million resulting from a compliance filing pursuant to the FERC’s September 2016 order. Additionally, theredetermined rate reflected recovery of the production cost allocation rider true-up adjustment of the 2016 unrecovered retail balance inthe amount of $0.3 million. Because of the small effect of the 2017 production cost allocation rider update, Entergy Arkansas proposedto reduce the effective period of the update to one month, July 2017. After the one month collection period, rates were set to zero for allrate classes for the period August 2017 through June 2018.In May 2018, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflectedrecovery of the 2017 under-recovered retail balance and a $2.8 million payment by Entergy Arkansas associated with a compliancefiling pursuant to a March 2018 FERC order related to 2010 production costs. The rates for the 2018 production cost allocation riderupdate are effective July 2018 through June 2019.Energy Cost Recovery RiderEntergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthlycustomer bills. The rider utilizes the prior calendar-year energy costs and projected energy sales for the twelve-month periodcommencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustmentreflecting the over- or under-recovery, including carrying charges, of the energy costs for the prior calendar year. The energy costrecovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchasedenergy costs.317Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisIn January 2014, Entergy Arkansas filed a motion with the APSC relating to its upcoming energy cost rate redetermination filingthat was made in March 2014. In that motion, Entergy Arkansas requested that the APSC authorize Entergy Arkansas to exclude fromthe redetermination of its 2014 energy cost rate $65.9 million of incremental fuel and replacement energy costs incurred in 2013 as aresult of the ANO stator incident. Entergy Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in itsdeferred fuel balance, with recovery to be reviewed in a later period after more information was available regarding various claimsassociated with the ANO stator incident. In February 2014 the APSC approved Entergy Arkansas’s request to retain that amount in itsdeferred fuel balance. In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In thatproceeding, the APSC approved a settlement agreement agreed upon by the parties, including a provision that requires EntergyArkansas to initiate a regulatory proceeding for the purpose of recovering funds currently withheld from rates and related to the statorincident, including the $65.9 million of deferred fuel and purchased energy costs previously noted, subject to certain timelines andconditions set forth in the settlement agreement. See the “ANO Damage, Outage, and NRC Reviews” section in Note 8 to the financialstatements for further discussion of the ANO stator incident.In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recoveryrider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March2017 recommending that the redetermined rate be implemented with the first billing cycle of April 2017 under the normal operation ofthe tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the ArkansasAttorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rateredetermination.In March 2018, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recoveryrider, which reflected an increase in the rate from $0.01547 per kWh to $0.01882 per kWh. The Arkansas Attorney General filed aresponse to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate theamount of the redetermination or, alternatively, to allow recovery subject to refund. Among the reasons the Attorney General cited forsuspension were questions pertaining to how Entergy Arkansas forecasted sales and potential implications of the Tax Act. EntergyArkansas replied to the Attorney General’s filing and stated that, to the extent there are questions pertaining to its load forecasting or theoperation of the energy cost recovery rider, those issues exceed the scope of the instant rate redetermination. Entergy Arkansas alsostated that potential effects of the Tax Act are appropriately considered in the APSC’s separate proceeding regarding potentialimplications of the tax law. The APSC general staff filed a reply to the Attorney General’s filing and agreed that Entergy Arkansas’sfiling complied with the terms of the energy cost recovery rider. The redetermined rate became effective with the first billing cycle ofApril 2018. Subsequently in April 2018 the APSC issued an order declining to suspend Entergy Arkansas’s energy cost recovery riderrate and declining to require further investigation at that time of the issues suggested by the Attorney General in the proceeding.Following a period of discovery, the Attorney General filed a supplemental response in October 2018 raising new issues with EntergyArkansas’s March 2018 rate redetermination and asserting that $45.7 million of the increase should be collected subject to refundpending further investigation. Entergy Arkansas filed to dismiss the Attorney General’s supplemental response, the APSC general stafffiled a motion to strike the Attorney General’s filing, and the Attorney General filed a supplemental response disputing EntergyArkansas and the APSC staff’s filing. Applicable APSC rules and processes authorize its general staff to initiate periodic audits ofEntergy Arkansas’s energy cost recovery rider. In late-2018, the APSC general staff notified Entergy Arkansas it has initiated an auditof the 2017 fuel costs. The time in which the audit will be complete is uncertain at this time.Opportunity Sales ProceedingIn June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electricenergy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy Systemresources; (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generatingcapacity; and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent anoffer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenged sales made beginning in 2002and requested refunds. In318Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisJuly 2009 the Utility operating companies filed a response to the complaint arguing among other things that the System Agreementcontemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement thatthose sales be included in the load (or load shape) for the applicable Utility operating company. The FERC subsequently ordered ahearing in the proceeding.After a hearing, the ALJ issued an initial decision in December 2010. The ALJ found that the System Agreement allowed forEntergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as jointaccount sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, alongwith interest. Entergy disagreed with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptionsto the decision.The FERC issued a decision in June 2012 and held that, while the System Agreement is ambiguous, it does provide authority forindividual Utility operating companies to make opportunity sales for their own account and Entergy Arkansas made and priced thesesales in good faith. The FERC found, however, that the System Agreement does not provide authority for an individual Utilityoperating company to allocate the energy associated with such opportunity sales as part of its load but provides a different allocationauthority. The FERC further found that the after-the-fact accounting methodology used to allocate the energy used to supply the saleswas inconsistent with the System Agreement. The FERC in its decision established further hearing procedures to quantify the effect ofrepricing the opportunity sales in accordance with the FERC’s June 2012 decision. The hearing was held in May 2013 and the ALJissued an initial decision in August 2013. The LPSC, the APSC, the City Council, and FERC staff filed briefs on exceptions and/orbriefs opposing exceptions. Entergy filed a brief on exceptions requesting that the FERC reverse the initial decision and a briefopposing certain exceptions taken by the LPSC and FERC staff.In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and the ALJ’s August 2013 initialdecision. The first order denied Entergy’s request for rehearing and affirmed the FERC’s earlier rulings that Entergy’s originalmethodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make paymentsto the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation.The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, therulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments EntergyArkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system billsshould be performed but required that methodology be modified so that the sales have the same priority for purposes of energyallocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidthpayments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that suchadjustments and excess bandwidth payments should be taken into account but ordered further proceedings before an ALJ to addresswhether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculationmethodology.In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that payments made byEntergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. Entergy Services also filed arequest for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSCand the LPSC also filed requests for rehearing of the FERC’s April 2016 order. In September 2017 the FERC issued an order denyingthe request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should bereduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana. InNovember 2017 the FERC issued an order denying all of the remaining requests for rehearing of the April 2016 order. In November2017, Entergy Services filed a petition for review in the D.C. Circuit of the FERC’s orders in the first two phases of the opportunitysales case. In December 2017 the D.C. Circuit granted Entergy Services’s request to hold the appeal in abeyance pending finalresolution of the related proceeding before the FERC. In January 2018 the APSC and the LPSC filed separate petitions for review in theD.C. Circuit, and the D.C. Circuit consolidated the appeals with Entergy319Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisServices’s appeal and held all of the appeals in abeyance pending final resolution of the related proceeding before the FERC.The hearing required by the FERC’s April 2016 order was held in May 2017. In July 2017 the ALJ issued an initial decisionaddressing whether a cap on any reduction due to bandwidth payments was necessary and whether to implement the other adjustmentsto the calculation methodology. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individualbriefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC,the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties.Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016,Entergy Arkansas recorded a liability of $87 million, which included interest, for its estimated increased costs and payment to the otherUtility operating companies, and a deferred fuel regulatory asset of $75 million. Following its assessment of the course of theproceedings, including the FERC’s denial of rehearing in November 2017 described above, in the fourth quarter 2017, EntergyArkansas recorded an additional liability of $35 million and a regulatory asset of $31 million.In October 2018 the FERC issued an order addressing the ALJ’s July 2017 initial decision. The FERC reversed the ALJ’sdecision to cap the reduction in Entergy Arkansas’s payment to account for the increased bandwidth payments that Entergy Arkansasmade to the other operating companies. The FERC also reversed the ALJ’s decision that Grand Gulf sales from January throughSeptember 2000 should be included in the calculation of Entergy Arkansas’s payment. The FERC affirmed on other grounds the ALJ’srejection of the LPSC’s claim that certain joint account sales should be accounted for as part of the calculation of Entergy Arkansas’spayment. In December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order. The compliance filingprovided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. Refunds andinterest in the following amounts were paid by Entergy Arkansas to the other operating companies in December 2018: Total refunds including interest Payment/(Receipt) (In Millions) PrincipalInterestTotalEntergy Arkansas$68$67$135Entergy Louisiana($30)($29)($59)Entergy Mississippi($18)($18)($36)Entergy New Orleans($3)($4)($7)Entergy Texas($17)($16)($33)Entergy Arkansas previously recognized a regulatory asset with a balance of $116 million as of December 31, 2018 for a portion of thepayments due as a result of this proceeding.Federal RegulationSee the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.Nuclear MattersEntergy Arkansas owns and, through an affiliate, operates the ANO 1 and ANO 2 nuclear power plants. Entergy Arkansas is,therefore, subject to the risks related to owning and operating nuclear plants. These include risks related to: the use, storage, andhandling and disposal of high-level and low-level radioactive materials; the substantial financial320Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and Analysisrequirements, both for capital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals,including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plantsystems and the Fukushima event; regulatory requirements and potential future regulatory changes, including changes affecting theregulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; the performanceand capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel andnuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earningsto complete decommissioning of each site when required; and limitations on the amounts and types of insurance commercially availablefor losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident. In the event of anunanticipated early shutdown of either ANO 1 or ANO 2, Entergy Arkansas may be required to file with the APSC a rate mechanism toprovide additional funds or credit support to satisfy regulatory requirements for decommissioning. ANO 1’s operating license expires in2034 and ANO 2’s operating license expires in 2038.See Note 8 to the financial statements for discussion of the NRC’s decision in March 2015 to move ANO into the“multiple/repetitive degraded cornerstone column,” or Column 4, of the NRC’s Reactor Oversight Process Action Matrix, and theresulting significant additional NRC inspection activities at the ANO site. In June 2018 the NRC moved ANO 1 and ANO 2 into the“licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRCinspections to review ANO 1’s and ANO 2’s performance in addressing issues that had previously resulted in classification in the“multiple/repetitive degraded cornerstone column,” or Column 4.Environmental RisksEntergy Arkansas’s facilities and operations are subject to regulation by various governmental authorities having jurisdictionover air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmentalmatters. Management believes that Entergy Arkansas is in substantial compliance with environmental regulations currently applicableto its facilities and operations, with reference to possible exceptions noted in “Regulation of Entergy’s Business - EnvironmentalRegulation” in Part I, Item 1. Because environmental regulations are subject to change, future compliance costs cannot be preciselyestimated.Critical Accounting EstimatesThe preparation of Entergy Arkansas’s financial statements in conformity with generally accepted accounting principles requiresmanagement to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect onreported financial position, results of operations, and cash flows. Management has identified the following accounting policies andestimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and thepotential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on thepresentation of Entergy Arkansas’s financial position or results of operations.Nuclear Decommissioning CostsSee “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nucleardecommissioning costs.321Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisUtility Regulatory AccountingSee “Utility Regulatory Accounting” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.Impairment of Long-lived Assets and Trust Fund InvestmentsSee “Impairment of Long-lived Assets and Trust Fund Investments” in the “Critical Accounting Estimates” section ofEntergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated withthe impairment of long-lived assets and trust fund investments.Taxation and Uncertain Tax PositionsSee “Taxation and Uncertain Tax Positions” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for further discussion.Qualified Pension and Other Postretirement BenefitsEntergy Arkansas’s qualified pension and other postretirement reported costs, as described in Note 11 to the financialstatements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and variousactuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” inthe “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance ofthe assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.Costs and SensitivitiesThe following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes incertain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019 QualifiedPension Cost Impact on 2018 QualifiedProjected BenefitObligation Increase/(Decrease) Discount rate (0.25%) $2,620 $39,773Rate of return on plan assets (0.25%) $2,782 $—Rate of increase in compensation 0.25% $1,338 $6,238The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation tochanges in certain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019Postretirement Benefit Cost Impact on 2018AccumulatedPostretirement BenefitObligation Increase/(Decrease) Discount rate (0.25%) $59 $5,337Health care cost trend 0.25% $220 $3,805322Table of ContentsEntergy Arkansas, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisEach fluctuation above assumes that the other components of the calculation are held constant.Costs and FundingTotal qualified pension cost for Entergy Arkansas in 2018 was $43 million. Entergy Arkansas anticipates 2019 qualifiedpension cost to be $44.4 million. Entergy Arkansas contributed $64.1 million to its qualified pension plan in 2018 and estimatespension contributions will be approximately $27.1 million in 2019, although the 2019 required pension contributions will be knownwith more certainty when the January 1, 2019 valuations are completed, which is expected by April 1, 2019.Total other postretirement health care and life insurance benefit income for Entergy Arkansas in 2018 was $10.2million. Entergy Arkansas expects 2019 postretirement health care and life insurance benefit income of approximately $12.5 million. Entergy Arkansas contributed $195 thousand to its other postretirement plans in 2018 and estimates 2019 contributions will beapproximately $501 thousand. Federal Healthcare LegislationSee “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical AccountingEstimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion ofFederal Healthcare Legislation.Other ContingenciesSee “Other Contingencies” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and otherrisks.New Accounting PronouncementsSee “New Accounting Pronouncements” section of Note 1 to the financial statements for a discussion of new accountingpronouncements.323Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the members and Board of Directors ofEntergy Arkansas, LLC and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Entergy Arkansas, LLC and Subsidiaries (the “Company”) as ofDecember 31, 2018 and 2017, the related consolidated statements of income, cash flows and changes in member’s equity (pages 325through 330 and applicable items in pages 53 through 237), for each of the three years in the period ended December 31, 2018, and therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all materialrespects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flowsfor each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in theUnited States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part ofour audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Company’s auditor since 2001.324Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING REVENUES Electric $2,060,643 $2,139,919 $2,086,608 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 517,245 402,777 325,036Purchased power 252,390 230,652 233,350Nuclear refueling outage expenses 77,915 83,968 56,650Other operation and maintenance 724,831 694,157 693,181Decommissioning 60,420 56,860 53,610Taxes other than income taxes 104,771 103,662 93,109Depreciation and amortization 292,649 277,146 264,215Other regulatory charges (credits) - net (14,807) (16,074) 7,737TOTAL 2,015,414 1,833,148 1,726,888 OPERATING INCOME 45,229 306,771 359,720 OTHER INCOME Allowance for equity funds used during construction 16,557 18,452 17,099Interest and investment income 25,406 35,882 19,087Miscellaneous - net (14,874) (13,967) (14,838)TOTAL 27,089 40,367 21,348 INTEREST EXPENSE Interest expense 124,459 122,075 115,311Allowance for borrowed funds used during construction (7,781) (8,585) (9,228)TOTAL 116,678 113,490 106,083 INCOME (LOSS) BEFORE INCOME TAXES (44,360) 233,648 274,985 Income taxes (297,067) 93,804 107,773 NET INCOME 252,707 139,844 167,212 Preferred dividend requirements 1,249 1,428 5,270 EARNINGS APPLICABLE TO COMMON EQUITY $251,458 $138,416 $161,942 See Notes to Financial Statements. 325Table of Contents(Page left blank intentionally)326Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 201820172016 (In Thousands)OPERATING ACTIVITIES Net income $252,707 $139,844 $167,212Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation, amortization, and decommissioning, including nuclear fuel amortization 443,698 427,394 414,933Deferred income taxes, investment tax credits, and non-current taxes accrued 129,524 67,711 201,219Changes in assets and liabilities: Receivables 4,294 (23,397) (39,118)Fuel inventory 6,210 3,402 29,929Accounts payable (126,405) 16,011 143,645Prepaid taxes and taxes accrued 9,568 40,127 37,485Interest accrued 678 1,635 (3,303)Deferred fuel costs 43,869 33,190 (105,741)Other working capital accounts (30,118) 15,087 (46,490)Provisions for estimated losses 14,250 16,047 13,130Other regulatory assets 32,460 (76,762) (95,464)Other regulatory liabilities (341,682) 1,043,507 62,994Deferred tax rate change recognized as regulatory liability/asset — (1,047,837) —Pension and other postretirement liabilities (40,157) (70,826) (36,805)Other assets and liabilities (187,071) (29,577) (67,115)Net cash flow provided by operating activities 211,825 555,556 676,511INVESTING ACTIVITIES Construction expenditures (660,044) (735,816) (666,289)Allowance for equity funds used during construction 17,013 19,211 17,754Nuclear fuel purchases (99,417) (151,424) (102,050)Proceeds from sale of nuclear fuel 54,810 51,029 39,313Proceeds from nuclear decommissioning trust fund sales 300,801 339,434 197,390Investment in nuclear decommissioning trust funds (315,163) (352,138) (213,093)Payment for purchase of plant — — (237,323)Insurance proceeds 14,790 — 10,404Other (1,517) 392 5,899Net cash flow used in investing activities (688,727)(829,312)(947,995)FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 958,434 294,656 817,563Retirement of long-term debt (690,488) (175,560) (628,433)Capital contribution from parent 350,000 — 200,000Redemption of preferred stock (32,660) — (85,283)Change in money pool payable - net 16,601 114,905 (1,510)Changes in short-term borrowings - net (49,974) 49,974 (11,690)Distributions/dividends paid: Common equity (91,751) (15,000) —Preferred stock (1,606) (1,428) (6,631)Other 12,249 (8,084) (1,158)Net cash flow provided by financing activities 470,805 259,463 282,858Net increase (decrease) in cash and cash equivalents (6,097) (14,293) 11,374Cash and cash equivalents at beginning of period 6,216 20,509 9,135Cash and cash equivalents at end of period $119 $6,216 $20,509SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $118,731 $115,162 $112,912Income taxes $44,393 ($8,141) ($135,709)See Notes to Financial Statements. 327Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $118 $6,184Temporary cash investments 1 32Total cash and cash equivalents 119 6,216Securitization recovery trust account 4,666 3,748Accounts receivable: Customer 94,348 110,016Allowance for doubtful accounts (1,264) (1,063)Associated companies 48,184 38,765Other 64,393 65,209Accrued unbilled revenues 108,092 105,120Total accounts receivable 313,753 318,047Deferred fuel costs 19,235 63,302Fuel inventory - at average cost 23,148 29,358Materials and supplies - at average cost 196,314 192,853Deferred nuclear refueling outage costs 78,966 56,485Prepayments and other 14,553 12,108TOTAL 650,754 682,117 OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 912,049 944,890Other 5,480 3,160TOTAL 917,529 948,050 UTILITY PLANT Electric 11,611,041 11,059,538Construction work in progress 243,731 280,888Nuclear fuel 220,602 277,345TOTAL UTILITY PLANT 12,075,374 11,617,771Less - accumulated depreciation and amortization 4,864,818 4,762,352UTILITY PLANT - NET 7,210,556 6,855,419 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Other regulatory assets (includes securitization property of $14,329 as of December 31, 2018 and $28,583 as ofDecember 31, 2017) 1,534,977 1,567,437Deferred fuel costs 67,294 67,096Other 20,486 13,910TOTAL 1,622,757 1,648,443 TOTAL ASSETS $10,401,596 $10,134,029 See Notes to Financial Statements. 328Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands) CURRENT LIABILITIES Short-term borrowings $— $49,974Accounts payable: Associated companies 251,768 365,915Other 187,387 215,942Customer deposits 99,053 97,687Taxes accrued 56,889 47,321Interest accrued 18,893 18,215Current portion of unprotected excess accumulated deferred income taxes 99,316 —Other 23,943 29,922TOTAL 737,249 824,976 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 1,085,545 1,190,669Accumulated deferred investment tax credits 32,903 34,104Regulatory liability for income taxes - net 505,748 985,823Other regulatory liabilities 402,668 363,591Decommissioning 1,048,428 981,213Accumulated provisions 48,979 34,729Pension and other postretirement liabilities 313,295 353,274Long-term debt (includes securitization bonds of $20,898 as of December 31, 2018 and $34,662 as of December31, 2017) 3,225,759 2,952,399Other 17,919 5,147TOTAL 6,681,244 6,900,949 Commitments and Contingencies Preferred stock without sinking fund — 31,350 EQUITY Member's equity 2,983,103 2,376,754TOTAL 2,983,103 2,376,754 TOTAL LIABILITIES AND EQUITY $10,401,596 $10,134,029 See Notes to Financial Statements. 329Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Member's Equity (In Thousands) Balance at December 31, 2015$1,891,658Net income167,212Capital contributions from parent200,000Capital stock redemption(283)Preferred stock dividends(5,270)Balance at December 31, 2016$2,253,317Net income139,844Common equity distributions(15,000)Preferred stock dividends(1,428)Other21Balance at December 31, 2017$2,376,754Net income252,707Capital contributions from parent350,000Common equity distributions(91,751)Non-cash contribution from parent94,335Preferred stock dividends(1,249)Other2,307Balance at December 31, 2018$2,983,103 See Notes to Financial Statements. 330Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESSELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (In Thousands) Operating revenues $2,060,643 $2,139,919 $2,086,608 $2,253,564 $2,172,391Net income $252,707 $139,844 $167,212 $74,272 $121,392Total assets $10,401,596 $10,134,029 $9,606,117 $8,747,774 $8,777,655Long-term obligations (a) $3,225,759 $2,983,749 $2,746,435 $2,691,189 $2,757,423 (a) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund. 2018 2017 2016 2015 2014 (Dollars In Millions) Electric Operating Revenues: Residential $807 $768 $789 $824 $755Commercial 426 495 495 515 461Industrial 434 472 446 477 424Governmental 17 19 18 20 18Total retail 1,684 1,754 1,748 1,836 1,658Sales for resale: Associated companies 104 128 49 128 131Non-associated companies 145 121 118 195 282Other 128 137 172 95 101Total $2,061 $2,140 $2,087 $2,254 $2,172 Billed Electric Energy Sales (GWh): Residential 8,248 7,298 7,618 8,016 8,070Commercial 5,967 5,825 5,988 6,020 5,934Industrial 8,071 7,528 6,795 6,889 6,808Governmental 239 237 237 235 238Total retail 22,525 20,888 20,638 21,160 21,050Sales for resale: Associated companies 1,773 1,782 1,609 2,239 2,299Non-associated companies 6,447 6,549 7,115 7,980 8,003Total 30,745 29,219 29,362 31,379 31,352331Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISResults of OperationsNet Income2018 Compared to 2017Net income increased $359.3 million primarily due to a lower effective income tax rate and higher other income, partially offsetby higher depreciation and amortization expenses and higher other operation and maintenance expenses.2017 Compared to 2016Net income decreased $305.7 million primarily due to the effect of the enactment of the Tax Cuts and Jobs Act, in December2017, which resulted in a decrease of $182.6 million in net income in 2017, and the effect of a settlement with the IRS related to the2010-2011 IRS audit, which resulted in a $136.1 million reduction of income tax expense in 2016. Also contributing to the decrease innet income were higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue and higherother income. See Note 3 to the financial statements for discussion of the effects of the Tax Cuts and Jobs Act and the IRS audit.Net Revenue2018 Compared to 2017Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2018 to2017. Amount (In Millions) 2017 net revenue$2,560.5Return of unprotected excess accumulated deferred income taxes to customers(141.1)Regulatory credit in 2017 resulting from reduction of the federal corporate income tax rate(55.5)Retail electric price(32.3)Volume/weather68.7Other15.92018 net revenue$2,416.2The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotectedexcess accumulated deferred income taxes through changes in the formula rate plan, effective May 2018. There is no effect on netincome as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements forfurther discussion of regulatory activity regarding the Tax Cuts and Jobs Act.The regulatory credit in 2017 resulting from reduction of the federal corporate income tax rate variance is due to the reductionof the Vidalia purchased power agreement regulatory liability by $30.5 million and the reduction in 2017 of the Louisiana Act 55financing savings obligation regulatory liabilities by $25 million, as a result of the332Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysisenactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%.The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.The retail electric price variance is primarily due to regulatory charges of $73.1 million recorded in 2018 to reflect the effects ofa provision in the settlement reached in the formula rate plan extension proceeding to return the benefits of the lower federal income taxrate in 2018 to customers. Partially offsetting the decrease were increases resulting from an increase in retail formula rate plan revenues,implemented with the first billing cycle of September 2018, and increases resulting from lower Grand Gulf purchased power expenses.See Note 2 to the financial statements for further discussion of the formula rate plan extension proceeding.The volume/weather variance is primarily due to an increase of 907 GWh, or 2%, in billed electricity usage, including the effectof more favorable weather on residential and commercial sales. The increase was partially offset by a decrease in industrial usageprimarily due to a decrease in demand from existing customers.2017 Compared to 2016Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2017 to2016. Amount (In Millions) 2016 net revenue$2,438.4Regulatory credit resulting from reduction of the federal corporate income tax rate55.5Retail electric price42.8Louisiana Act 55 financing savings obligation17.2Volume/weather(12.4)Other19.02017 net revenue$2,560.5The regulatory credit resulting from reduction of the federal corporate income tax rate variance is due to the reduction of theVidalia purchased power agreement regulatory liability by $30.5 million and the reduction of the Louisiana Act 55 financing savingsobligation regulatory liabilities by $25 million as a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, whichlowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and Jobs Act are discussed further in Note3 to the financial statements.The retail electric price variance is primarily due to an increase in formula rate plan revenues, implemented with the first billingcycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of theUnion Power Station in March 2016 and a provision recorded in 2016 related to the settlement of the Waterford 3 replacement steamgenerator prudence review proceeding. See Note 2 to the financial statements for further discussion of the formula rate plan revenuesand the Waterford 3 replacement steam generator prudence review proceeding.The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings tobe shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlementon the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financialstatements for additional discussion of the settlement and benefit sharing.333Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisThe volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales anddecreased usage during the unbilled sales period. The decrease was partially offset by an increase of 1,237 GWh, or 4%, in industrialusage primarily due to an increase in demand from existing customers and expansion projects in the chemicals industry.Other Income Statement Variances2018 Compared to 2017Other operation and maintenance expenses increased primarily due to:•an increase of $11.9 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performedduring plant outages in 2018 as compared to 2017;•an increase of $11.7 million in energy efficiency costs primarily due to the implementation of a new energy efficiency programin January 2018;•an increase of $9 million in information technology expenses primarily due to higher software maintenance costs and highercontract costs;•an increase of $8.3 million in transmission expenses primarily due to higher labor and contract costs to support industrialcustomers;•an increase of $7.2 million in loss provisions; and•an increase of $7 million in nuclear generation expenses primarily due to higher nuclear labor costs to position the nuclear fleetto meet its operational goals and a higher scope of work performed during plant outages in 2018 as compared to 2017.The increase was partially offset by:•a $14.8 million gain as a result of the sale of Willow Glen Power Plant•a decrease of $7.4 million as a result of the amortization through November 2017 of deferred MISO implementation costs, asapproved by the LPSC;•higher nuclear insurance refunds of $4.2 million in 2018; and•a decrease of $3.7 million in compensation and benefits costs primarily due to lower incentive-based compensation accruals in2018 as compared to 2017.Taxes other than income taxes increased primarily due to increases in ad valorem taxes and payroll taxes. Ad valorem taxesincreased primarily due to higher assessments.Depreciation and amortization expenses increased primarily due to additions to plant in service.Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higherconstruction work in progress in 2018, which included the St. Charles Power Station and Lake Charles Power Station projects. Theincrease was partially offset by a change in decommissioning trust fund investment activity, including portfolio rebalancing of certainof the decommissioning trust funds in 2017.2017 Compared to 2016Other operation and maintenance expenses increased primarily due to:•an increase of $17.8 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor,to position the nuclear fleet to meet its operational goals, partially offset by a lower scope of work performed during plantoutages in 2017;•an increase of $9.5 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in2017 as compared to the prior year;334Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysis•an increase of $4.1 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financialstatements for further information on the recovery of these costs;•an increase of $3.6 million in transmission and distribution expenses due to higher vegetation maintenance costs; and•an increase of $3.2 million in write-offs of customer accounts.Taxes other than income taxes increased primarily due to increases in ad valorem taxes, state franchise taxes, and payroll taxes.Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the UnionPower Station beginning in 2017. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law whichbecame effective in 2017.Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Blocks 3 and 4of the Union Power Station purchased in March 2016, and the effects of recording in third quarter 2016 final court decisions in theRiver Bend and Waterford 3 lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include thereimbursement of approximately $6 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note14 to the financial statements for discussion of the Union Power Station purchase. See Note 8 to the financial statements for discussionof the spent nuclear fuel litigation.Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higherconstruction work in progress in 2017, which includes the St. Charles Power Station project, and higher realized gains in 2017 on theRiver Bend decommissioning trust fund investments, including portfolio rebalancing to the 30% interest in River Bend formerly ownedby Cajun.Interest expense decreased primarily due to an increase in the allowance for borrowed funds used during construction due tohigher construction work in progress in 2017, which includes the St. Charles Power Station project.Income TaxesThe effective income tax rate for 2018 was (8.8%). The difference in the effective income tax rate versus the federal statutoryrate of 21% for 2018 was primarily due to the amortization of excess accumulated deferred income taxes and an IRS audit settlementfor the 2012-2013 tax returns. See Note 3 to the financial statements for a reconciliation of the federal statutory rates of 21% to theeffective income tax rates.The effective income tax rate for 2017 was 60.5%. The difference in the effective income tax rate versus the statutory rate of35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President Trump in December 2017, whichchanged the federal corporate income tax rate from 35% to 21% effective in 2018. See Note 3 to the financial statements for areconciliation of the federal statutory rate of 35% to the effective income tax rate.The effective income tax rate for 2016 was 12.6%. The difference in the effective income tax rate of 12.6% versus the statutoryrate of 35% for 2016 was primarily due to the reversal of a portion of the provision for uncertain tax positions as a result of thesettlement of the 2010-2011 IRS audit in the second quarter 2016 and book and tax differences related to the non-taxable incomedistributions earned on preferred membership interests, partially offset by state income taxes. See Note 3 to the financial statements fora reconciliation of the federal statutory rate of 35% to the effective income tax rate.335Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisIncome Tax LegislationSee the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion andAnalysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to thefinancial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of operations and financialposition, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statementsdiscusses the regulatory proceedings that have considered the effects of the Act.Liquidity and Capital ResourcesCash FlowCash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Thousands)Cash and cash equivalents at beginning of period$35,907 $213,850 $35,102 Net cash provided by (used in): Operating activities1,395,204 1,337,545 1,037,912Investing activities(1,878,208) (1,787,409) (1,474,065)Financing activities490,461 271,921 614,901Net increase (decrease) in cash and cash equivalents7,457 (177,943) 178,748 Cash and cash equivalents at end of period$43,364 $35,907 $213,850Operating ActivitiesNet cash flow provided by operating activities increased $57.7 million in 2018 primarily due to:•a decrease of $76.5 million in spending on nuclear fueling outages;•a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC relatedto the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlementand refund;•the receipt of $58.6 million from Entergy Arkansas as a result of a compliance filing made in response to the FERC’s October2018 order in the Entergy Arkansas opportunity sales proceeding. See Note 2 to the financial statements for further discussionof the opportunity sales proceeding; and•the timing of collection of receivables from customers.The increase was partially offset by:•a decrease of $129 million in income tax refunds in 2018 as compared to the same period in 2017. Entergy Louisiana receivedincome tax refunds in 2018 and 2017 in accordance with an intercompany income tax allocation agreement. The income taxrefunds in 2018 and 2017 resulted from the utilization of Entergy Louisiana’s net operating loss;•the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements forfurther discussion of regulatory activity regarding the Tax Cuts and Jobs Act; and•the timing of recovery of fuel and purchased power costs.336Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisNet cash flow provided by operating activities increased $299.6 million in 2017 primarily due to: •income tax refunds of $234.2 million in 2017 compared to income tax payments of $156.6 million in 2016. Entergy Louisianareceived income tax refunds in 2017 and made income tax payments in 2016 in accordance with an intercompany income taxallocation agreement. The income tax refunds in 2017 resulted from the utilization of Entergy Louisiana’s net operating losses.The income tax payments in 2016 resulted primarily from adjustments associated with the settlement of the 2010-2011 IRSaudit, payments for state taxes resulting from the effect of the final settlement of the 2006-2007 IRS audit, and the effect of netoperating loss limitations. See Note 3 to the financial statements for a discussion of the 2010-2011 IRS audit;•an increase due to the timing of recovery of fuel and purchased power costs; and•an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leasedassets.The increase was partially offset by:•a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC relatedto the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlementand refund;•an increase of $62.8 million in spending on nuclear refueling outages; and•proceeds of $37.8 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storagecosts that were previously expensed. See Note 8 to the financial statements for a discussion of the spent nuclear fuel litigation. Investing ActivitiesNet cash flow used in investing activities increased $90.8 million in 2018 primarily due to:•an increase of $67.8 million in transmission construction expenditures primarily due to a higher scope of work performed in2018 as compared to 2017;•an increase of $65.5 million in fossil-fueled generation expenditures primarily due to higher spending on the Lake CharlesPower Station project in 2018, partially offset by lower spending on the St. Charles Power Station project in 2018; and•money pool activity.The increase was partially offset by a decrease of $97.5 million as a result of fluctuations in nuclear fuel activity because of variationsfrom year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and thetiming of cash payments during the nuclear fuel cycle.Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana’s receivablefrom the money pool increased by $35.7 million in 2018 compared to decreasing by $11.3 million in 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Net cash flow used in investing activities increased $313.3 million in 2017 primarily due to:•an increase of $364.3 million in fossil-fueled generation construction expenditures primarily due to higher spending on the St.Charles Power Station and Lake Charles Power Station projects in 2017;•an increase of $148.9 million in transmission construction expenditures due to a higher scope of work performed in 2017;•an increase of $144.9 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in thetiming and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cashpayments during the nuclear fuel cycle;337Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysis•proceeds of $57.9 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage coststhat were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation;•an increase of $53.6 million in nuclear construction expenditures primarily due to increased spending on various nuclearprojects in 2017;•an increase of $30.4 million in distribution construction expenditures due to increased spending on digital technologyimprovements within the customer contact centers;•an increase of $19.9 million due to increased spending on advanced metering infrastructure; and•an increase of $12.3 million due to various information technology projects and upgrades in 2017.The increase was partially offset by:•the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $475million in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase;•money pool activity; and•an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017.Decreases in Entergy Louisiana’s receivable from the money pool are a source of cash flow, and Entergy Louisiana’s receivablefrom the money pool decreased by $11.3 million in 2017 compared to increasing by $16.3 million in 2016.Financing ActivitiesNet cash flow provided by financing activities increased $218.5 million in 2018 primarily due to:•the issuance of $750 million of 4.00% Series collateral trust mortgage bonds in March 2018. A portion of the proceeds was usedto repay $375 million of 6.0% Series first mortgage bonds in May 2018;•the issuance of $600 million of 4.20% collateral trust mortgage bonds in August 2018. A portion of the proceeds was used torepay $300 million of 6.5% Series first mortgage bonds in September 2018;•the redemption of $25 million of 3.25% Series G nuclear fuel company variable interest entity notes payable in June 2017;•the redemption of $75 million of 3.25% Series Q nuclear fuel company variable interest entity notes payable in July 2017; and•the termination of $57.5 million of the Waterford 3 lease obligation and $42.7 million of Waterford Series collateral trustmortgage notes in 2017.The increase was partially offset by:•the issuance of $450 million of 3.12% collateral trust mortgage bonds in May 2017. A portion of the proceeds was used torepay $45.3 million of Waterford Series collateral trust mortgage bonds;•net repayments of short-term borrowings of $43.5 million on the nuclear fuel company variable interest entities’ credit facilitiesin 2018 compared to net short-term borrowings of $39.7 million in 2017;•net repayments of long-term borrowings of $18.6 million on the nuclear fuel company variable interest entities’ credit facilitiesin 2018 compared to net long-term borrowings of $102 million in 2017; and•an increase of $36.8 million in common equity distributions in 2018 primarily to maintain Entergy Louisiana’s targeted capitalstructure.Net cash flow provided by financing activities decreased $343 million in 2017 primarily due to the net issuance of $325.6million of long-term debt in 2017 compared to the net issuance of $961.2 million in 2016. The decrease was partially offset by:338Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysis•a decrease of $194.3 million of common equity distributions primarily as a result of higher construction expenditures and highernuclear fuel purchases in 2017; and•net borrowings of $39.7 million on the nuclear fuel company variable interest entities’ credit facilities in 2017 compared to netrepayments of $56.6 million in 2016 See Note 5 to the financial statements for details of long-term debt.Capital StructureEntergy Louisiana’s debt to capital ratio is balanced between equity and debt, as shown in the following table. December 31, 2018 December 31, 2017Debt to capital53.6% 53.8%Effect of excluding securitization bonds(0.3%) (0.3%)Debt to capital, excluding securitization bonds (a)53.3% 53.5%Effect of subtracting cash(0.1%) (0.1%)Net debt to net capital, excluding securitization bonds (a)53.2% 53.4%(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including thecurrently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cashequivalents. Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition andbelieves they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because thesecuritization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements. EntergyLouisiana also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes itprovides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debtindicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.Entergy Louisiana seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost ofcapital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operatingcash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a distribution, or both,in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to supportplanned investments, Entergy Louisiana may issue incremental debt or reduce distributions, or both, to maintain its targeted capitalstructure. In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure iffinanced entirely with debt and reducing distributions, Entergy Louisiana may receive equity contributions to maintain the targetedcapital structure.Uses of CapitalEntergy Louisiana requires capital resources for:•construction and other capital investments;•debt maturities or retirements;•working capital purposes, including the financing of fuel and purchased power costs; and•distribution and interest payments.339Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisFollowing are the amounts of Entergy Louisiana’s planned construction and other capital investments. 2019 2020 2021 (In Millions)Planned construction and capital investment: Generation$610 $325 $625Transmission460 405 265Distribution390 400 530Utility Support175 135 100Total$1,635 $1,265 $1,520Following are the amounts of Entergy Louisiana’s existing debt and lease obligations (includes estimated interest payments) andother purchase obligations. 2019 2020-2021 2022-2023 After 2023 Total (In Millions)Long-term debt (a)$301 $1,245 $1,033 $8,502 $11,081Operating leases$26 $41 $28 $22 $117Purchase obligations (b)$730 $1,347 $2,410 $5,043 $9,530(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. For Entergy Louisiana, almost all of the total consists of unconditional fuel and purchased power obligations,including its obligations under the Vidalia purchased power agreement and the Unit Power Sales Agreement, both of which arediscussed in Note 8 to the financial statements.In addition to the contractual obligations given above, Entergy Louisiana currently expects to contribute approximately $26.5 million toits qualified pension plans and approximately $17.9 million to its other postretirement health care and life insurance plans in 2019,although the 2019 required pension contributions will be known with more certainty when the January 1, 2019 valuations arecompleted, which is expected by April 1, 2019. See “Critical Accounting Estimates - Qualified Pension and Other PostretirementBenefits” below for a discussion of qualified pension and other postretirement benefits funding.Also, in addition to the contractual obligations, Entergy Louisiana has $802.3 million of unrecognized tax benefits and interestnet of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties inthe timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regardingunrecognized tax benefits.In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Louisianaincludes specific investments, such as the Washington Parish Energy Center, St. Charles Power Station, and Lake Charles Power Station,each discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distributionspending to enhance reliability and improve service to customers, including investment to support advanced metering; resourceplanning, including potential generation projects; system improvements; investments in River Bend and Waterford 3; software andsecurity; and other investments. Entergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio withnew or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or theexploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. Theestimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing340Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysiseffects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economictrends, business restructuring, changes in project plans, and the ability to access capital.As a wholly-owned subsidiary of Entergy Utility Holding Company, LLC, Entergy Louisiana pays distributions from itsearnings at a percentage determined monthly.St. Charles Power StationIn August 2015, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity andconvenience would be served by the construction of the St. Charles Power Station, a nominal 980 megawatt combined-cycle generatingunit, on land adjacent to the existing Little Gypsy plant in St. Charles Parish, Louisiana. It is currently estimated to cost $869 million toconstruct, including transmission interconnection and other related costs. The LPSC issued an order approving certification of St.Charles Power Station in December 2016. Construction is in progress and commercial operation is expected to occur by mid-2019.Lake Charles Power StationIn November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience andnecessity would be served by the construction of the Lake Charles Power Station, a nominal 994 megawatt combined-cycle generatingunit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the LakeCharles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in thepublic interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving thestipulation and approved certification of the unit. Construction is in progress and commercial operation is expected to occur by mid-2020.Washington Parish Energy CenterIn April 2017, Entergy Louisiana signed an agreement with a subsidiary of Calpine Corporation for the construction andpurchase of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with atotal nominal capacity of approximately 361 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa,Louisiana and, subject to permits and approvals, is expected to be completed by 2021. Subject to regulatory approvals, EntergyLouisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, includingtransmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of theplant. In April 2018 the parties reached a settlement recommending certification and cost recovery through the additional capacitymechanism of the formula rate plan, consistent with prior LPSC precedent with respect to the certification and recovery of plantspreviously acquired by Entergy Louisiana. The LPSC issued an order approving the settlement in May 2018.Advanced Metering Infrastructure (AMI) In November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’sdeployment of advanced electric and gas metering infrastructure is in the public interest. Entergy Louisiana proposed to deployadvanced meters that enable two-way data communication; design and build a secure and reliable network to support suchcommunications; and implement support systems. AMI is intended to serve as the foundation of Entergy Louisiana’s modernized powergrid. The filing included an estimate of implementation costs for AMI of $330 million. The filing identified a number of quantified andunquantified benefits, and Entergy Louisiana provided a cost/benefit analysis showing that its combined electric and gas AMIdeployment is expected to produce a nominal net benefit to customers of $607 million. Entergy Louisiana also sought to continue toinclude in rate base the remaining book value, approximately $92 million at December 31, 2015, of the existing electric meters and alsoto depreciate those assets using current depreciation rates. Entergy Louisiana proposed a 15-year useful life for the new advanced341Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysismeters, the three-year deployment of which began in 2019. Deployment of the communications network began in 2018. EntergyLouisiana proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in overthe period 2019 through 2022. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’sproposed AMI system, with modifications to the proposed customer charge. In July 2017 the LPSC approved the stipulation. EntergyLouisiana expects to recover the undepreciated balance of its existing meters through a regulatory asset at current depreciation rates.Sources of CapitalEntergy Louisiana’s sources to meet its capital requirements include:•internally generated funds;•cash on hand;•debt or preferred membership interest issuances;•capital contributions; and•bank financing under new or existing facilities.Entergy Louisiana may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interestrates are favorable. All debt and common and preferred membership interest issuances by Entergy Louisiana require prior regulatory approval. Debtissuances are also subject to issuance tests set forth in its bond indentures and other agreements. Entergy Louisiana has sufficientcapacity under these tests to meet its foreseeable capital needs.Entergy Louisiana’s receivables from the money pool were as follows as of December 31 for each of the following years.2018 2017 2016 2015(In Thousands)$46,845 $11,173 $22,503 $6,154See Note 4 to the financial statements for a description of the money pool.Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in September 2023. The credit facilityincludes fronting commitments for the issuance of letters of credit against $15 million of the borrowing capacity of the facility. As ofDecember 31, 2018, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, EntergyLouisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As ofDecember 31, 2018, a $25.9 million letter of credit was outstanding under Entergy Louisiana’s uncommitted letter of credit facility. SeeNote 4 to the financial statements for additional discussion of the credit facilities.The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, each in the amount of$105 million and scheduled to expire in September 2021. As of December 31, 2018, $38.6 million of loans were outstanding under thecredit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of December 31, 2018, $82million in loans were outstanding under the Entergy Louisiana Waterford nuclear fuel company variable interest entity credit facility.See Note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facilities.342Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisEntergy Louisiana obtained authorizations from the FERC through November 2020 for the following:•short-term borrowings not to exceed an aggregate amount of $450 million at any time outstanding;•long-term borrowings and security issuances; and•borrowings by its nuclear fuel company variable interest entities. See Note 4 to the financial statements for further discussion of Entergy Louisiana’s short-term borrowing limits.Hurricane IsaacIn June 2014 the LPSC voted to approve a series of orders which (i) quantified $290.8 million of Hurricane Isaac systemrestoration costs as prudently incurred; (ii) determined $290 million as the level of storm reserves to be re-established; (iii) authorizedEntergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) granted other requestedrelief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Louisiana committed topass on to customers a minimum of $30.8 million of customer benefits through annual customer credits of approximately $6.2 millionfor five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation and theLouisiana State Bond Commission. See Note 2 to the financial statements for a discussion of the August 2014 issuance of bonds underAct 55 of the Louisiana Legislature.Little Gypsy Repowering ProjectIn April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its LittleGypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repoweringproject and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed withthe project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmentalconcerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisianacomplied with the LPSC’s directive and recommended that the project be suspended for an extended period of time of three years ormore. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent. In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repoweringproject and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC staff and intervenors filedtestimony. The LPSC staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that thetiming of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that theLPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, but at a reducedrate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated thatEntergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, inaccordance with accounting standards, Entergy Louisiana determined that it was probable that the Little Gypsy repowering projectwould be abandoned and accordingly reclassified $199.8 million of project costs from construction work in progress to a regulatoryasset. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. InJanuary 2011 all parties participated in a mediation on the disputed issues, resulting in a settlement of all disputed issues, including costrecovery and cost allocation. The settlement provides for Entergy Louisiana to recover $200 million as of March 31, 2011, and carryingcosts on that amount on specified terms thereafter. The settlement also provides for Entergy Louisiana to recover the approved projectcosts by securitization. In April 2011, Entergy Louisiana filed an application with the LPSC to authorize the securitization of theinvestment recovery costs associated with the project and to issue a financing order by which Entergy Louisiana could accomplish suchsecuritization. In August 2011 the LPSC issued an order approving the settlement and also343Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysisissued a financing order for the securitization. See Note 5 to the financial statements for a discussion of the September 2011 issuance ofthe securitization bonds.State and Local Rate Regulation and Fuel-Cost RecoveryThe rates that Entergy Louisiana charges for its services significantly influence its financial position, results of operations, andliquidity. Entergy Louisiana is regulated and the rates charged to its customers are determined in regulatory proceedings. Agovernmental agency, the LPSC, is primarily responsible for approval of the rates charged to customers.Retail Rates - ElectricFilings with the LPSC2015 Formula Rate Plan FilingIn May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. Theevaluation report reflected an earned return on common equity of 9.07%. As such, no adjustment to base formula rate plan revenue wasrequired. The following other adjustments, however, were required under the formula rate plan: an increase in the legacy EntergyLouisiana additional capacity mechanism of $14.2 million; a separate increase in legacy Entergy Louisiana revenue of $10 millionprimarily to reflect the effects of the termination of the System Agreement; an increase in the legacy Entergy Gulf States Louisianaadditional capacity mechanism of $0.5 million; a decrease in legacy Entergy Gulf States Louisiana revenue of $58.7 million primarily toreflect the effects of the termination of the System Agreement; and an increase of $11 million to the MISO cost recovery mechanism.Rates were implemented with the first billing cycle of September 2016, subject to refund. Following implementation of the as-filed ratesin September 2016, there were several interim updates to Entergy Louisiana’s formula rate plan, including the one submitted inDecember 2016, reflecting implementation of the settlement of the Waterford 3 replacement steam generator project prudence reviewdescribed below. In June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by theLPSC in June 2017, finalizing the results of the May 2016 evaluation report, interim updates, and corresponding proceedings with nochanges to rates already implemented.2016 Formula Rate Plan FilingIn May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. Theevaluation report reflected an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue wasrequired. Adjustments, however, were required under the formula rate plan; the 2016 formula rate plan evaluation report showed adecrease in formula rate plan revenue of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana formularate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and adecrease in incremental formula rate plan revenue of $3.7 million. Additionally, the formula rate plan evaluation report called for adecrease of $40.5 million in the MISO cost recovery revenue requirement from $46.8 million to $6.3 million. Rates reflecting theseadjustments were implemented with the first billing cycle of September 2017, subject to refund. In September 2017 the LPSC issued itsreport indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report were required but reserved forseveral issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report. In July 2018, EntergyLouisiana and the LPSC staff filed an unopposed joint report setting forth a correction to the annualization calculation, the effect ofwhich was a net $3.5 million revenue requirement reduction and indicating that there are no outstanding issues with the 2016 formularate plan report, the supplemental report, or the interim updates. In September 2018 the LPSC approved the unopposed joint report.344Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisFormula Rate Plan Extension Through 2019 Test YearIn August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications to its terms. Those modifications include: a one-time resetting of base rates to the midpoint of theband at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidthfrom a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recovercertain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. In April 2018,the LPSC approved an unopposed joint motion filed by Entergy Louisiana and the LPSC staff that settles the matter. The settlementextends the formula rate plan for three years, providing for rates through at least August 2021. In addition to retaining the majorfeatures of the traditional formula rate plan, some of the more substantive features of the extended formula rate plan include:•a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity for the 2017 test year and for theSt. Charles Power Station when it enters commercial operation;•a 9.8% target earned return on common equity for the 2018 and 2019 test years;•narrowing of the common equity bandwidth to plus or minus 60 basis points around the earned return on common equity;•a cap on potential revenue increase of $35 million for the 2018 evaluation period, and $70 million for the cumulative 2018 and2019 evaluation periods, on formula rate plan cost of service rate increases (the cap excludes rate changes associated with thetransmission recovery mechanism described below and rate changes associated with additional capacity);•a framework for the flow back of certain tax benefits created by the Tax Act to customers; and•a transmission recovery mechanism providing for the opportunity to recover certain transmission related expenditures in excessof $100 million for projects placed in service up to one month prior to rate change outside of sharing that is designed to operatein a fashion similar to the additional capacity mechanism.2017 Formula Rate Plan FilingIn June 2018, Entergy Louisiana filed its formula rate plan evaluation report for its 2017 calendar year operations. The 2017 testyear evaluation report produced an earned return on equity of 8.16%, due in large part to revenue-neutral realignments to otherrecovery mechanisms. Without these realignments, the evaluation report produces an earned return on equity of 9.88% and a resultingbase rider formula rate plan revenue increase of $4.8 million. Excluding the Tax Act credits provided for by the tax reform adjustmentmechanisms, total formula rate plan revenues were further increased by a total of $98 million as a result of the evaluation report due toadjustments to the additional capacity and MISO cost recovery mechanisms of the formula rate plan, and implementation of thetransmission recovery mechanism. In August 2018, Entergy Louisiana filed a supplemental formula rate plan evaluation report to reflectchanges from the 2016 test year formula rate plan proceedings, a decrease to the transmission recovery mechanism to reflect loweractual capital additions, and a decrease to evaluation period expenses to reflect the terms of a new power sales agreement. Based on theAugust 2018 update, Entergy Louisiana recognized a total decrease in formula rate plan revenue of approximately $17.6 million.Results of the updated 2017 evaluation report filing were implemented with the September 2018 billing month subject to refund andreview by the LPSC staff and intervenors. In accordance with the terms of the formula rate plan, in September 2018 the LPSC staff andintervenors submitted their responses to Entergy Louisiana’s original formula rate plan evaluation report and supplemental complianceupdates. The LPSC staff asserted objections/reservations regarding 1) Entergy Louisiana’s proposed rate adjustments associated with thereturn of excess accumulated deferred income taxes pursuant to the Tax Act and the treatment of accumulated deferred income taxesrelated to reductions of rate base; 2) Entergy Louisiana’s reservation regarding treatment of a regulatory asset related to certain specialorders by the LPSC; and 3) test year expenses billed from Entergy Services to Entergy Louisiana. Intervenors also objected to EntergyLouisiana’s treatment of the regulatory asset related to certain special orders by the LPSC. A procedural schedule has not yet beenestablished to resolve these issues.345Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisEntergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy Entergy Louisiana andlegacy Entergy Gulf States Louisiana residential rates, which combination, if approved, would be accomplished on a revenue-neutralbasis intended not to affect the rates of other customer classes.Waterford 3 Replacement Steam Generator ProjectFollowing the completion of the Waterford 3 replacement steam generator project, the LPSC undertook a prudence review inconnection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1)project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) theoutage length and replacement power costs. In July 2014 the LPSC staff filed testimony recommending potential project andreplacement power cost disallowances of up to $71 million, citing a need for further explanation or documentation from EntergyLouisiana. An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steamgenerator fabricator was imprudent. Entergy Louisiana provided further documentation and explanation requested by the LPSC staff.An evidentiary hearing was held in December 2014. Entergy Louisiana believed that the replacement steam generator costs wereprudently incurred and applicable legal principles supported their recovery in rates. Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty at the time associated with the resolutionof the prudence review. In December 2015 the ALJ issued a proposed recommendation, which was subsequently finalized, concludingthat Entergy Louisiana prudently managed the Waterford 3 replacement steam generator project, including the selection, use, andoversight of contractors, and could not reasonably have anticipated the damage to the steam generators. Nevertheless, the ALJconcluded that Entergy Louisiana was liable for the conduct of its contractor and subcontractor and, therefore, recommended adisallowance of $67 million in capital costs. Additionally, the ALJ concluded that Entergy Louisiana did not sufficiently justify theincurrence of $2 million in replacement power costs during the replacement outage. Although the ALJ’s recommendation had not yetbeen considered by the LPSC, after considering the progress of the proceeding in light of the ALJ recommendation, Entergy Louisianarecorded in the fourth quarter 2015 approximately $77 million in charges, including a $45 million asset write-off and a $32 millionregulatory charge, to reflect that a portion of the assets associated with the Waterford 3 replacement steam generator project was nolonger probable of recovery. Entergy Louisiana maintained that the ALJ’s recommendation contained significant factual and legalerrors.In October 2016 the parties reached a settlement in this matter. The settlement was approved by the LPSC in December 2016.The settlement effectively provided for an agreed-upon disallowance of $67 million of plant, which had been previously written off byEntergy Louisiana, as discussed above. The refund to customers of approximately $71 million as a result of the settlement approved bythe LPSC was made to customers in January 2017. Of the $71 million of refunds, $68 million was credited to customers throughEntergy Louisiana’s formula rate plan, outside of sharing, and $3 million through its fuel adjustment clause. Entergy Louisiana hadpreviously recorded a provision of $48 million for this refund. The previously-recorded provision included the cumulative revenuesrecorded through December 2016 related to the $67 million of disallowed plant. An additional regulatory charge of $23 million wasrecorded in fourth quarter 2016 to reflect the effects of the settlement. The settlement also provided that Entergy Louisiana could retainthe value associated with potential service credits agreed to by the project contractor, to the extent they are realized in the future.Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May2017 and the LPSC accepted the joint report of proceedings resolving the matter.Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana PlantsIn January 2015, Entergy Gulf States Louisiana filed its application with the LPSC for approval of the acquisition and costrecovery of two power blocks of the Union Power Station for an expected base purchase price of approximately $237 million per powerblock, subject to adjustments. In September 2015, Entergy Gulf States Louisiana agreed to settlement terms with all parties for EntergyGulf States Louisiana’s purchase of the two power blocks. In October 2015 the LPSC voted unanimously to approve the uncontestedsettlement which finds, among other things, that346Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysisacquisition of Power Blocks 3 and 4 is in the public interest and, therefore, prudent. The business combination of Entergy Gulf StatesLouisiana and Entergy Louisiana received regulatory approval and closed in October 2015 making Entergy Louisiana the namedpurchaser of Power Blocks 3 and 4 of the Union Power Station. In March 2016, Entergy Louisiana acquired Power Blocks 3 and 4 ofUnion Power Station for an aggregate purchase price of approximately $475 million and implemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station,Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 andits decision to retire Little Gypsy 1. In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana,LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on itsdeactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-yearplanning horizon. Parties requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4. No partycontested the prudence of the decision to deactivate Willow Glen 2 and 4 or suggested reactivation of these units; however, issues wereraised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather thanplacing the units into suspended status for the three-year term permitted by MISO. In March 2018 the LPSC adopted the ALJ’srecommended order finding that Entergy Louisiana did not demonstrate that its decision to permanently surrender transmission rightsfor the mothballed (not retired) Willow Glen 2 and 4 units was reasonable and that Entergy Louisiana should hold customers harmlessfrom increased transmission expenses should those units be reactivated. Because no party or the LPSC suggested that Willow Glen 2and 4 should be reactivated and because the cost to return those units to service far exceeded the revenue the units were expected togenerate in MISO, Entergy Louisiana retired Willow Glen 2 and 4 in March 2018. Entergy Louisiana submitted a compliance filingregarding retirement of Willow Glen 2 and 4, and the LPSC closed the proceeding.Retail Rates - Gas2016 Rate Stabilization Plan FilingIn January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30,2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37%. In April 2017 theLPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 millionannual increase in revenue with rates implemented with the first billing cycle of May 2017.2017 Rate Stabilization Plan FilingIn January 2018, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30,2017. The filing of the evaluation report for the test year 2017 reflected an earned return on common equity of 9.06%. This earnedreturn is below the earnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million. Due to theenactment in late-December 2017 of the Tax Cuts and Jobs Act, Entergy Louisiana did not have adequate time to reflect the effects ofthis tax legislation in the rate stabilization plan. In April 2018, Entergy Louisiana filed a supplemental evaluation report for the test yearended September 2017, reflecting the effects of the Tax Act, including a proposal to use the unprotected excess accumulated deferredincome taxes to offset approximately $1.4 million of storm restoration deferred operation and maintenance costs incurred by EntergyLouisiana in connection with the August 2016 flooding disaster in its gas service area. The supplemental filing reflects an earned returnon common equity of 10.79%. As-filed rates from the supplemental filing were implemented, subject to refund, with customersreceiving a cost reduction of approximately $0.7 million effective with bills rendered on and after the first billing cycle of May 2018, aswell as a $0.2 million reduction in the gas infrastructure rider effective with bills rendered on and after the first billing cycle of July2018. The proceeding is currently in its discovery phase. A procedural schedule has not been established.347Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and Analysis2018 Rate Stabilization Plan FilingIn January 2019, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30,2018. The filing of the evaluation report for the test year 2018 reflected an earned return on common equity of 2.69%. This earnedreturn is below the earning sharing band of the gas rate stabilization plan and results in a rate increase of $2.8 million. EntergyLouisiana will make a compliance filing in April 2019 and rates will be implemented during the first billing cycle of May 2019.Fuel and purchased power recoveryEntergy Louisiana recovers electric fuel and purchased power costs for the billing month based upon the level of such costsincurred two months prior to the billing month. Entergy Louisiana’s purchased gas adjustments include estimates for the billing monthadjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed tocustomers, including carrying charges.In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of EntergyGulf States Louisiana and its affiliates. The audit included a review of the reasonableness of charges flowed by Entergy Gulf StatesLouisiana through its fuel adjustment clause for the period 2005 through 2009. In March 2016 the LPSC staff consultant issued itsaudit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million, plusinterest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustmentclause to base rates. In September 2016 the LPSC staff filed testimony stating that it was no longer recommending a disallowance of$3.4 million of the $8.6 million discussed above, but otherwise maintained the positions from its report. Subsequently, the partiesentered into a settlement, which was approved by the LPSC in November 2016. The settlement recognized the dry cask storagerecovery method issue, which was addressed in the separate proceeding approved by the LPSC in October 2017, provided for a refundof $5 million, which was made to legacy Entergy Gulf States Louisiana customers in December 2016, and resolved all other issuesraised in the audit.In July 2014 the LPSC authorized its staff to initiate an audit of the fuel adjustment clause filings by Entergy Gulf StatesLouisiana, whose business was combined with Entergy Louisiana in 2015. The audit includes a review of the reasonableness of chargesflowed through Entergy Gulf States Louisiana’s fuel adjustment clause for the period from 2010 through 2013. In January 2019, theLPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refundapproximately $900,000, plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant.Entergy Louisiana is evaluating the staff’s recommended disallowance.In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The auditincludes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from2010 through 2013. In January 2019, the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultantrecommended that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the imputation of aclaim of vendor fault in servicing its nuclear plant. Entergy Louisiana is evaluating the staff’s recommended disallowance.In June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gasadjustment clause filings. In recognition of the business combination that occurred in 2015, the audit notice was issued to EntergyLouisiana and will also include a review of charges to legacy Entergy Gulf States Louisiana customers prior to the businesscombination. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clausefor the period from 2014 through 2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the periodfrom 2012 through 2015. Discovery commenced in March 2017. No report of audit has been issued.348Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisIn May 2018 the LPSC staff provided notice of audits of Entergy Louisiana’s purchased gas adjustment clause filings. The auditincludes a review of the reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the periodfrom 2016 through 2017. Discovery commenced in September 2018. No report of audit has been issued.Industrial and Commercial CustomersEntergy Louisiana’s large industrial and commercial customers continually explore ways to reduce their energy costs. Inparticular, cogeneration is an option available to a portion of Entergy Louisiana’s industrial customer base. Entergy Louisiana respondsby working with industrial and commercial customers and negotiating electric service contracts to provide competitive rates that matchspecific customer needs and load profiles. Entergy Louisiana actively participates in economic development, customer retention, andreclamation activities to increase industrial and commercial demand, from both new and existing customers.Federal RegulationSee the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.Nuclear MattersEntergy Louisiana owns and, through an affiliate, operates the River Bend and Waterford 3 nuclear power plants. EntergyLouisiana is, therefore, subject to the risks related to owning and operating nuclear plants. These include risks related to: the use,storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both forcapital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financialrequirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushimaevent; regulatory requirements and potential future regulatory changes, including changes affecting the regulations governing nuclearplant ownership, operations, license renewal and amendments, and decommissioning; the performance and capacity factors of thesenuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the feescharged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete decommissioning ofeach site when required; and limitations on the amounts and types of insurance commercially available for losses in connection withnuclear plant operations and catastrophic events such as a nuclear accident. In the event of an unanticipated early shutdown of RiverBend or Waterford 3, Entergy Louisiana may be required to provide additional funds or credit support to satisfy regulatory requirementsfor decommissioning. In December 2018 the NRC renewed Waterford 3’s operating license until 2044 and River Bend’s operating license until 2045. Environmental RisksEntergy Louisiana’s facilities and operations are subject to regulation by various governmental authorities having jurisdictionover air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters.Management believes that Entergy Louisiana is in substantial compliance with environmental regulations currently applicable to itsfacilities and operations, with reference to possible exceptions noted in “Regulation of Entergy’s Business - EnvironmentalRegulation” in Part I, Item 1. Because environmental regulations are subject to change, future compliance costs cannot be preciselyestimated.349Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisCritical Accounting EstimatesThe preparation of Entergy Louisiana’s financial statements in conformity with generally accepted accounting principlesrequires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effecton reported financial position, results of operations, and cash flows. Management has identified the following accounting policies andestimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and thepotential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on thepresentation of Entergy Louisiana’s financial position or results of operations.Nuclear Decommissioning CostsSee “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nucleardecommissioning costs.In the first quarter 2018, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend asa result of a revised decommissioning cost study. The revised estimate resulted in an $85.4 million increase in its decommissioning costliability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life ofthe unit.Utility Regulatory AccountingSee “Utility Regulatory Accounting” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.Impairment of Long-lived Assets and Trust Fund InvestmentsSee “Impairment of Long-lived Assets and Trust Fund Investments” in the “Critical Accounting Estimates” section ofEntergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated withthe impairment of long-lived assets and trust fund investments.Taxation and Uncertain Tax PositionsSee “Taxation and Uncertain Tax Positions” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for further discussion.Qualified Pension and Other Postretirement BenefitsEntergy Louisiana’s qualified pension and other postretirement reported costs, as described in Note 11 to the financialstatements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and variousactuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” inthe “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance ofthe assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate. Cost SensitivityThe following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes incertain actuarial assumptions (dollars in thousands).350Table of ContentsEntergy Louisiana, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisActuarial Assumption Change in Assumption Impact on 2019 QualifiedPension Cost Impact on 2018 ProjectedQualified Benefit Obligation Increase/(Decrease) Discount rate (0.25%) $3,117 $42,612Rate of return on plan assets (0.25%) $3,124 $—Rate of increase in compensation 0.25% $1,712 $8,597The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation tochanges in certain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019Postretirement Benefit Cost Impact on 2018Accumulatedpostretirement BenefitObligation Increase/(Decrease) Discount rate (0.25%) $695 $8,073Health care cost trend 0.25% $1,087 $6,610Each fluctuation above assumes that the other components of the calculation are held constant.Costs and FundingTotal qualified pension cost for Entergy Louisiana in 2018 was $52.1 million. Entergy Louisiana anticipates 2019 qualifiedpension cost to be $48.6 million. Entergy Louisiana contributed $71.9 million to its pension plans in 2018 and estimates pensioncontributions will be approximately $26.5 million in 2019, although the 2019 required pension contributions will be known with morecertainty when the January 1, 2019 valuations are completed, which is expected by April 1, 2019.Total postretirement health care and life insurance benefit costs for Entergy Louisiana in 2018 were $11.2 million. EntergyLouisiana expects 2019 postretirement health care and life insurance benefit costs of approximately $7.2 million. Entergy Louisianacontributed $14.3 million to its other postretirement plans in 2018 and estimates that 2019 contributions will be approximately $17.9million.Federal Healthcare LegislationSee “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical AccountingEstimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion ofFederal Healthcare Legislation.Other ContingenciesSee “Other Contingencies” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and otherrisks.New Accounting PronouncementsSee “New Accounting Pronouncements” section of Note 1 to the financial statements for a discussion of new accountingpronouncements.351Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the members and Board of Directors ofEntergy Louisiana, LLC and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Entergy Louisiana, LLC and Subsidiaries (the “Company”) as ofDecember 31, 2018 and 2017, the related consolidated statements of income, comprehensive income, cash flows, and changes inequity (pages 353 through 358 and applicable items in pages 53 through 237), for each of the three years in the period endedDecember 31, 2018, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accountingprinciples generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part ofour audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Company’s auditor since 2001.352Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING REVENUES Electric $4,232,541 $4,246,020 $4,126,343Natural gas 63,779 54,530 50,705TOTAL 4,296,320 4,300,550 4,177,048 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 915,410 912,060 804,433Purchased power 960,272 980,070 890,058Nuclear refueling outage expenses 51,626 52,074 51,361Other operation and maintenance 959,185 941,604 897,661Decommissioning 53,736 49,457 46,944Taxes other than income taxes 183,745 175,359 165,665Depreciation and amortization 492,179 467,369 451,290Other regulatory charges (credits) - net 4,396 (152,080) 44,131TOTAL 3,620,549 3,425,913 3,351,543 OPERATING INCOME 675,771 874,637 825,505 OTHER INCOME Allowance for equity funds used during construction 79,922 51,485 27,925Interest and investment income 141,882 164,550 154,778Miscellaneous - net (27,530) (39,756) (37,715)TOTAL 194,274 176,279 144,988 INTEREST EXPENSE Interest expense 288,658 275,185 273,283Allowance for borrowed funds used during construction (39,616) (25,914) (14,571)TOTAL 249,042 249,271 258,712 INCOME BEFORE INCOME TAXES 621,003 801,645 711,781 Income taxes (54,611) 485,298 89,734 NET INCOME $675,614 $316,347 $622,047 See Notes to Financial Statements. 353Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Years Ended December 31, 2018 2017 2016 (In Thousands) Net Income $675,614 $316,347 $622,047 Other comprehensive income Pension and other postretirement liabilities (net of tax expense of $17,743, $234, and $5,034) 50,296 2,042 7,970Other comprehensive income 50,296 2,042 7,970 Comprehensive Income $725,910 $318,389 $630,017 See Notes to Financial Statements. 354Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands)OPERATING ACTIVITIES Net income $675,614 $316,347 $622,047Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation, amortization, and decommissioning, including nuclear fuel amortization 662,390 621,018 620,211Deferred income taxes, investment tax credits, and non-current taxes accrued 174,063 575,804 178,549Changes in working capital: Receivables 89,701 (53,829) (102,200)Fuel inventory 5,310 11,010 (2,693)Accounts payable 11,372 58,880 (36,720)Prepaid taxes and taxes accrued 12,711 128,261 (235,246)Interest accrued 7,922 (70) 1,218Deferred fuel costs (40,036) 23,236 (17,023)Other working capital accounts (5,809) (30,911) 6,462Changes in provisions for estimated losses 8,307 (8,324) 490Changes in other regulatory assets 40,765 492,696 57,579Changes in other regulatory liabilities (125,185) 605,453 62,351Deferred tax rate change recognized as regulatory liability/asset — (1,207,808) —Changes in pension and other postretirement liabilities (106,269) (32,309) (52,559)Other (15,652) (161,909) (64,554)Net cash flow provided by operating activities 1,395,204 1,337,545 1,037,912INVESTING ACTIVITIES Construction expenditures (1,805,641) (1,662,835) (1,030,416)Allowance for equity funds used during construction 79,922 51,485 27,925Insurance proceeds 3,480 5,305 10,564Nuclear fuel purchases (111,329) (197,829) (73,618)Proceeds from the sale of nuclear fuel 53,603 42,634 63,304Payment for purchase of plant — — (474,670)Payments to storm reserve escrow account (4,770) (2,110) (1,063)Receipts from storm reserve escrow account 4 8,835 —Changes in securitization account (1,655) 880 351Proceeds from nuclear decommissioning trust fund sales 1,055,690 231,293 219,182Investment in nuclear decommissioning trust funds (1,097,204) (266,592) (257,209)Changes in money pool receivable - net (35,672) 11,330 (16,349)Proceeds from sale of assets 11,987 — —Payment for purchase of assets (26,623) (9,805) —Litigation proceeds for reimbursement of spent nuclear fuel storage costs — — 57,934Net cash flow used in investing activities (1,878,208) (1,787,409) (1,474,065)FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 2,319,799 733,344 2,450,063Retirement of long-term debt (1,664,354) (407,736) (1,488,870)Changes in short-term borrowings - net (43,540) 39,746 (56,562)Distributions paid: Common equity (128,000) (91,250) (285,500)Other 6,556 (2,183) (4,230)Net cash flow provided by financing activities 490,461 271,921 614,901Net increase (decrease) in cash and cash equivalents 7,457 (177,943) 178,748Cash and cash equivalents at beginning of period 35,907 213,850 35,102Cash and cash equivalents at end of period $43,364 $35,907 $213,850SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $272,335 $266,871 $324,456Income taxes ($105,157) ($234,199) $156,605 See Notes to Financial Statements. 355Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $252 $5,836Temporary cash investments 43,112 30,071Total cash and cash equivalents 43,364 35,907Accounts receivable: Customer 199,903 254,308Allowance for doubtful accounts (1,813) (8,430)Associated companies 123,363 143,524Other 60,879 60,893Accrued unbilled revenues 167,052 153,118Total accounts receivable 549,384 603,413Fuel inventory 34,418 39,728Materials and supplies - at average cost 324,627 299,881Deferred nuclear refueling outage costs 24,406 65,711Prepayments and other 38,715 34,035TOTAL 1,014,914 1,078,675 OTHER PROPERTY AND INVESTMENTS Investment in affiliate preferred membership interests 1,390,587 1,390,587Decommissioning trust funds 1,284,996 1,312,073Storm reserve escrow account 289,525 284,759Non-utility property - at cost (less accumulated depreciation) 286,555 245,255Other 14,927 18,999TOTAL 3,266,590 3,251,673 UTILITY PLANT Electric 20,532,312 19,678,536Natural gas 211,421 191,899Construction work in progress 1,864,582 1,281,452Nuclear fuel 298,022 337,402TOTAL UTILITY PLANT 22,906,337 21,489,289Less - accumulated depreciation and amortization 8,837,596 8,703,047UTILITY PLANT - NET 14,068,741 12,786,242 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Other regulatory assets (includes securitization property of $49,753 as of December 31, 2018 and $71,367 as ofDecember 31, 2017) 1,105,077 1,145,842Deferred fuel costs 168,122 168,122Other 28,371 18,310TOTAL 1,301,570 1,332,274 TOTAL ASSETS $19,651,815 $18,448,864 See Notes to Financial Statements. 356Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $2 $675,002Short-term borrowings — 43,540Accounts payable: Associated companies 102,749 126,685Other 390,367 404,374Customer deposits 155,314 150,623Taxes accrued 30,868 18,157Interest accrued 83,450 75,528Deferred fuel costs 31,411 71,447Current portion of unprotected excess accumulated deferred income taxes 31,457 —Other 49,202 79,037TOTAL 874,820 1,644,393 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 2,226,721 2,050,371Accumulated deferred investment tax credits 116,999 121,870Regulatory liability for income taxes - net 581,001 725,368Other regulatory liabilities 748,784 761,059Decommissioning 1,280,272 1,140,461Accumulated provisions 310,755 302,448Pension and other postretirement liabilities 643,171 748,384Long-term debt (includes securitization bonds of $55,682 as of December 31, 2018 and $77,736 as of December31, 2017) 6,805,766 5,469,069Other 160,608 176,637TOTAL 12,874,077 11,495,667 Commitments and Contingencies EQUITY Member’s equity 5,909,071 5,355,204Accumulated other comprehensive loss (6,153) (46,400)TOTAL 5,902,918 5,308,804 TOTAL LIABILITIES AND EQUITY $19,651,815 $18,448,864 See Notes to Financial Statements. 357Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Common Equity Member’s Equity Accumulated OtherComprehensive Income(Loss) Total (In Thousands) Balance at December 31, 2015 $4,793,724 ($56,412) $4,737,312Net income 622,047 — 622,047Other comprehensive income — 7,970 7,970Distributions to parent (285,500) — (285,500)Other (20) — (20)Balance at December 31, 2016 $5,130,251 ($48,442) $5,081,809Net income 316,347 — 316,347Other comprehensive income — 2,042 2,042Distributions declared on common equity (91,250) — (91,250)Other (144) — (144)Balance at December 31, 2017 $5,355,204 ($46,400) $5,308,804Net income 675,614 — 675,614Other comprehensive income — 50,296 50,296Distributions declared on common equity (128,000) — (128,000)Reclassification pursuant to ASU 2018-02 6,262 (10,049) (3,787)Other (9) — (9)Balance at December 31, 2018 $5,909,071 ($6,153) $5,902,918 See Notes to Financial Statements. 358Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESSELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (In Thousands) Operating revenues$4,296,320 $4,300,550 $4,177,048 $4,417,146 $4,740,504Net income$675,614 $316,347 $622,047 $446,639 $446,022Total assets$19,651,815 $18,448,864 $17,701,271 $16,387,447 $16,423,825Long-term obligations (a)$6,805,766 $5,469,069 $5,612,593 $4,806,790 $4,882,813 (a) Includes long-term debt (excluding currently maturing debt). 2018 2017 2016 2015 2014 (Dollars In Millions) Electric Operating Revenues: Residential$1,244 $1,198 $1,196 $1,292 $1,358Commercial941 956 930 989 1,044Industrial1,462 1,534 1,350 1,420 1,569Governmental69 69 67 67 70Total retail3,716 3,757 3,543 3,768 4,041Sales for resale: Associated companies295 278 368 406 427Non-associated companies62 64 50 36 80Other160 147 165 152 121Total$4,233 $4,246 $4,126 $4,362 $4,669 Billed Electric Energy Sales (GWh): Residential14,494 13,357 13,810 14,399 14,415Commercial11,578 11,342 11,478 11,700 11,555Industrial29,255 29,754 28,517 27,713 27,025Governmental823 790 794 756 732Total retail56,150 55,243 54,599 54,568 53,727Sales for resale: Associated companies5,498 4,793 7,345 7,500 6,240Non-associated companies1,762 1,711 1,690 770 1,051Total63,410 61,747 63,634 62,838 61,018 359Table of ContentsENTERGY MISSISSIPPI, LLCMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISInternal RestructuringIn March 2018, Entergy Mississippi filed an application with the MPSC seeking authorization to undertake a restructuring thatwould result in the transfer of substantially all of the assets and operations of Entergy Mississippi to a new entity, which wouldultimately be held by an existing Entergy subsidiary holding company. In September 2018, Entergy Mississippi and the MississippiPublic Utilities Staff entered into and filed a joint stipulation regarding the restructuring filing. In September 2018 the MPSC issued anorder accepting the stipulation in its entirety and approving the restructuring and credits of $27 million to retail customers over sixyears, consisting of annual payments of $4.5 million for the years 2019-2024. Entergy Mississippi also received the required FERCapproval.In November 2018, Entergy Mississippi undertook a multi-step restructuring, including the following:•Entergy Mississippi, Inc. redeemed its outstanding preferred stock, at the aggregate redemption price of approximately $21.2million.•Entergy Mississippi, Inc. converted from a Mississippi corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy Mississippi, Inc. allocated substantially all of its assets to anew subsidiary, Entergy Mississippi Power and Light, LLC, a Texas limited liability company (Entergy Mississippi Power andLight), and Entergy Mississippi Power and Light assumed substantially all of the liabilities of Entergy Mississippi, Inc., in atransaction regarded as a merger under the TXBOC. Entergy Mississippi, Inc. remained in existence and held the membershipinterests in Entergy Mississippi Power and Light.•Entergy Mississippi, Inc. contributed the membership interests in Entergy Mississippi Power and Light to an affiliate (EntergyUtility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of thecontribution, Entergy Mississippi Power and Light is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.In December 2018, Entergy Mississippi, Inc. changed its name to Entergy Utility Enterprises, Inc., and Entergy Mississippi Power andLight then changed its name to Entergy Mississippi, LLC. Entergy Mississippi, LLC holds substantially all of the assets, and assumedsubstantially all of the liabilities, of Entergy Mississippi, Inc. The restructuring was accounted for as a transaction between entities undercommon control.Results of OperationsNet Income2018 Compared to 2017Net income increased $16 million primarily due to a lower effective income tax rate and higher net revenue, after excluding theeffect of the return of unprotected excess accumulated deferred income taxes to customers which is offset in income taxes. The increaseis partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher taxesother than income taxes.2017 Compared to 2016Net income increased $0.8 million primarily due to higher other income, lower other operation and maintenance expenses, andlower interest expense, substantially offset by higher depreciation and amortization expenses and a higher effective income tax rate.360Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisNet Revenue2018 Compared to 2017Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2018 to2017. Amount (In Millions) 2017 net revenue$703.1Return of unprotected excess accumulated deferredincome taxes to customers(153.0)Provision for formula rate plan look-backevaluation(9.3)Retail electric price4.2Volume/weather17.62018 net revenue$562.6The return of unprotected excess accumulated deferred income taxes to customers is due to a regulatory charge recorded inJune 2018 that resulted in a $127.2 million reduction in net utility plant and the return of unprotected excess accumulated deferredincome taxes through customer bill credits over a three-month period from July 2018 through September 2018, each per an agreementapproved by the MPSC in June 2018, resulting from the stipulation related to the effects of the Tax Cuts and Jobs Act. There is no effecton net income as the reductions in net revenue are offset by a reduction in income tax expense. See Note 2 to the financial statementsfor further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.The provision for formula rate plan look-back evaluation results from a regulatory provision recorded in fourth quarter 2018 inconnection with the formula rate plan look-back evaluation report filing that will be made in March 2019. The provision reflects theestimate of the difference between the 2018 earned rate of return on rate base and an established performance-adjusted benchmark rateof return under the formula rate plan performance-adjusted bandwidth mechanism.The retail electric price variance is primarily due to higher storm damage rider revenues. Entergy Mississippi resumed billing thestorm damage rider effective with the September 2017 billing cycle and ceased billing the storm damage rider effective with the August2018 billing cycle. See Note 2 to the financial statements for further discussion of the storm damage rider.The volume/weather variance is primarily due to an increase of 643 GWh, or 5%, in billed electricity usage, including the effectof more favorable weather on residential sales.2017 Compared to 2016Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2017 to 2016.361Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and Analysis Amount (In Millions) 2016 net revenue$705.4Volume/weather(18.2)Retail electric price13.5Other2.42017 net revenue$703.1The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales.The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, effective with the first billingcycle of July 2016, and an increase in the energy efficiency rider, effective with the first billing cycle of February 2017, each asapproved by the MPSC. The increase was partially offset by decreased storm damage rider revenues due to resetting the storm damageprovision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage ridereffective with the September 2017 billing cycle. See Note 2 to the financial statements for further discussion of the formula rate planand the storm damage rider.Other Income Statement Variances2018 Compared to 2017Other operation and maintenance expenses increased primarily due to:•a $5.8 million loss on the sale of fuel oil inventory per an agreement approved by the MPSC in June 2018 resulting from thestipulation related to the effects of the Tax Act. There is no effect on net income as the loss on the sale of fuel oil inventory isoffset by a reduction in income tax expense. See Note 2 to the financial statements for discussion of the agreement;•an increase of $5.2 million in storm damage provisions. See Note 2 to the financial statements for a discussion of storm costrecovery;•an increase of $3.1 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done duringplant outages;•an increase of $2.7 million in customer service costs primarily due to write-offs of customer accounts and higher contract costs;and•an increase of $2.1 million in vegetation maintenance costs.The increase was partially offset by a decrease of $2.4 million in compensation and benefits costs primarily due to lower incentive-based compensation accruals in 2018 as compared to 2017.Taxes other than income taxes increased primarily due to an increase in ad valorem taxes and an increase in local franchisetaxes. Ad valorem taxes increased primarily due to higher assessments and higher millage rates. Local franchise taxes increasedprimarily due to higher residential and commercial revenues in 2018 as compared to 2017.Depreciation and amortization expenses increased primarily due to additions to plant in service.Interest expense increased primarily due to the issuance of $150 million of 3.25% Series first mortgage bonds in November2017.362Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and Analysis2017 Compared to 2016Other operation and maintenance expenses decreased primarily due to:•a decrease of $12 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs and alower scope of work done during plant outages in 2017 as compared to the same period in 2016; and•a decrease of $3.6 million in storm damage provisions. See Note 2 to the financial statements for a discussion of storm costrecovery.The decrease was partially offset by an increase of $4.8 million in energy efficiency costs and an increase of $2.7 million incompensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to the prior year.Depreciation and amortization expenses increased primarily due to additions to plant in service.Other income increased primarily due to interest income recorded in connection with the opportunity sales proceeding, interestincome recorded on the deferred fuel balance, and an increase in the allowance for equity funds used during construction due to higherconstruction work in progress in 2017 as compared to 2016. See Note 2 to the financial statements for further discussion of theopportunity sales proceeding.Interest expense decreased primarily due to the refinancing at lower interest rates of certain first mortgage bonds in 2016 andthe retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5 to the financial statementsfor details of long-term debt.Income TaxesThe effective income tax rates for 2018, 2017, and 2016 were (41,237%), 40.2%, and 36.9%, respectively. The difference inthe effective income tax rate of (41,237%) versus the federal statutory rate of 21% for 2018 was primarily due to the flow through ofexcess accumulated deferred income taxes. See Note 3 to the financial statements for a reconciliation of the federal statutory rates of21% for 2018 and 35% for 2017 and 2016 to the effective income tax rates.Income Tax LegislationSee the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion andAnalysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to thefinancial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of operations and financialposition, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statementsdiscusses the regulatory proceedings that have considered the effects of the Act.363Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisLiquidity and Capital ResourcesCash FlowCash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Thousands)Cash and cash equivalents at beginning of period$6,096 $76,834 $145,605 Net cash provided by (used in): Operating activities418,382 226,585 212,280Investing activities(419,453) (417,226) (289,444)Financing activities31,929 119,903 8,393Net increase (decrease) in cash and cash equivalents30,858 (70,738) (68,771) Cash and cash equivalents at end of period$36,954 $6,096 $76,834Operating ActivitiesNet cash flow provided by operating activities increased $191.8 million in 2018 primarily due to:•the receipt of $36.2 million from Entergy Arkansas as a result of a compliance filing made in response to the FERC’s October2018 order in the Entergy Arkansas opportunity sales proceeding. See Note 2 to the financial statements for further discussionof the opportunity sales proceeding;•the timing of collection of receivables from customers;•the timing of recovery of fuel and purchased power costs;•$26.2 million in proceeds from the sale of fuel oil inventory in 2018;•the effect of favorable weather on billed sales; and•the timing of collection of storm damage rider revenues. See Note 2 to the financial statements for further discussion of thestorm damage rider.The increase was partially offset by the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to thefinancial statements for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.Net cash flow provided by operating activities increased $14.3 million in 2017 primarily due to the timing of recovery of fueland purchased power costs in 2017 as compared to 2016 and an increase of $12.6 million in income tax refunds in 2017 as comparedto 2016. Entergy Mississippi had income tax refunds in 2017 and 2016 in accordance with an intercompany income tax allocationagreement. The 2017 income tax refunds were primarily due to the utilization of Entergy Mississippi’s federal net operating losses andstate income tax refunds resulting from the carryback of net operating losses. The increase was partially offset by the timing ofpayments to vendors.Investing ActivitiesNet cash flow used in investing activities increased $2.2 million in 2018 primarily due to:•money pool activity;•an increase of $9 million in information technology construction expenditures primarily due to increased spending on varioustechnology projects;•an increase of $8.4 million in distribution construction expenditures primarily due to increased spending on advanced meteringinfrastructure; and364Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and Analysis•several individually insignificant items.The increase was partially offset by:•a decrease of $35.7 million in transmission construction expenditures primarily due to a lower scope of work performed in2018;•a decrease of $17.1 million in fossil-fueled generation construction expenditures primarily due to a lower scope of workperformed in 2018; and•a decrease of $15.2 million in storm spending in 2018.Increases in Entergy Mississippi’s receivable from the money pool are a use of cash flow, and Entergy Mississippi’s receivablefrom the money pool increased by $39.7 million in 2018 compared to decreasing by $9 million in 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Net cash flow used in investing activities increased $127.8 million in 2017 primarily due to:•an increase of $48.4 million in transmission construction expenditures primarily due to a higher scope of work performed in2017 as compared to 2016;•an increase of $39.2 million in fossil-fueled generation construction expenditures primarily due to a higher scope of workperformed in 2017 as compared to 2016; and•an increase of $30.2 million in distribution construction expenditures primarily due to an increase in storm spending in 2017 ascompared to 2016 and increased spending on digital technology improvements within the customer contact centers.Financing ActivitiesNet cash flow provided by financing activities decreased $88 million primarily due to:•the issuance of $150 million of 3.25% Series first mortgage bonds in November 2017; and•the redemption of $20 million of preferred stock in 2018 in connection with the internal restructuring. See Note 2 to thefinancial statements for further discussion of the internal restructuring and Note 6 to the financial statements for details ofpreferred stock activity.The decrease was partially offset by:•the issuance of $55 million of 4.52% Series first mortgage bonds in December 2018;•a decrease of $16 million in common equity distributions paid in 2018 resulting from Entergy Mississippi’s historical andplanned capital investments; and•an increase in advances received from customers for transmission projects.Net cash flow provided by financing activities increased $111.5 million in 2017 primarily due to the issuance of $150 million of3.25% Series first mortgage bonds in November 2017 and the redemption of $30 million of preferred stock in 2016, partially offset bythe net issuance of $61.4 million of long-term debt in 2016.See Note 5 to the financial statements for details on long-term debt.365Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisCapital StructureEntergy Mississippi’s debt to capital ratio is balanced between equity and debt, as shown in the following table. December 31, 2018 December 31, 2017Debt to capital50.6% 51.5%Effect of subtracting cash(0.7%) (0.2%)Net debt to net capital49.9% 51.3%Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including thecurrently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists ofcapital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believesit provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. Entergy Mississippiuses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors andcreditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debtposition that could not be readily satisfied by cash and cash equivalents on hand.Entergy Mississippi seeks to optimize its capital structure in accordance with its regulatory requirements and to control its costof capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent thatoperating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as adistribution, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows areinsufficient to support planned investments, Entergy Mississippi may issue incremental debt or reduce distributions, or both, to maintainits targeted capital structure. In addition, in certain infrequent circumstances, such as large transactions that would materially alter thecapital structure if financed entirely with debt and reducing distributions, Entergy Mississippi may receive equity contributions tomaintain the targeted capital structure.Uses of CapitalEntergy Mississippi requires capital resources for:•construction and other capital investments;•debt maturities or retirements;•working capital purposes, including the financing of fuel and purchased power costs; and•distributions and interest payments. Following are the amounts of Entergy Mississippi’s planned construction and other capital investments. 2019 2020 2021 (In Millions)Planned construction and capital investment: Generation$405 $50 $225Transmission145 140 135Distribution160 160 140Utility Support75 55 35Total$785 $405 $535366Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisFollowing are the amounts of Entergy Mississippi’s existing debt obligations and lease obligations (includes estimated interestpayments) and other purchase obligations. 2019 2020-2021 2022-2023 After 2023 Total (In Millions)Long-term debt (a)$197 $84 $331 $1,590 $2,202Operating leases$9 $16 $9 $4 $38Purchase obligations (b)$219 $400 $371 $3,851 $4,841(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. For Entergy Mississippi, almost all of the total consists of unconditional fuel and purchased powerobligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financialstatements. In addition to the contractual obligations given above, Entergy Mississippi currently expects to contribute approximately $7.7 million toits qualified pension plans and approximately $123 thousand to other postretirement health care and life insurance plans in 2019,although the 2019 required pension contributions will be known with more certainty when the January 1, 2019 valuations arecompleted, which is expected by April 1, 2019. See “Critical Accounting Estimates – Qualified Pension and Other PostretirementBenefits” below for a discussion of qualified pension and other postretirement benefits funding. Also, in addition to the contractual obligations, Entergy Mississippi has $30.5 million of unrecognized tax benefits and interestnet of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties inthe timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regardingunrecognized tax benefits.In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Mississippiincludes amounts associated with specific investments such as the Choctaw Generating Station and the Sunflower Solar Facility, eachdiscussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending toenhance reliability and improve service to customers, including advanced meters and related investments; resource planning, includingpotential generation projects; system improvements; software and security; and other investments. Estimated capital expenditures aresubject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements,environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans,and the ability to access capital.As a wholly-owned subsidiary of Entergy Utility Holding Company, LLC, Entergy Mississippi pays distributions from itsearnings at a percentage determined monthly. Choctaw Generating StationIn August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary ofGenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near FrenchCamp, Mississippi. The purchase price is expected to be approximately $314 million. Entergy Mississippi also expects to invest invarious plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million. Thepurchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federaland state regulatory and permitting agencies. These include regulatory approvals from the MPSC and the FERC. Clearance under theHart-Scott-Rodino Antitrust Improvements Act has occurred. In October 2018, Entergy Mississippi filed an application with the MPSCseeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to itsformula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism,367Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and Analysisin the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, includingthe non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for otherfuture capacity additions approved by the MPSC. Closing is expected to occur by the end of 2019.Sunflower Solar FacilityIn November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MWto-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi. Theestimated base purchase price is approximately $138.4 million. The estimated total investment, including the base purchase price andother related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase iscontingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and stateregulatory and permitting agencies. The project will be built by Sunflower County Solar Project, LLC, a sub-subsidiary of RecurrentEnergy, LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencieshave been met. In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for SunflowerSolar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility. Entergy Mississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rateadjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by EntergyMississippi, including the annual ownership costs of the Sunflower Solar Facility. Closing is expected to occur by the end of 2021.Advanced Metering Infrastructure (AMI)In November 2016, Entergy Mississippi filed an application seeking an order from the MPSC granting a certificate of publicconvenience and necessity and finding that Entergy Mississippi’s deployment of AMI is in the public interest. Entergy Mississippiproposed to replace existing meters with advanced meters that enable two-way data communication; to design and build a secure andreliable network to support such communications; and to implement support systems. AMI is intended to serve as the foundation ofEntergy Mississippi’s modernized power grid. The filing included an estimate of implementation costs for AMI of $132 million. Thefiling identified a number of quantified and unquantified benefits, and Entergy Mississippi provided a cost benefit analysis showing thatits AMI deployment is expected to produce a nominal benefit to customers of $496 million over a 15-year period, which when nettedagainst the costs of AMI results in $183 million of net customer benefits. Entergy Mississippi also sought to continue to include in ratebase the remaining book value, approximately $56 million at December 31, 2015, of existing meters that will be retired as part of theAMI deployment and also to depreciate those assets using current depreciation rates. Entergy Mississippi proposed a 15-yeardepreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019, subject to approval bythe MPSC. Deployment of the communications network began in 2018. Entergy Mississippi proposed to include the AMI deploymentcosts and the quantified benefits in existing rate mechanisms, primarily through future formula rate plan filings and/or future energycost recovery rider schedule re-determinations, as applicable. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippientered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filingwithout material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate ofpublic convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base theremaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets usingcurrent depreciation rates. In June 2018, as part of the order approving the joint stipulation between the Mississippi Public Utilities Staffand Entergy Mississippi addressing Entergy Mississippi’s 2018 formula rate plan evaluation report and the ratemaking effects of theTax Act, the MPSC approved the acceleration of the recovery of substantially all of Entergy Mississippi’s existing customer meters inanticipation of AMI deployment.368Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisSources of CapitalEntergy Mississippi’s sources to meet its capital requirements include:•internally generated funds;•cash on hand;•debt or preferred membership interest issuances;•capital contributions; and•bank financing under new or existing facilities.Entergy Mississippi may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions andinterest rates are favorable.All debt and preferred membership interest issuances by Entergy Mississippi require prior regulatory approval. Debt issuancesare also subject to issuance tests set forth in its bond indenture and other agreements. Entergy Mississippi has sufficient capacity underthese tests to meet its foreseeable capital needs.Entergy Mississippi’s receivables from the money pool were as follows as of December 31 for each of the following years.2018 2017 2016 2015(In Thousands)$41,380 $1,633 $10,595 $25,930See Note 4 to the financial statements for a description of the money pool.Entergy Mississippi has three separate credit facilities in the aggregate amount of $82.5 million scheduled to expire in May2019. No borrowings were outstanding under the credit facilities as of December 31, 2018. In addition, Entergy Mississippi is a partyto an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of December 31, 2018,$16.7 million of letters of credit were outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to thefinancial statements for additional discussion of the credit facilities.Entergy Mississippi obtained authorization from the FERC through November 2020 for short-term borrowings not to exceed anaggregate amount of $175 million at any time outstanding and long-term borrowings and security issuances. See Note 4 to the financialstatements for further discussion of Entergy Mississippi’s short-term borrowing limits.State and Local Rate Regulation and Fuel-Cost RecoveryThe rates that Entergy Mississippi charges for electricity significantly influence its financial position, results of operations, andliquidity. Entergy Mississippi is regulated and the rates charged to its customers are determined in regulatory proceedings. Agovernmental agency, the MPSC, is primarily responsible for approval of the rates charged to customers.Formula Rate Plan FilingsIn March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showing Entergy Mississippi’s projectedearned return for the 2016 calendar year to be below the formula rate plan bandwidth. The filing showed a $32.6 million rate increasewas necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96%, within theformula rate plan bandwidth. In June 2016 the MPSC approved Entergy Mississippi’s joint stipulation with the Mississippi PublicUtilities Staff. The joint stipulation369Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and Analysisprovided for a total revenue increase of $23.7 million. The revenue increase included a $19.4 million increase through the formula rateplan, resulting in a return on common equity point of adjustment of 10.07%. The revenue increase also included $4.3 million inincremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider. The revenue increase and advalorem tax adjustment rider were effective with the July 2016 bills.In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showingEntergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to bewithin the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi PublicUtilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, whichresulted in no change in rates.In March 2018, Entergy Mississippi submitted its formula rate plan 2018 test year filing and 2017 look-back filing showingEntergy Mississippi’s earned return for the historical 2017 calendar year and projected earned return for the 2018 calendar year, in largepart as a result of the lower federal corporate income tax rate effective in 2018, to be within the formula rate plan bandwidth, resultingin no change in rates. In June 2018, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation thatconfirmed that Entergy Mississippi’s earned returns for both the 2017 look-back filing and 2018 test year were within the respectiveformula rate plan bandwidths. In June 2018 the MPSC approved the stipulation, which resulted in no change in rates. See Note 2 to thefinancial statements for additional discussion regarding the treatment of the effects of the lower federal corporate income tax rate.Entergy Mississippi’s formula rate plan includes a look-back evaluation report filing in March 2019 that will compare actual2018 results to the performance-adjusted allowed return on rate base. In fourth quarter 2018, Entergy Mississippi recorded a provisionof $9.3 million that reflects the estimate of the difference between the 2018 earned rate of return on rate base and an establishedperformance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism.In October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, theinterim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacityacquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allowsimilar cost recovery treatment for other future capacity additions, such as the Sunflower Solar facility, that are approved by the MPSC.Internal RestructuringSee “Internal Restructuring” above for additional discussion of Entergy Mississippi’s internal restructuring. In December2018, Entergy Mississippi filed its notice of intent to implement the restructuring credit rider to allow Entergy Mississippi to returncredits of $27 million to retail customers over six years. In January 2019 the MPSC approved the proposed restructuring creditadjustment factor, which is effective for bills rendered beginning February 2019.Fuel and Purchased Power Cost RecoveryEntergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted annually to reflect accumulated over-or under-recoveries. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of theMPSC.In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected throughJanuary 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC furtherordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015Entergy Mississippi should file a revised fuel370Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and Analysisfactor with the MPSC no later than February 1, 2016. Pursuant to that order, Entergy Mississippi submitted a revised fuel factor.Additionally, because Entergy Mississippi’s projected over-recovery balance for the period ending January 31, 2016 was $68 million,in February 2016, Entergy Mississippi filed for another interim adjustment to the energy cost factor effective April 2016 to flow throughto customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC inFebruary 2016 effective for April 2016 bills.In November 2016, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included an over-recovery of less than $2 million as of September 30, 2016. Also,in January 2017 the MPSC approved the annual factor effective with February 2017 bills. Also in January 2017 the MPSC certified tothe Mississippi Legislature the audit reports of its independent auditors for the fuel year ending September 30, 2016. In its order, theMPSC expressly reserved the right to review and determine the recoverability of any and all purchased power expenditures madeduring fiscal year 2016. The MPSC hired independent auditors to conduct an annual operations audit and a financial audit. Theindependent auditors issued their audit reports in December 2017. The audit reports included several recommendations for action byEntergy Mississippi but did not recommend any cost disallowances. In January 2018 the MPSC certified the audit reports to theMississippi Legislature. In November 2017 the Public Utilities Staff separately engaged a consultant to review the outage at the GrandGulf Nuclear Station that began in 2016. The review is currently in progress.In November 2017, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included an under-recovery of approximately $61.5 million as of September 30,2017. Entergy Mississippi proposed a two-tiered energy cost factor designed to promote overall rate stability throughout 2018particularly during the summer months. In January 2018 the MPSC approved the proposed energy cost factors effective for February2018 bills.In November 2018, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy costrecovery rider. The calculation of the annual factor included an under-recovery of approximately $57 million as of September 30, 2018.In January 2019 the MPSC approved the proposed energy cost factor effective for February 2019 bills.Mississippi Attorney General ComplaintThe Mississippi Attorney General filed a complaint in state court in December 2008 against Entergy Corporation, EntergyMississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach ofgood faith and fair dealing, and requesting an accounting and restitution. The complaint is wide ranging and relates to tariffs andprocedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believesthe complaint is unfounded. In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S.District Court in Jackson, Mississippi. In June 2010 the MPSC authorized the deferral of certain legal expenses associated with thislitigation until it is resolved. As of December 31, 2018, Entergy Mississippi has a regulatory asset of $23.6 million for these deferredlegal expenses. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trialto April 2019.Storm Cost Recovery Filings with Retail RegulatorsEntergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If EntergyMississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceasesuntil such time that the accumulated storm damage provision becomes less than $10 million. As of April 30, 2016, EntergyMississippi’s storm damage provision balance was less than $10 million, therefore Entergy Mississippi resumed billing the monthlystorm damage provision effective with June 2016 bills. As of September 30, 2016, however, Entergy Mississippi’s storm damageprovision balance exceeded $15 million. Accordingly the storm damage provision was reset to zero beginning with November 2016bills. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was again less than $10 million,therefore371Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisEntergy Mississippi resumed billing the monthly storm damage provision effective with September 2017 bills. As of June 30, 2018,Entergy Mississippi’s storm damage provision balance exceeded $15 million. Accordingly the storm damage provision was reset tozero beginning with August 2018 bills.Federal RegulationSee the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.Nuclear MattersSee the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor a discussion of nuclear matters.Environmental RisksEntergy Mississippi’s facilities and operations are subject to regulation by various governmental authorities having jurisdictionover air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmentalmatters. Management believes that Entergy Mississippi is in substantial compliance with environmental regulations currently applicableto its facilities and operations, with reference to possible exceptions noted in “Regulation of Entergy’s Business - EnvironmentalRegulation” in Part I, Item 1. Because environmental regulations are subject to change, future compliance costs cannot be preciselyestimated.Critical Accounting EstimatesThe preparation of Entergy Mississippi’s financial statements in conformity with generally accepted accounting principlesrequires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effecton reported financial position, results of operations, and cash flows. Management has identified the following accounting policies andestimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is thepotential for future changes in the assumptions and measurements that could produce estimates that would have a material impact onthe presentation of Entergy Mississippi’s financial position or results of operations.Utility Regulatory AccountingSee “Utility Regulatory Accounting” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.Impairment of Long-lived Assets and Trust Fund InvestmentsSee “Impairment of Long-lived Assets and Trust Fund Investments” in the “Critical Accounting Estimates” section ofEntergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated withthe impairment of long-lived assets.Taxation and Uncertain Tax PositionsSee “Taxation and Uncertain Tax Positions” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for further discussion.372Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisQualified Pension and Other Postretirement BenefitsEntergy Mississippi’s qualified pension and other postretirement reported costs, as described in Note 11 to the financialstatements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and variousactuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” inthe “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance ofthe assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.Cost SensitivityThe following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes incertain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019 QualifiedPension Cost Impact on 2018 ProjectedQualified Benefit Obligation Increase/(Decrease) Discount rate (0.25%) $755 $11,196Rate of return on plan assets (0.25%) $823 $—Rate of increase in compensation 0.25% $392 $1,940The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation tochanges in certain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019Postretirement Benefit Cost Impact on 2018Accumulated PostretirementBenefit Obligation Increase/(Decrease) Discount rate (0.25%) $153 $2,004Health care cost trend 0.25% $248 $1,617Each fluctuation above assumes that the other components of the calculation are held constant.Costs and FundingTotal qualified pension cost for Entergy Mississippi in 2018 was $10.8 million. Entergy Mississippi anticipates 2019 qualifiedpension cost to be $11.3 million. Entergy Mississippi contributed $14.9 million to its qualified pension plans in 2018 and estimates2019 pension contributions will be approximately $7.7 million, although the 2019 required pension contributions will be known withmore certainty when the January 1, 2019 valuations are completed, which is expected by April 1, 2019.Total postretirement health care and life insurance benefit income for Entergy Mississippi in 2018 was $1.5 million. EntergyMississippi expects 2019 postretirement health care and life insurance benefit income of approximately $425 thousand. EntergyMississippi contributed $87 thousand to its other postretirement plans in 2018 and estimates that 2019 contributions will beapproximately $123 thousand.373Table of ContentsEntergy Mississippi, LLCManagement’s Financial Discussion and AnalysisFederal Healthcare LegislationSee “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical AccountingEstimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion ofFederal Healthcare Legislation.Other ContingenciesSee “Other Contingencies” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and otherrisks.New Accounting PronouncementsSee “New Accounting Pronouncements” section of Note 1 to the financial statements for a discussion of new accountingpronouncements.374Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the members and Board of Directors ofEntergy Mississippi, LLCOpinion on the Financial StatementsWe have audited the accompanying balance sheets of Entergy Mississippi, LLC (the “Company”) as of December 31, 2018 and 2017,the related statements of income, cash flows and changes in member’s equity (pages 376 through 380 and applicable items in pages 53through 237), for each of the three years in the period ended December 31, 2018, and the related notes (collectively referred to as the“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of theCompany as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in theperiod ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part ofour audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Company’s auditor since 2001.375Table of ContentsENTERGY MISSISSIPPI, LLCINCOME STATEMENTS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING REVENUES Electric $1,335,112 $1,198,229 $1,094,649 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 260,198 185,816 95,090Purchased power 364,575 328,463 297,902Other operation and maintenance 261,613 240,738 248,019Taxes other than income taxes 101,999 95,051 94,482Depreciation and amortization 152,577 143,479 136,214Other regulatory charges (credits) - net 147,704 (19,134) (3,721)TOTAL 1,288,666 974,413 867,986 OPERATING INCOME 46,446 223,816 226,663 OTHER INCOME Allowance for equity funds used during construction 8,710 9,667 5,801Interest and investment income 135 85 656Miscellaneous - net (2,732) (2,232) (5,955)TOTAL 6,113 7,520 502 INTEREST EXPENSE Interest expense 55,905 51,260 57,114Allowance for borrowed funds used during construction (3,651) (3,875) (2,987)TOTAL 52,254 47,385 54,127 INCOME BEFORE INCOME TAXES 305 183,951 173,038 Income taxes (125,773) 73,919 63,854 NET INCOME 126,078 110,032 109,184 Preferred dividend requirements and other 834 953 2,443 EARNINGS APPLICABLE TO COMMON EQUITY $125,244 $109,079 $106,741 See Notes to Financial Statements. 376Table of ContentsENTERGY MISSISSIPPI, LLCSTATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING ACTIVITIES Net income $126,078 $110,032 $109,184Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation and amortization 152,577 143,479 136,214Deferred income taxes, investment tax credits, and non-current taxes accrued 56,502 84,816 60,986Changes in assets and liabilities: Receivables 37,762 (29,528) (28,819)Fuel inventory 33,675 5,266 401Accounts payable (7,472) 3,595 33,733Taxes accrued (5,291) 18,803 20,579Interest accrued (2,670) 1,248 822Deferred fuel costs 24,428 (25,487) (114,711)Other working capital accounts (9,902) 5,115 (5,222)Provisions for estimated losses 6,378 (9,676) 6,378Other regulatory assets 54,860 (17,412) (3,626)Other regulatory liabilities (131,856) 405,395 (2,986) Deferred tax rate change recognized as regulatory liability/asset — (452,429) —Pension and other postretirement liabilities (8,405) (8,055) (10,648)Other assets and liabilities 91,718 (8,577) 9,995Net cash flow provided by operating activities 418,382 226,585 212,280INVESTING ACTIVITIES Construction expenditures (387,293) (427,616) (310,356)Allowance for equity funds used during construction 8,710 9,667 5,801Changes in money pool receivable - net (39,747) 8,962 15,335Payment for purchase of assets — (6,958) —Other (1,123) (1,281) (224)Net cash flow used in investing activities (419,453) (417,226) (289,444)FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 54,449 148,185 623,812Retirement of long-term debt — — (562,400)Redemption of preferred stock (21,208) — (30,000)Distributions/dividends paid: Common equity (10,000) (26,000) (24,000)Preferred stock (993) (953) (2,755)Other 9,681 (1,329) 3,736Net cash flow provided by financing activities 31,929 119,903 8,393Net increase (decrease) in cash and cash equivalents 30,858 (70,738) (68,771)Cash and cash equivalents at beginning of period 6,096 76,834 145,605Cash and cash equivalents at end of period $36,954 $6,096 $76,834SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $56,037 $47,631 $53,693Income taxes ($19,118) ($25,043) ($12,487)See Notes to Financial Statements. 377Table of ContentsENTERGY MISSISSIPPI, LLCBALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $11 $1,607Temporary cash investments 36,943 4,489Total cash and cash equivalents 36,954 6,096Accounts receivable: Customer 73,205 72,039Allowance for doubtful accounts (563) (574)Associated companies 51,065 45,081Other 8,647 9,738Accrued unbilled revenues 50,171 54,256Total accounts receivable 182,525 180,540Deferred fuel costs 8,016 32,444Fuel inventory - at average cost 11,931 45,606Materials and supplies - at average cost 47,255 42,571Prepayments and other 9,365 7,041TOTAL 296,046 314,298 OTHER PROPERTY AND INVESTMENTS Non-utility property - at cost (less accumulated depreciation) 4,576 4,592Escrow accounts 32,447 31,969TOTAL 37,023 36,561 UTILITY PLANT Electric 4,780,720 4,660,297Property under capital lease — 125Construction work in progress 128,149 149,367TOTAL UTILITY PLANT 4,908,869 4,809,789Less - accumulated depreciation and amortization 1,641,821 1,681,306UTILITY PLANT - NET 3,267,048 3,128,483 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Other regulatory assets 343,049 397,909Other 3,638 2,124TOTAL 346,687 400,033 TOTAL ASSETS $3,946,804 $3,879,375 See Notes to Financial Statements. 378Table of ContentsENTERGY MISSISSIPPI, LLCBALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $150,000 $—Accounts payable: Associated companies 42,928 55,689Other 79,117 77,326Customer deposits 85,085 83,654Taxes accrued 77,552 82,843Interest accrued 20,231 22,901Other 7,526 12,785TOTAL 462,439 335,198 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 551,869 488,806Accumulated deferred investment tax credits 10,186 8,867Regulatory liability for income taxes - net 246,402 411,011Other regulatory liabilities 33,622 869Asset retirement cost liabilities 9,206 9,219Accumulated provisions 51,142 44,764Pension and other postretirement liabilities 93,100 101,498Long-term debt 1,175,750 1,270,122Other 20,862 10,770TOTAL 2,192,139 2,345,926 Commitments and Contingencies Preferred stock without sinking fund — 20,381 EQUITY Member's equity 1,292,226 1,177,870TOTAL 1,292,226 1,177,870 TOTAL LIABILITIES AND EQUITY $3,946,804 $3,879,375 See Notes to Financial Statements. 379Table of ContentsENTERGY MISSISSIPPI, LLCSTATEMENTS OF CHANGES IN MEMBER'S EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Member's Equity (In Thousands) Balance at December 31, 2015$1,012,050Net income109,184Common equity distributions(24,000)Preferred stock dividends(2,443)Balance at December 31, 2016$1,094,791Net income110,032Common equity distributions(26,000)Preferred stock dividends(953)Balance at December 31, 2017$1,177,870Net income126,078Common equity distributions(10,000)Preferred stock dividends(834)Other(888)Balance at December 31, 2018$1,292,226 See Notes to Financial Statements. 380Table of ContentsENTERGY MISSISSIPPI, LLCSELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (In Thousands) Operating revenues$1,335,112 $1,198,229 $1,094,649 $1,396,985 $1,524,193Net income$126,078 $110,032 $109,184 $92,708 $74,821Total assets$3,946,804 $3,879,375 $3,602,140 $3,477,407 $3,358,625Long-term obligations (a)$1,175,750 $1,290,503 $1,141,924 $972,058 $1,097,182 (a) Includes long-term debt (excluding currently maturing debt), non-current capital lease obligations, and preferred stock without sinking fund. 2018 2017 2016 2015 2014 (Dollars In Millions) Electric Operating Revenues: Residential$579 $502 $459 $565 $585Commercial462 423 374 465 481Industrial175 159 134 164 175Governmental44 41 38 47 47Total retail1,260 1,125 1,005 1,241 1,288Sales for resale: Associated companies1 — 1 75 153Non-associated companies25 18 30 10 14Other49 55 59 71 69Total$1,335 $1,198 $1,095 $1,397 $1,524 Billed Electric Energy Sales (GWh): Residential5,829 5,308 5,617 5,661 5,672Commercial4,865 4,783 4,894 4,913 4,821Industrial2,559 2,536 2,493 2,283 2,297Governmental438 421 439 433 414Total retail13,691 13,048 13,443 13,290 13,204Sales for resale: Associated companies— — — 1,419 2,657Non-associated companies1,060 857 1,021 261 193Total14,751 13,905 14,464 14,970 16,054381Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISResults of OperationsNet Income2018 Compared to 2017Net income increased $8.6 million primarily due to a lower effective income tax rate and higher net revenue, after excluding theeffect of the return of unprotected excess accumulated deferred income taxes to customers which is offset in income taxes, partiallyoffset by higher other operation and maintenance expenses, lower other income, and higher depreciation and amortization expenses.2017 Compared to 2016Net income decreased $4.3 million primarily due to higher taxes other than income taxes, lower net revenue, and a highereffective income tax rate, partially offset by lower other operation and maintenance expenses and higher other income.Net Revenue2018 Compared to 2017Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue$311.9Return of unprotected excess accumulated deferredincome taxes to customers(13.4)Net gas revenue2.9Volume/weather10.7Other(1.5)2018 net revenue$310.6 The return of unprotected excess accumulated deferred income taxes to customers is primarily due to the return of unprotectedexcess accumulated deferred income taxes through the fuel adjustment clause beginning in July 2018. There is no effect on net incomeas the reduction in net revenue is offset by a reduction in income tax expense. See Note 2 to the financial statements for furtherdiscussion of regulatory activity regarding the Tax Cuts and Jobs Act.The net gas revenue variance is primarily due to the effect of more favorable weather on residential and commercial sales.The volume/weather variance is primarily due to an increase of 292 GWh, or 5%, in billed electricity usage, including the effectof more favorable weather on residential and commercial sales and a 1% increase in the average number of electric customers.382Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and Analysis2017 Compared to 2016Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2017 to 2016. Amount (In Millions) 2016 net revenue$317.2Retail electric price(6.4)Volume/weather(4.3)Other5.42017 net revenue$311.9 The retail electric price variance is primarily due to a net decrease in the purchased power and capacity acquisition costrecovery rider. There was a decrease in the rider primarily due to credits to customers as part of the Entergy New Orleans internalrestructuring agreement in principle, effective with the first billing cycle of June 2017, partially offset by lower credits to customers in2017 related to the retirement of Michoud Units 2 and 3. See Note 2 to the financial statements for further discussion of the creditsassociated with Entergy New Orleans’s internal restructuring and the Michoud retirement.The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales,partially offset by an increase in residential and commercial usage resulting from a 1% increase in the average number of residentialand commercial electric customers. Other Income Statement Variances2018 Compared to 2017Other operation and maintenance expenses increased primarily due to:•an increase of $2.9 million in distribution expenses primarily due to higher contract labor costs;•an increase of $2.8 million in energy efficiency costs;•an increase of $2.2 million in gas operation expenses primarily due to higher labor costs, including contract labor;•an increase of $2.1 million in loss provisions;•an increase of $2.1 million in information technology costs primarily due to higher software maintenance costs and highercontract costs; and•an increase of $1.9 million in customer service costs primarily due to higher write-offs of customer accounts in 2018.Depreciation and amortization expenses increased primarily due to additions to plant in service.Other income decreased primarily due to the accrual in fourth quarter 2018 of a $5 million settlement offer in the New OrleansPower Station show cause proceeding. See “Liquidity and Capital Resources - Uses of Capital - New Orleans Power Station” belowfor discussion of the New Orleans Power Station proceedings.383Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and Analysis2017 Compared to 2016Other operation and maintenance expenses decreased primarily due to:•a decrease of $7.9 million in fossil-fueled generation expenses primarily due to lower outage costs at Power Block 1 of theUnion Power Station in 2017 as compared to 2016, the deactivation of Michoud Units 2 and 3 effective May 2016, and asbestosloss provisions in 2016;•a decrease of $4.5 million in other loss provisions; and•a decrease of $2.8 million due to lower write-offs of uncollectible customer accounts.The decrease was partially offset by:•an increase of $4 million in distribution expenses primarily due to higher labor costs, including contract labor, and highervegetation maintenance costs; and•an increase of $1.3 million in energy efficiency costs.Taxes other than income taxes increased primarily due to an increase in ad valorem taxes and higher local franchise taxes. Advalorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the UnionPower Station beginning in 2017. Local franchise taxes increased primarily due to higher electric retail revenues in 2017 as comparedto 2016.Other income increased primarily due to a decrease in charitable contributions made in 2017 as compared to 2016. Income TaxesThe effective income tax rates for 2018, 2017, and 2016 were (4.8%), 42.8%, and 37.0%, respectively. The difference in theeffective income tax rate of (4.8%) versus the federal statutory rate of 21% for 2018 was primarily due to the amortization of excessaccumulated deferred income taxes. See Note 3 to the financial statements for a reconciliation of the federal statutory rates of 21% for2018 and 35% for 2017 and 2016 to the effective income tax rates.Income Tax LegislationSee the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion andAnalysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to thefinancial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of operations and financialposition, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statementsdiscusses the regulatory proceedings that have considered the effects of the Act.384Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisLiquidity and Capital ResourcesCash FlowCash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Thousands)Cash and cash equivalents at beginning of period$32,741 $103,068 $88,876 Net cash provided by (used in): Operating activities171,778 127,797 205,211Investing activities(207,616) (109,500) (322,681)Financing activities22,774 (88,624) 131,662Net increase (decrease) in cash and cash equivalents(13,064)(70,327)14,192 Cash and cash equivalents at end of period$19,677$32,741$103,068Operating ActivitiesNet cash flow provided by operating activities increased $44 million in 2018 primarily due to:•an increase of $31.1 million in 2018 of income tax refunds. Entergy New Orleans had income tax refunds in 2018 and 2017 inaccordance with an intercompany income tax allocation agreement. The income tax refunds in 2018 resulted from the utilizationof Entergy New Orleans’s net operating loss; and•the receipt of $7 million from Entergy Arkansas as a result of a compliance filing made in response to the FERC’s October 2018order in the Entergy Arkansas opportunity sales proceeding. See Note 2 to the financial statements for further discussion of theopportunity sales proceeding.The increase was partially offset by the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to thefinancial statements for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.Net cash flow provided by operating activities decreased $77.4 million in 2017 primarily due to a decrease of $77.3 million inincome tax refunds in 2017 compared to 2016 and the timing of collections of receivables from customers and payments to vendors.Entergy New Orleans had income tax refunds in 2017 and 2016 in accordance with an intercompany income tax allocation agreement.The 2016 income tax refunds resulted primarily from deductible temporary differences. The decrease was partially offset by an increasedue to the timing of recovery of fuel and purchased power costs.Investing Activities Net cash flow used in investing activities increased $98.1 million in 2018 primarily due to an increase of $74.5 million in fossil-fueled generation construction expenditures due to higher spending on the New Orleans Power Station project in 2018 as compared to2017 and money pool activity.Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’sreceivable from the money pool increased by $9.3 million in 2018 compared to decreasing by $1.5 million in 2017. The money pool isan inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.385Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisNet cash flow used in investing activities decreased $213.2 million in 2017 primarily due to the purchase of Power Block 1 ofthe Union Power Station for approximately $237 million in March 2016. See Note 14 to the financial statements for discussion of theUnion Power Station purchase. The decrease was partially offset by an increase of $16.7 million in distribution constructionexpenditures primarily due to a higher scope of work performed in 2017 as compared to 2016. Financing ActivitiesEntergy New Orleans’s financing activities provided $22.8 million of cash in 2018 compared to using $88.6 million of cash in2017 primarily due to the following activity:•the issuance of $60 million of 4.51% Series first mortgage bonds in September 2018;•a decrease of $50.5 million in common equity distributions in 2018 as compared to 2017. Common equity distributions werelower in 2018 primarily as a result of the construction of the New Orleans Power Station, as discussed below, and the excessaccumulated deferred income taxes being returned to customers as a result of the enactment of the Tax Cuts and Jobs act inDecember 2017. See Note 2 to the financial statements for discussion of regulatory proceedings related to the enactment of theTax Cuts and Jobs Act;•$20 million in capital contributions received from Entergy Corporation in 2017. The 2017 contribution was made inconsideration of Entergy New Orleans’s upcoming capital requirements; and•the redemption of $19.8 million of preferred stock in 2017 in connection with the internal restructuring, as discussed below.Entergy New Orleans’s financing activities used $88.6 million of cash in 2017 compared to providing $131.7 million of cash in2016 primarily due to the following activity:•the issuance of $110 million of 5.50% Series first mortgage bonds in March 2016;•an increase of $55.5 million in common equity distributions in 2017 as compared to 2016. Common equity distributions in2017 increased primarily as a result of Entergy New Orleans’s cash position in excess of its working capital requirements. Therewere no common equity distributions in first quarter 2016 in anticipation of the purchase of Power Block 1 of the Union PowerStation in March 2016;•a decrease of $27.8 million in capital contributions received from Entergy Corporation in 2017 compared to 2016. The 2017contribution was made in consideration of Entergy New Orleans’s upcoming capital requirements. The 2016 contribution wasmade in anticipation of Entergy New Orleans’s purchase of Power Block 1 of the Union Power Station; and•the redemptions of $7.8 million of 4.75% Series preferred stock, $6 million of 5.56% Series preferred stock, and $6 million of4.36% Series preferred stock in 2017 in connection with the internal restructuring, as discussed below.See Note 14 to the financial statements for discussion of the Union Power Station purchase.Capital StructureEntergy New Orleans’s debt to capital ratio is balanced between equity and debt as shown in the following table. The increase inthe debt to capital ratio is primarily due to the issuance of long-term debt in 2018. 386Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and Analysis December 31, 2018 December 31, 2017Debt to capital52.1% 51.3%Effect of excluding securitization bonds(3.5%) (4.7%)Debt to capital, excluding securitization bonds (a)48.6% 46.6%Effect of subtracting cash(1.2%) (2.4%)Net debt to net capital, excluding securitization bonds (a)47.4% 44.2%(a) Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, long-term debt, including the currentlymaturing portion, and the long-term payable due to an associated company. Capital consists of debt and common equity. Net capitalconsists of capital less cash and cash equivalents. Entergy New Orleans uses the debt to capital ratios excluding securitization bonds inanalyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy NewOrleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described inNote 5 to the financial statements. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds inanalyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy NewOrleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readilysatisfied by cash and cash equivalents on hand.Entergy New Orleans seeks to optimize its capital structure in accordance with its regulatory requirements and to control its costof capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent thatoperating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as adistribution, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows areinsufficient to support planned investments, Entergy New Orleans may issue incremental debt or reduce distributions, or both, tomaintain its targeted capital structure. In addition, in certain infrequent circumstances, such as large transactions that would materiallyalter the capital structure if financed entirely with debt and reducing distributions, Entergy New Orleans may receive equitycontributions to maintain the targeted capital structure.Uses of CapitalEntergy New Orleans requires capital resources for:•construction and other capital investments;•working capital purposes, including the financing of fuel and purchased power costs;•debt maturities or retirements; and•distribution and interest payments.Following are the amounts of Entergy New Orleans’s planned construction and other capital investments. 2019 2020 2021 (In Millions)Planned construction and capital investment: Generation$110 $65 $100Transmission15 10 5Distribution90 95 110Utility Support25 15 20Total$240 $185 $235387Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisFollowing are the amounts of Entergy New Orleans’s existing debt and lease obligations (includes estimated interest payments)and other purchase obligations. 2019 2020-2021 2022-2023 After 2023 Total (In Millions)Long-term debt (a)$34 $92 $163 $704 $993Operating leases$3 $4 $2 $2 $11Purchase obligations (b)$199 $397 $409 $2,770 $3,775(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. For Entergy New Orleans, almost all of the total consists of unconditional fuel and purchased powerobligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financialstatements.In addition to the contractual obligations given above, Entergy New Orleans currently expects to contribute approximately $1.8 millionto its qualified pension plan and approximately $2.1 million to other postretirement health care and life insurance plans in 2019,although the 2019 required pension contributions will be known with more certainty when the January 1, 2019 valuations arecompleted, which is expected by April 1, 2019. See “Critical Accounting Estimates - Qualified Pension and Other PostretirementBenefits” below for a discussion of qualified pension and other postretirement benefits funding.Also in addition to the contractual obligations, Entergy New Orleans has $265.9 million of unrecognized tax benefits andinterest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimateddue to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additionalinformation regarding unrecognized tax benefits.In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy New Orleansincludes specific investments such as the New Orleans Power Station discussed below; transmission projects to enhance reliability,reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers,including advanced meters and related investments; system improvements; software and security; and other investments. Estimatedcapital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatoryconstraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, businessrestructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt andpreferred stock maturities in Notes 5 and 6 to the financial statements.As a wholly-owned subsidiary of Entergy Utility Holding Company, LLC, Entergy New Orleans pays distributions from itsearnings at a percentage determined monthly.New Orleans Power StationIn June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination andauthorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at thesite of the existing Michoud generating facility, which was retired effective May 31, 2016. In January 2017 several intervenors filedtestimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleanssubmitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and arelated cost recovery plan. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed thecommitment to pursue up to 100 MW of renewable resources to serve New Orleans. In March 2018 the City Council adopted a388Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and Analysisresolution approving construction of the 128 MW unit. The targeted commercial operation date is mid-2020, subject to receipt of allnecessary permits. In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council arequest for rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed alawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced thatit would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in payingcertain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the CityCouncil. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation.The City Council issued a request for qualifications for an investigator and in June 2018 selected two investigators. In October 2018 theinvestigators for the City Council released their report, concluding that individuals were paid to attend and/or speak in support of theNew Orleans Power Station and that Entergy New Orleans “knew or should have known that such conduct occurred or reasonablymight occur.” The City Council held a special meeting on October 31, 2018 to allow the investigators to present the report and for theCity Council to consider next steps. At that meeting, the City Council issued a resolution requiring Entergy New Orleans to show causewhy it should not be fined $5 million as a result of the findings in the report. In November 2018, Entergy New Orleans submitted itsresponse to the show cause resolution, disagreeing with certain characterizations and omissions of fact in the report and asserting thatthe City Council could not legally impose the proposed fine. Simultaneous with the filing of its response to the show cause resolution,Entergy New Orleans sent a letter to the City Council re-asserting that the City Council’s imposition of the proposed fine would beunlawful, but acknowledging that the actions of a subcontractor, which was retained by an Entergy New Orleans contractor without theknowledge or contractually-required consent of Entergy New Orleans, were contrary to Entergy’s values. In that letter, Entergy NewOrleans offered to donate $5 million to the City Council to resolve the show cause proceeding. In January 2019, Entergy New Orleanssubmitted a new settlement proposal to the City Council. The proposal retains the components of the first offer but adds to it acommitment to make reasonable efforts to limit the costs of the project to the $210 million cost estimate with advanced notification ofanticipated cost overruns, additional reporting requirements for cost and environmental items, and a commitment regarding reliabilityinvestment and to work with the New Orleans Sewerage and Water Board to provide a reliable source of power. In February 2019 theCity Council approved a resolution approving the settlement proposal and allowing the construction of the New Orleans Power Stationto commence.Gas Infrastructure Rebuild PlanIn September 2016, Entergy New Orleans submitted to the City Council a request for authorization for Entergy New Orleans toproceed with annual incremental capital funding of $12.5 million for its gas infrastructure rebuild plan, which would replace all ofEntergy New Orleans’s low pressure cast iron, steel, and vintage plastic pipe over a ten-year period commencing in 2017. Entergy NewOrleans also proposed that recovery of the investment to fund its gas infrastructure replacement plan be determined in connection withits next base rate case. The City Council authorized Entergy New Orleans to proceed with its replacement plans and established aschedule for proceedings in advance of the rate case intended to provide an opportunity for evaluation of the gas infrastructure plan thatwould best serve the public interest and the effect on customers of the approval of any such plan. In the course of that proceeding, theCity Council’s advisors submitted pre-filed testimony recommending that Entergy New Orleans be allowed to continue with itsconditioned-based approach to gas pipeline replacement to replace approximately 238 miles of low pressure pipe at a rate ofapproximately 25 miles per year. The City Council’s advisors also recommended that Entergy New Orleans be required to adhere tocertain reporting requirements and recognized the need to address the sustained level of investment in gas infrastructure on customerbills. In September 2017, Entergy New Orleans filed rebuttal testimony suggesting that its recovery of future investment and customereffects would be addressed in the rate case that Entergy New Orleans was required to file in July 2018. The procedural schedule wassuspended in order to allow for resolution of the proceeding.389Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisRenewablesIn July 2018, Entergy New Orleans filed an application with the City Council requesting approval of three utility-scale solarprojects totaling 90 MW. If approved, the resource additions will allow Entergy New Orleans to make significant progress towardsmeeting its voluntary commitment to the City Council to add up to 100 MW of renewable energy resources. The three projects includeconstructing a self-build solar plant in Orleans Parish with an output of 20 MW, acquiring a 50 MW solar facility in WashingtonParish through a build-own-transfer acquisition, and procuring 20 MW of solar power from a project to be built in St. JamesParish through a power purchase agreement. In August 2018 the City Council approved a procedural schedule opening discovery thatwas designed to encourage settlement by December 2018. In December 2018 the City Council advisors requested that Entergy NewOrleans pursue alternative deal structures for the Washington Parish project and attempt to reduce costs for the 20 MW Orleans Parishproject. The City Council approved a motion to allow parties to continue settlement discussions until April 2019.Advanced Metering Infrastructure (AMI)In October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’sdeployment of advanced electric and gas metering infrastructure is in the public interest. Entergy New Orleans proposed to deployadvanced meters that enable two-way data communication; design and build a secure and reliable network to support suchcommunications; and implement support systems. AMI is intended to serve as the foundation of Entergy New Orleans’s modernizedpower grid. The filing included an estimate of implementation costs for AMI of $75 million. The filing identified a number ofquantified and unquantified benefits, and Entergy New Orleans provided a cost/benefit analysis showing that its combined electric andgas AMI deployment is expected to produce a nominal net benefit to customers of $101 million. Entergy New Orleans also sought tocontinue to include in rate base the remaining book value, approximately $21 million at December 31, 2015, of the existing electricmeters and also to depreciate those assets using current depreciation rates. Entergy New Orleans proposed a 15-year depreciable lifefor the new advanced meters, the three-year deployment of which began in 2019. Deployment of the information technologyinfrastructure began in 2017 and deployment of the communications network began in 2018. Entergy New Orleans proposed torecover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019through 2022. The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to certainmodifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In January2018 a settlement was reached between the City Council’s advisors and Entergy New Orleans. In February 2018 the City Councilapproved the settlement, which deferred cost recovery to the 2018 Entergy New Orleans rate case, but also stated that an adjustment for2018-2019 AMI costs can be filed in the rate case and that, for all subsequent AMI costs, the mechanism to be approved in the 2018rate case will allow for the timely recovery of such costs. In April 2018 the City Council adopted a resolution directing Entergy NewOrleans to explore the options for accelerating the deployment of AMI. In June 2018 the City Council approved a one-year accelerationof AMI in its service area for an incremental $4.4 million.Sources of CapitalEntergy New Orleans’s sources to meet its capital requirements include:•internally generated funds;•cash on hand;•debt and preferred membership interest issuances;•capital contributions; and•bank financing under new or existing facilities.Entergy New Orleans may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions andinterest rates are favorable.390Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisAll debt and common and preferred membership interest issuances by Entergy New Orleans require prior regulatory approval.Debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements. Entergy New Orleans hassufficient capacity under these tests to meet its foreseeable capital needs.Entergy New Orleans’s receivables from the money pool were as follows as of December 31 for each of the following years.2018 2017 2016 2015(In Thousands)$22,016 $12,723 $14,215 $15,794See Note 4 to the financial statements for a description of the money pool.Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in November 2021. The creditfacility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility.As of December 31, 2018, there were no cash borrowings and a $0.8 million letter of credit was outstanding under the facility. Inaddition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligationsto MISO. As of December 31, 2018, a $2 million letter of credit was outstanding under Entergy New Orleans’s letter of credit facility.See Note 4 to the financial statements for additional discussion of the credit facilities.Entergy New Orleans obtained authorization from the FERC through October 2019 for short-term borrowings not to exceed anaggregate amount of $150 million at any time outstanding and long-term borrowings and securities issuances. See Note 4 to thefinancial statements for further discussion of Entergy New Orleans’s short-term borrowing limits. The long-term securities issuances ofEntergy New Orleans are limited to amounts authorized not only by the FERC, but also by the City Council, and the current CityCouncil authorization extends through October 2019.State and Local Rate RegulationThe rates that Entergy New Orleans charges for electricity and natural gas significantly influence its financial position, results ofoperations, and liquidity. Entergy New Orleans is regulated and the rates charged to its customers are determined in regulatoryproceedings. A governmental agency, the City Council, is primarily responsible for approval of the rates charged to customers.Retail RatesAs a provision of the settlement agreement approved by the City Council in May 2015 providing for the transfer from EntergyLouisiana to Entergy New Orleans of certain assets that supported the provision of service to Entergy Louisiana’s customers in Algiers,it was agreed that, with limited exceptions, no action may be taken with respect to Entergy New Orleans’s base rates until rates areimplemented from a base rate case that must be filed for its electric and gas operations in 2018. This provision eliminated the formularate plan applicable to Algiers operations. The limited exceptions included continued implementation of the then-remaining two yearsof the four-year phased-in rate increase for the Algiers area and certain exceptional cost increases or decreases in the base revenuerequirement. An additional provision of the settlement agreement allowed for continued recovery of the revenue requirement associatedwith the capacity and energy from Ninemile 6 received by Entergy New Orleans under a power purchase agreement with EntergyLouisiana (Algiers PPA). The settlement authorized Entergy New Orleans to recover the remaining revenue requirement related to theAlgiers PPA through base rates charged to Algiers customers. The settlement also provided for continued implementation of the AlgiersMISO recovery rider.In addition to the Algiers PPA, Entergy New Orleans has a separate power purchase agreement with Entergy Louisiana for 20%of the capacity and energy from Ninemile 6 (Ninemile PPA), which commenced operation in391Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisDecember 2014. Initially, recovery of the non-fuel costs associated with the Ninemile PPA was authorized through a special Ninemile 6rider billed only to Entergy New Orleans customers outside of Algiers.In August 2015, Entergy New Orleans filed an application with the City Council seeking authorization to proceed with thepurchase of Union Power Block 1, with an expected base purchase price of approximately $237 million, subject to adjustments, andseeking approval of the recovery of the associated costs. In November 2015 the City Council issued written resolutions and an orderapproving an agreement in principle between Entergy New Orleans and City Council advisors providing that the purchase of UnionPower Block 1 and related assets by Entergy New Orleans is prudent and in the public interest. The City Council authorized expansionof the terms of the purchased power and capacity acquisition cost recovery rider to recover the non-fuel purchased power expense fromNinemile 6, the revenue requirement associated with the purchase of Power Block 1 of the Union Power Station, and a credit tocustomers of $400 thousand monthly beginning June 2016 in recognition of the decrease in other operation and maintenance expensesthat would result with the deactivation of Michoud Units 2 and 3. In March 2016, Entergy New Orleans purchased Power Block 1 of theUnion Power Station for approximately $237 million and initiated recovery of these costs with March 2016 bills. In July 2016, EntergyNew Orleans and the City Council Utility Committee agreed to a temporary increase in the Michoud credit to customers to a total of$1.4 million monthly for August 2016 through December 2016.A 2008 rate case settlement included $3.1 million per year in electric rates to fund the Energy Smart energy efficiencyprograms. The rate settlement provided an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the CityCouncil and provided a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energysavings generated from the energy efficiency programs. In January 2015 the City Council approved funding for the Energy Smartprogram from April 2015 through March 2017 using the remainder of the approximately $12.8 million of 2014 rough production costequalization funds, with any remaining costs being recovered through the fuel adjustment clause. This funding methodology wasmodified in November 2015 when the City Council directed Entergy New Orleans to use a combination of guaranteed customer savingsrelated to a prior agreement with the City Council and rough production cost equalization funds to cover program costs prior torecovering any costs through the fuel adjustment clause. In April 2017 the City Council approved an implementation plan for theEnergy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported forEnergy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy SmartAlgiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for thelegacy customers. In September 2017, Entergy New Orleans filed a supplemental plan and proposed several options for an interim costrecovery mechanism necessary to recover program costs during the period between when existing funds directed to Energy Smartprograms are depleted and when new rates from the 2018 combined rate case, which includes a cost recovery mechanism for EnergySmart funding, take effect (estimated to be August 2019). In December 2017 the City Council approved an energy efficiency costrecovery rider as an interim funding mechanism for Energy Smart, subject to verification that no additional funding sources exist. InJune 2018 the City Council also approved a resolution recommending that Entergy New Orleans allocate approximately $13.5 millionof benefits resulting from the Tax Act to Energy Smart. Entergy New Orleans is seeking approval of a permanent and stable source offunding for Energy Smart as part of its base rate case filed in September 2018.In September 2018, Entergy New Orleans filed an electric and gas base rate case with the City Council. The filing requests a10.5% return on equity for electric operations with opportunity to earn a 10.75% return on equity through a performance adderprovision of the electric formula rate plan in subsequent years under a formula rate plan, and requests a 10.75% return on equity for gasoperations. The proposed electric rates in the revised filing reflect a net reduction of $20.3 million. The reduction in electric ratesincludes a base rate increase of $135.2 million, of which $131.5 million is associated with moving costs currently collected through fueland other riders into base rates, plus a request for an advanced metering surcharge to recover $7.1 million associated with advancedmetering infrastructure, offset by a net decrease of $31.1 million related to fuel and other riders. The filing also includes a proposed gasrate decrease of $142 thousand. Entergy New Orleans’s rates reflect the inclusion of federal income tax reductions due to the Tax Actand the provisions of a previously-approved agreement in principle determining how the benefits of the392Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisTax Act would flow. Entergy New Orleans included cost of service studies for electric and gas operations for the twelve months endingDecember 31, 2017 and the projected twelve months ending December 31, 2018. In addition, Entergy New Orleans included capitaladditions expected to be placed into service for the period through December 31, 2019. Entergy New Orleans’s request for a change inrates is based on the projected twelve months ending December 31, 2018.The filing’s major provisions include: (1) a new electric rate structure, which realigns the revenue requirement associated withcapacity and long-term service agreement expense from certain existing riders to base revenue, provides for the recovery of the cost ofadvanced metering infrastructure, and partially blends rates for Entergy New Orleans’s customers residing in Algiers with customersresiding in the remainder of Orleans Parish through a three-year phase-in; (2) contemporaneous cost recovery riders for investments inenergy efficiency/demand response, incremental changes in capacity/long-term service agreement costs, grid modernization investment,and gas infrastructure replacement investment; and (3) formula rate plans for both electric and gas operations. In February 2019 theCity Council’s advisors and several intervenors filed testimony in response to Entergy New Orleans’s application. The City Council’sadvisors have recommended, among other things, overall rate reductions of approximately $33 million in electric rates and $3.8 millionin gas rates. Certain intervenors have recommended overall rate reductions of up to approximately $49 million in electric rates and $5million in gas rates. The procedural schedule calls for an evidentiary hearing to be held in June 2019.Internal RestructuringIn July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuringthat would result in the transfer of substantially all of the assets and operations of Entergy New Orleans, Inc. to a new entity, whichwould ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolutionapproving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certainintervenors. Pursuant to the agreement in principle, Entergy New Orleans would credit retail customers $10 million in 2017, $1.4million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transactioncloses until such time as new base rates go into effect as a result of the then-anticipated 2018 base rate case (which has subsequentlybeen filed). Entergy New Orleans began crediting retail customers in June 2017. In June 2017 the FERC approved the transaction and,pursuant to the agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each ofthe years 2018, 2019, and 2020.In November 2017, Entergy New Orleans undertook a multi-step restructuring, including the following:•Entergy New Orleans, Inc. redeemed its outstanding preferred stock at a price of approximately $21 million, which included acall premium of approximately $819,000, plus any accumulated and unpaid dividends.•Entergy New Orleans, Inc. converted from a Louisiana corporation to a Texas corporation.•Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans, Inc. allocated substantially all of its assets to anew subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), andEntergy New Orleans Power assumed substantially all of the liabilities of Entergy New Orleans, Inc. in a transaction regarded asa merger under the TXBOC. Entergy New Orleans, Inc. remained in existence and held the membership interests in EntergyNew Orleans Power.•Entergy New Orleans, Inc. contributed the membership interests in Entergy New Orleans Power to an affiliate (Entergy UtilityHolding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of thecontribution, Entergy New Orleans Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.In December 2017, Entergy New Orleans, Inc. changed its name to Entergy Utility Group, Inc., and Entergy New Orleans Power thenchanged its name to Entergy New Orleans, LLC. Entergy New Orleans, LLC holds substantially all of the assets, and has assumedsubstantially all of the liabilities, of Entergy New Orleans, Inc. The restructuring was accounted for as a transaction between entitiesunder common control.393Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisFuel and Purchased Power Cost RecoveryEntergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel andpurchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fueland purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billingmonth, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.Show Cause OrderIn July 2016 the City Council approved the issuance of a show cause order, which directed Entergy New Orleans to make afiling on or before September 29, 2016 to demonstrate the reasonableness of its actions or positions with regard to certain issues in fourexisting dockets that relate to Entergy New Orleans’s: (i) storm hardening proposal; (ii) 2015 integrated resource plan; (iii) gasinfrastructure rebuild proposal; and (iv) proposed sizing of the New Orleans Power Station and its community outreach prior to thefiling. In September 2016, Entergy New Orleans filed its response to the City Council’s show cause order. The City Council has notestablished any further procedural schedule with regard to this proceeding.Reliability InvestigationIn August 2017 the City Council established a docket to investigate the reliability of the Entergy New Orleans distributionsystem and to consider implementing certain reliability standards and possible financial penalties for not meeting any such standards. InApril 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in themanagement and maintenance of the reliability of its distribution system. The resolution also called for Entergy New Orleans to file arevised reliability plan addressing the current state of its distribution system and proposing remedial measures for increasing reliability.In June 2018, Entergy New Orleans filed its response to the City Council’s resolution regarding the prudence of its management andmaintenance of the reliability of its distribution system. In July 2018, Entergy New Orleans filed its revised reliability plan discussingthe various reliability programs that it uses to improve distribution system reliability and discussing generally the positive effect thatadvanced meter deployment and grid modernization can have on future reliability. Entergy New Orleans has retained a nationalconsulting firm with expertise in distribution system reliability to conduct a review of Entergy New Orleans’s distribution systemreliability-related practices and procedures and to provide recommendations for improving distribution system reliability. The reportwas filed with the City Council in October 2018. The City Council also approved a resolution that opens a prudence investigation intowhether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should beimposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation and asserting that it had beenprudent in managing system reliability.Federal RegulationSee the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation. Nuclear MattersSee the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor a discussion of nuclear matters.394Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisEnvironmental RisksEntergy New Orleans’s facilities and operations are subject to regulation by various governmental authorities having jurisdictionover air quality, water quality, control of toxic substances and hazardous solid wastes, and other environmental matters. Managementbelieves that Entergy New Orleans is in substantial compliance with environmental regulations currently applicable to its facilities andoperations, with reference to possible exceptions noted in “Regulation of Entergy’s Business - Environmental Regulation” in Part I,Item 1. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.Critical Accounting EstimatesThe preparation of Entergy New Orleans’s financial statements in conformity with generally accepted accounting principlesrequires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effecton reported financial position, results of operations, and cash flows. Management has identified the following accounting policies andestimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is thepotential for future changes in the assumptions and measurements that could produce estimates that would have a material impact onthe presentation of Entergy New Orleans’s financial position or results of operations.Utility Regulatory AccountingSee “Utility Regulatory Accounting” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.Impairment of Long-lived Assets and Trust Fund InvestmentsSee “Impairment of Long-lived Assets and Trust Fund Investments” in the “Critical Accounting Estimates” section ofEntergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated withthe impairment of long-lived assets.Taxation and Uncertain Tax PositionsSee “Taxation and Uncertain Tax Positions” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for further discussion.Qualified Pension and Other Postretirement BenefitsEntergy New Orleans’s qualified pension and other postretirement reported costs, as described in Note 11 to the financialstatements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and variousactuarial calculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” inthe “Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance ofthe assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.Cost SensitivityThe following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes incertain actuarial assumptions (dollars in thousands).395Table of ContentsEntergy New Orleans, LLC and SubsidiariesManagement’s Financial Discussion and AnalysisActuarial Assumption Change in Assumption Impact on 2019 QualifiedPension Cost Impact on 2018 ProjectedQualified Benefit Obligation Increase/(Decrease) Discount rate (0.25%) $306 $4,917Rate of return on plan assets (0.25%) $372 $—Rate of increase in compensation 0.25% $162 $746The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation tochanges in certain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019Postretirement Benefit Cost Impact on 2018Accumulated PostretirementBenefit Obligation Increase/(Decrease) Discount rate (0.25%) ($5) $1,036Health care cost trend 0.25% $44 $788Each fluctuation above assumes that the other components of the calculation are held constant.Costs and FundingTotal qualified pension cost for Entergy New Orleans in 2018 was $5.8 million. Entergy New Orleans anticipates 2019 qualifiedpension cost to be $5.1 million. Entergy New Orleans contributed $7.3 million to its pension plans in 2018 and estimates 2019 pensioncontributions will be approximately $1.8 million, although the 2019 required pension contributions will be known with more certaintywhen the January 1, 2019 valuations are completed, which is expected by April 1, 2019.Total postretirement health care and life insurance benefit income for Entergy New Orleans in 2018 was $3.7 million. EntergyNew Orleans expects 2019 postretirement health care and life insurance benefit income of approximately $3.6 million. Entergy NewOrleans contributed $3.8 million to its other postretirement plans in 2018 and estimates 2019 contributions will be approximately $2.1million.Federal Healthcare LegislationSee “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical AccountingEstimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion ofFederal Healthcare Legislation.Other ContingenciesSee “Other Contingencies” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and otherrisks.New Accounting PronouncementsSee “New Accounting Pronouncements” section of Note 1 to the financial statements for a discussion of new accountingpronouncements.396Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the members and Board of Directors ofEntergy New Orleans, LLC and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Entergy New Orleans, LLC and Subsidiaries (the “Company”) as ofDecember 31, 2018 and 2017, the related consolidated statements of income, cash flows, and changes in member’s equity (pages 398through 402 and applicable items in pages 53 through 237), for each of the three years in the period ended December 31, 2018, and therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all materialrespects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flowsfor each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in theUnited States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part ofour audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Company’s auditor since 2001.397Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING REVENUES Electric $624,733 $631,744 $586,820Natural gas 92,657 84,326 78,643TOTAL 717,390 716,070 665,463 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 114,787 111,082 40,489Purchased power 270,634 282,178 299,551Other operation and maintenance 124,293 107,977 116,457Taxes other than income taxes 56,141 54,590 48,078Depreciation and amortization 55,930 52,945 51,737Other regulatory charges - net 21,413 10,889 8,258TOTAL 643,198 619,661 564,570 OPERATING INCOME 74,192 96,409 100,893 OTHER INCOME Allowance for equity funds used during construction 5,941 2,418 1,178Interest and investment income 604 707 256Miscellaneous - net (10,444) (1,269) (4,158)TOTAL (3,899) 1,856 (2,724) INTEREST EXPENSE Interest expense 21,772 21,281 21,061Allowance for borrowed funds used during construction (2,195) (847) (446)TOTAL 19,577 20,434 20,615 INCOME BEFORE INCOME TAXES 50,716 77,831 77,554 Income taxes (2,436) 33,278 28,705 NET INCOME 53,152 44,553 48,849 Preferred dividend requirements and other — 841 965 EARNINGS APPLICABLE TO COMMON EQUITY $53,152 $43,712 $47,884 See Notes to Financial Statements. 398Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands)OPERATING ACTIVITIES Net income $53,152 $44,553 $48,849Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation and amortization 55,930 52,945 51,737Deferred income taxes, investment tax credits, and non-current taxes accrued 24,548 64,036 140,283Changes in assets and liabilities: Receivables 15,724 (18,058) (3,888)Fuel inventory 357 (49) 71Accounts payable (385) 1,874 15,434Prepaid taxes and taxes accrued 30,547 (22,100) (1,685)Interest accrued 879 44 534Deferred fuel costs (6,486) 12,592 (33,839)Other working capital accounts 4,146 (2,711) 4,165Provisions for estimated losses 1,511 (3,430) 4,326Other regulatory assets 21,637 16,673 (2,784)Other regulatory liabilities (28,459) 110,147 (3,997)Deferred tax rate change recognized as regulatory liability/asset — (111,170) —Pension and other postretirement liabilities (15,134) (15,994) (6,859)Other assets and liabilities 13,811 (1,555) (7,136)Net cash flow provided by operating activities 171,778 127,797 205,211INVESTING ACTIVITIES Construction expenditures (202,186) (115,584) (90,512)Allowance for equity funds used during construction 5,941 2,418 1,178Payment for purchase of plant — — (237,335)Investments in affiliates — — (38)Changes in money pool receivable - net (9,293) 1,492 1,579Payments to storm reserve escrow account (1,311) (597) (438)Receipts from storm reserve escrow account 3 2,488 3Changes in securitization account (770) 283 2,882Net cash flow used in investing activities (207,616) (109,500) (322,681)FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 59,234 — 240,604Retirement of long-term debt (11,042) (10,600) (132,526)Repayment of long-term payable due to associated company (2,077) (2,104) (4,973)Redemption of preferred stock — (20,599) —Capital contributions from parent — 20,000 47,750Distributions/dividends paid: Common equity (23,750) (74,250) (18,720)Preferred stock — (1,083) (965)Other 409 12 492Net cash flow provided by (used in) financing activities 22,774 (88,624) 131,662Net increase (decrease) in cash and cash equivalents (13,064) (70,327) 14,192Cash and cash equivalents at beginning of period 32,741 103,068 88,876Cash and cash equivalents at end of period $19,677 $32,741 $103,068SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $19,840 $20,180 $19,317Income taxes ($39,781) ($8,660) ($85,962)See Notes to Financial Statements. 399Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents Cash $26 $30Temporary cash investments 19,651 32,711Total cash and cash equivalents 19,677 32,741Securitization recovery trust account 2,224 1,455Accounts receivable: Customer 43,890 51,006Allowance for doubtful accounts (3,222) (3,057)Associated companies 27,938 22,976Other 4,090 6,471Accrued unbilled revenues 18,907 20,638Total accounts receivable 91,603 98,034Fuel inventory - at average cost 1,533 1,890Materials and supplies - at average cost 12,133 10,381Prepaid taxes — 26,479Prepayments and other 6,905 8,030TOTAL 134,075179,010 OTHER PROPERTY AND INVESTMENTS Non-utility property at cost (less accumulated depreciation) 1,016 1,016Storm reserve escrow account 80,853 79,546Other — 2,373TOTAL 81,869 82,935 UTILITY PLANT Electric 1,364,091 1,302,235Natural gas 284,728 261,263Construction work in progress 146,668 46,993TOTAL UTILITY PLANT 1,795,487 1,610,491Less - accumulated depreciation and amortization 670,135 631,178UTILITY PLANT - NET 1,125,352 979,313 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Deferred fuel costs 4,080 4,080Other regulatory assets (includes securitization property of $60,453 as of December 31, 2018 and $72,095 as ofDecember 31, 2017) 229,796 251,433Other 1,416 1,065TOTAL 235,292 256,578 TOTAL ASSETS $1,576,588 $1,497,836 See Notes to Financial Statements. 400Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands) CURRENT LIABILITIES Payable due to associated company $1,979 $2,077Accounts payable: Associated companies 43,416 47,472Other 36,686 29,777Customer deposits 28,667 28,442Taxes accrued 4,068 —Interest accrued 6,366 5,487Deferred fuel costs 1,288 7,774Current portion of unprotected excess accumulated deferred income taxes 25,301 —Other 9,521 7,351TOTAL CURRENT LIABILITIES 157,292 128,380 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 323,595 283,302Accumulated deferred investment tax credits 2,219 2,323Regulatory liability for income taxes - net 60,249 119,259Asset retirement cost liabilities 3,291 3,076Accumulated provisions 86,594 85,083Pension and other postretirement liabilities 5,626 20,755Long-term debt (includes securitization bonds of $63,620 as of December 31, 2018 and $74,419 as of December31, 2017) 467,358 418,447Long-term payable due to associated company 14,367 16,346Other 11,047 5,317TOTAL NON-CURRENT LIABILITIES 974,346 953,908 Commitments and Contingencies EQUITY Member's equity 444,950 415,548TOTAL 444,950 415,548 TOTAL LIABILITIES AND EQUITY $1,576,588 $1,497,836 See Notes to Financial Statements. 401Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Member’s Equity (In Thousands) Balance at December 31, 2015$350,032Net income48,849Capital contributions from parent47,750Common equity distributions(18,720)Preferred stock dividends(965)Balance at December 31, 2016$426,946Net income44,553Capital contributions from parent20,000Common equity distributions(74,250)Preferred stock dividends(841)Other(860)Balance at December 31, 2017$415,548Net income53,152Common equity distributions(23,750)Balance at December 31, 2018$444,950 See Notes to Financial Statements. 402Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESSELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (In Thousands) Operating revenues$717,390 $716,070 $665,463 $671,446 $735,192Net income$53,152 $44,553 $48,849 $44,925 $31,030Total assets$1,576,588 $1,497,836 $1,494,569 $1,215,144 $1,014,916Long-term obligations (a)$481,725 $434,793 $466,670 $357,687 $323,280 (a) Includes long-term debt (including the long-term payable to associated company and excluding currently maturing debt) and preferred stock withoutsinking fund. 2018 2017 2016 2015 2014 (Dollars In Millions) Electric Operating Revenues: Residential$262 $250 $231 $220 $230Commercial217 228 206 186 196Industrial33 36 33 30 33Governmental72 77 69 64 67Total retail584 591 539 500 526Sales for resale: Associated companies— — 30 66 78Non-associated companies30 29 3 — 4Other11 12 15 18 17Total$625 $632 $587 $584 $625 Billed Electric Energy Sales (GWh): Residential2,401 2,155 2,231 2,301 2,262Commercial2,270 2,248 2,268 2,257 2,181Industrial448 429 441 463 455Governmental795 790 794 825 783Total retail5,914 5,622 5,734 5,846 5,681Sales for resale: Associated companies— — 1,071 1,644 1,379Non-associated companies1,484 1,703 141 11 18Total7,398 7,325 6,946 7,501 7,078 403Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISResults of OperationsNet Income2018 Compared to 2017Net income increased $86.1 million primarily due to a lower effective income tax rate and higher net revenue, partially offset byhigher depreciation and amortization expenses and higher other operation and maintenance expenses.2017 Compared to 2016Net income decreased $31.4 million primarily due to lower net revenue, higher depreciation and amortization expenses, higherother operation and maintenance expenses, and higher taxes other than income taxes.Net Revenue2018 Compared to 2017Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2018 to 2017. Amount (In Millions) 2017 net revenue$626.8Volume/weather26.4Purchased power capacity17.9Retail electric price(0.1)Return of unprotected excess accumulated deferredincome taxes to customers(14.6)Other(1.0)2018 net revenue$655.4The volume/weather variance is primarily due to an increase of 1,162 GWh, or 6%, in billed electricity usage, including theeffect of more favorable weather on residential sales and an increase in industrial usage. The increase in industrial usage is primarilydue to new customers in the chemicals and wood products industries and an increase in demand from cogeneration customers and mid-size to small customers.The purchased power capacity variance is primarily due to decreased purchased power capacity costs under Entergy Texas’spurchased power agreements with Entergy Louisiana.The retail electric price variance is primarily due to a regulatory charge of $25.4 million recorded in the fourth quarter 2018 toreflect the effects of a provision in the settlement reached in the 2018 rate case proceeding, as approved by the PUCT, to return thebenefits of the lower federal income tax rate in 2018 to customers. Partially offsetting the decrease was an annual base rate increase of$53.2 million effective October 2018 and an increase in the distribution cost recovery factor rider rate in September 2017, each asapproved by the PUCT. See Note 2 to the financial statements for further discussion of the rate case and the distribution cost recoveryfactor rider filings.404Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisThe return of unprotected excess accumulated deferred income taxes to customers resulted from the return in the fourth quarter2018 of unprotected excess accumulated deferred income taxes through a rider effective October 2018. There is no effect on netincome as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements forfurther discussion of regulatory activity regarding the Tax Cuts and Jobs Act.2017 Compared to 2016Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchasedpower expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2017 to 2016. Amount (In Millions) 2016 net revenue$644.2Net wholesale revenue(35.1)Purchased power capacity(5.9)Transmission revenue(5.4)Reserve equalization5.6Retail electric price19.0Other4.42017 net revenue$626.8The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of thepurchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.The purchased power capacity variance is primarily due to increased expenses due to capacity cost changes for ongoingpurchased power capacity contracts.The transmission revenue variance is primarily due to a decrease in the amount of transmission revenues allocated by MISO.The reserve equalization variance is due to the absence of reserve equalization expenses in 2017 as a result of Entergy Texas’sexit from the System Agreement in August 2016. See Note 2 to the financial statements for a discussion of the System Agreement.The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider inSeptember 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, each as approved by the PUCT. SeeNote 2 to the financial statements for further discussion of the transmission cost recovery factor rider filing.Other Income Statement Variances2018 Compared to 2017Other operation and maintenance expenses increased primarily due to: •the write-off of $6 million in capitalized skylining tree hazard costs as a result of the settlement of the rate case proceeding. SeeNote 2 to the financial statements for further discussion of the rate case proceeding;405Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and Analysis•an increase of $3.5 million in energy efficiency costs primarily due to the timing of recovery from customers; and•an increase of $1.4 million in transmission expenses primarily due to higher labor and contract costs to support industrialcustomers.The increase was partially offset by a decrease of $2.8 million in compensation and benefits costs primarily due to lower incentive-based compensation accruals in 2018 as compared to 2017 and a gain of $2.1 million on the sale of assets in 2018.Depreciation and amortization expenses increased primarily due to additions to plant in service.2017 Compared to 2016Other operation and maintenance expenses increased primarily due to:•an increase of $5.1 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs;•an increase of $4.3 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plantoutages in 2017 as compared to 2016; and•an increase of $2.8 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in2017 as compared to 2016.The increase was partially offset by a decrease of $4.5 million due to the absence of transmission equalization expenses, as allocatedunder the System Agreement, as a result of Entergy Texas’s exit from the System Agreement in August 2016.Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments anda true-up to the sales and use tax accruals recorded in 2016 resulting from an audit settlement.Depreciation and amortization expenses increased primarily due to additions to plant in service.Income TaxesThe effective income tax rates for 2018, 2017, and 2016 were (19.3%), 38.9%, and 37.0%, respectively. The difference in theeffective income tax rate of (19.3%) versus the federal statutory rate of 21% for 2018 was primarily due to the flow through andamortization of excess accumulated deferred income taxes, along with the effect on income tax expense of the resolution of EntergyTexas’s 2018 base rate proceeding. See Note 3 to the financial statements for a reconciliation of the federal statutory rates of 21% for2018 and 35% for 2017 and 2016 to the effective income tax rates.Income Tax LegislationSee the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion andAnalysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to thefinancial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of operations and financialposition, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statementsdiscusses the regulatory proceedings that have considered the effects of the Act.406Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisLiquidity and Capital ResourcesCash FlowCash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Thousands)Cash and cash equivalents at beginning of period$115,513 $6,181 $2,182 Net cash provided by (used in): Operating activities331,753 301,396 306,601Investing activities(395,973) (383,176) (330,191)Financing activities(51,237) 191,112 27,589Net increase (decrease) in cash and cash equivalents(115,457) 109,332 3,999 Cash and cash equivalents at end of period$56 $115,513 $6,181Operating ActivitiesNet cash flow provided by operating activities increased $30.4 million in 2018 primarily due to:•the receipt of $33.2 million from Entergy Arkansas as a result of a compliance filing made in response to the FERC’s October2018 order in the Entergy Arkansas opportunity sales proceeding. See Note 2 to the financial statements for further discussionof the Entergy Arkansas opportunity sales proceeding;•the effect of favorable weather on billed sales;•a decrease of $18.4 million in storm spending in 2018 as compared to 2017 primarily as a result of Hurricane Harvey in 2017;and•a decrease of $6.1 million in pension contributions in 2018 as compared to 2017. See “Critical Accounting Estimates” belowand in Note 11 to the financial statements for a discussion of qualified pension and other postretirement benefits funding.The increase was partially offset by:•income tax payments of $20.8 million in 2018 compared to income tax refunds of $21.1 million in 2017. The income taxpayments in 2018 and the income tax refunds in 2017 were in accordance with an intercompany income tax allocationagreement. The income tax payments in 2018 primarily resulted from the settlement of the 2012-2013 IRS audit. The incometax refunds in 2017 primarily resulted from deductible temporary differences;•the timing of recovery of fuel and purchased power costs; and•the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements forfurther discussion of regulatory activity regarding the Tax Cuts and Jobs Act.Net cash flow provided by operating activities decreased $5.2 million in 2017 primarily due to lower net income, the timing ofrecovery of fuel and purchased power costs, and an increase of $13.7 million in storm spending primarily as a result of HurricaneHarvey. The decrease was partially offset by income tax refunds of $21.1 million in 2017 compared to income tax payments of $28.5million in 2016. Entergy Texas had income tax refunds in 2017 and income tax payments in 2016 in accordance with an intercompanyincome tax allocation agreement. The income tax refunds in 2017 primarily resulted from deductible temporary differences. Theincome tax payments in 2016 resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit. See Note3 to the financial statements for a discussion of the income tax audit.407Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisInvesting ActivitiesNet cash flow used in investing activities increased $12.8 million in 2018 primarily due to an increase of $110.1 million infossil-fueled generation construction expenditures primarily due to the increase in spending on the Montgomery County Power Stationand an increase of $13.7 million in transmission construction expenditures primarily due to a higher scope of work performed in 2018as compared to 2017. The increase was partially offset by a decrease of $24.6 million in distribution construction expendituresprimarily due to the decreased storm spending in 2018 as compared to 2017 primarily as a result of Hurricane Harvey and money poolactivity.Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable fromthe money pool decreased by $44.9 million in 2018 compared to increasing by $44.2 million in 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings. Net cash flow used in investing activities increased $53 million in 2017 primarily due to:•money pool activity;•an increase of $34.9 million in distribution construction expenditures primarily due to increased storm spending primarily as aresult of Hurricane Harvey and spending on digital technology improvements within the customer contact centers;•an increase of $24.4 million in fossil-fueled generation construction expenditures primarily due to a higher scope of workperformed in 2017 as compared to 2016; and•an increase of $8.5 million in spending on advanced metering infrastructure.The increase was partially offset by a decrease of $51.7 million in transmission construction expenditures primarily due to a lowerscope of work performed in 2017 as compared to 2016.Increases in Entergy Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas’s receivable from themoney pool increased by $44.2 million in 2017 compared to increasing by $0.7 million in 2016. Financing ActivitiesEntergy Texas’s financing activities used $51.2 million of cash in 2018 compared to providing $191.1 million of cash in 2017primarily due to the issuance of $150 million of 3.45% Series first mortgage bonds in November 2017 and a $115 million capitalcontribution received from Entergy Corporation in December 2017 in anticipation of upcoming construction expenditures, partiallyoffset by money pool activity.Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the moneypool increased by $22.4 million in 2018. Net cash flow provided by financing activities increased $163.5 million in 2017 primarily due to:•a $115 million capital contribution received from Entergy Corporation in December 2017 in anticipation of upcomingconstruction expenditures;•the issuance of $150 million of 3.45% Series first mortgage bonds in November 2017 compared to the issuance of $125 millionof 2.55% Series first mortgage bonds in March 2016; and•money pool activity.Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pooldecreased by $22.1 million in 2016.408Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisCapital StructureEntergy Texas’s debt to capital ratio is balanced between equity and debt, as shown in the following table. The decrease in thedebt to capital ratio for Entergy Texas is primarily due to the increase in retained earnings. December 31, 2018 December 31, 2017Debt to capital51.6% 55.7%Effect of excluding the securitization bonds(5.2%) (6.3%)Debt to capital, excluding securitization bonds (a)46.4% 49.4%Effect of subtracting cash—% (2.5%)Net debt to net capital, excluding securitization bonds (a)46.4% 46.9%(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.Net debt consists of debt less cash and cash equivalents. Debt consists of long-term debt, including the currently maturingportion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas usesthe debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful informationto its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse toEntergy Texas, as more fully described in Note 5 to the financial statements. Entergy Texas also uses the net debt to net capital ratioexcluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors andcreditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position thatcould not be readily satisfied by cash and cash equivalents on hand.Entergy Texas seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost ofcapital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operatingcash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, inappropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support plannedinvestments, Entergy Texas may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. Inaddition, Entergy Texas may receive equity contributions to maintain the targeted capital structure for certain circumstances such aslarge transactions that would materially alter the capital structure if financed entirely with debt and reduced dividends.Uses of CapitalEntergy Texas requires capital resources for:•construction and other capital investments;•debt maturities or retirements;•working capital purposes, including the financing of fuel and purchased power costs; and•dividend and interest payments.409Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisFollowing are the amounts of Entergy Texas’s planned construction and other capital investments. 2019 2020 2021 (In Millions)Planned construction and capital investment: Generation$435 $260 $115Transmission295 195 100Distribution155 170 255Utility Support60 35 25Total$945 $660 $495Following are the amounts of Entergy Texas’s existing debt and lease obligations (includes estimated interest payments) andother purchase obligations. 2019 2020-2021 2022-2023 After 2023 Total (In Millions)Long-term debt (a)$626 $426 $107 $1,143 $2,302Operating leases (b)$5 $8 $4 $3 $20Purchase obligations (c)$277 $491 $498 $1,282 $2,548(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations.(c)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. For Entergy Texas, it primarily includes unconditional fuel and purchased power obligations.In addition to the contractual obligations given above, Entergy Texas expects to contribute approximately $1.6 million to itsqualified pension plans and approximately $56 thousand to other postretirement health care and life insurance plans in 2019, althoughthe 2019 required pension contributions will be known with more certainty when the January 1, 2019 valuations are completed, whichis expected by April 1, 2019. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below fora discussion of qualified pension and other postretirement benefits funding.Also in addition to the contractual obligations, Entergy Texas has $14.6 million of unrecognized tax benefits and interest net ofunused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due touncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional informationregarding unrecognized tax benefits.In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Texasincludes specific investments such as the Montgomery County Power Station; transmission projects to enhance reliability, reducecongestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, includingadvanced meters and related investments; system improvements; software and security; and other investments. Estimated capitalexpenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints andrequirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes inproject plans, and the ability to access capital. Management provides more information on long-term debt in Note 5 to the financialstatements.As a wholly-owned subsidiary, Entergy Texas dividends its earnings to Entergy Corporation at a percentage determinedmonthly. 410Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisMontgomery County Power StationIn October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience andnecessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cyclegenerating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of theMontgomery County Power Station is $937 million, including approximately $111 million of transmission interconnection and networkupgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a reportaffirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process thatshowed no undue preference to any proposal. In June 2017 parties to the proceeding filed an unopposed stipulation and settlementagreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for MontgomeryCounty Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Transmissioninterconnection and network upgrades and other related costs are not subject to the $831 million cap. In July 2017 the PUCT approvedthe stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.Advanced Metering Infrastructure (AMI)In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas anddirects that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed anapplication seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replaceexisting meters with advanced meters that enable two-way data communication; design and build a secure and reliable network tosupport such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’smodernized power grid. The filing included an estimate of implementation costs for AMI of $132 million. The filing identified anumber of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominalnet operational cost savings to customers of $33 million. Entergy Texas also sought to continue to include in rate base the remainingbook value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment andalso to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the newadvanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff torecover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters.Further, Entergy Texas sought approval of fees that would be charged to customers who choose to opt out of receiving service throughan advanced meter and instead receive electric service with a non-standard meter. In October 2017, Entergy Texas and other partiesentered into and filed an unopposed stipulation and settlement agreement, permitting deployment of AMI with limited modifications.The PUCT approved the stipulation and settlement agreement in December 2017. Entergy Texas implemented the AMI surcharge tariffbeginning with January 2018 bills. As of December 31, 2018, Entergy Texas has a regulatory liability related to the collection of thesurcharge from customers. Consistent with the approval, deployment of the communications network began in 2018 and deployment ofthe advanced meters will begin in March 2019. Entergy Texas expects to recover the remaining net book value of its existing metersthrough a regulatory asset to be amortized at current depreciation rates.Sources of CapitalEntergy Texas’s sources to meet its capital requirements include:•internally generated funds;•cash on hand;•debt or preferred stock issuances;•capital contributions; and•bank financing under new or existing facilities.Entergy Texas may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions411Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and Analysisand interest and dividend rates are favorable.All debt and common and preferred stock issuances by Entergy Texas require prior regulatory approval. Debt issuances are alsosubject to issuance tests set forth in its bond indenture and other agreements. Entergy Texas has sufficient capacity under these tests tomeet its foreseeable capital needs.Entergy Texas’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the followingyears.2018 2017 2016 2015(In Thousands)($22,389) $44,903 $681 ($22,068)See Note 4 to the financial statements for a description of the money pool.Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in September 2023. The credit facilityincludes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As ofDecember 31, 2018, there were no cash borrowings and $1.3 million of letters of credit outstanding under the credit facility. Inaddition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations toMISO. As of December 31, 2018, a $20.9 million letter of credit was outstanding under Entergy Texas’s letter of credit facility. SeeNote 4 to the financial statements for additional discussion of the credit facilities.Entergy Texas obtained authorizations from the FERC through November 2020 for short-term borrowings, not to exceed anaggregate amount of $200 million at any time outstanding, and long-term borrowings and security issuances. See Note 4 to the financialstatements for further discussion of Entergy Texas’s short-term borrowing limits.In January 2019, Entergy Texas issued $300 million of 4.0% Series first mortgage bonds and $400 million of 4.5% Series firstmortgage bonds due March 2029 and 2039, respectively. Entergy Texas used the proceeds to pay, at maturity, its $500 million of7.125% Series first mortgage bonds due February 2019 and for general corporate purposes.State and Local Rate Regulation and Fuel-Cost RecoveryThe rates that Entergy Texas charges for its services significantly influence its financial position, results of operations, andliquidity. Entergy Texas is regulated and the rates charged to its customers are determined in regulatory proceedings. The PUCT, agovernmental agency, is primarily responsible for approval of the rates charged to customers.Filings with the PUCT2018 Rate CaseIn May 2018, Entergy Texas filed a base rate case with the PUCT seeking an increase in base rates and rider rates ofapproximately $166 million, of which $48 million is associated with moving costs currently being collected through riders into baserates such that the total incremental revenue requirement increase is approximately $118 million. The base rate case was based on a 12-month test year ending December 31, 2017. In addition, Entergy Texas included capital additions placed into service for the period ofApril 1, 2013 through December 31, 2017, as well as a post-test year adjustment to include capital additions placed in service by June30, 2018.In October 2018 the parties filed an unopposed settlement resolving all issues in the proceeding and a motion for interim rateseffective for usage on and after October 17, 2018. The unopposed settlement reflects the following terms: a base rate increase of $53.2million (net of costs realigned from riders), a $25 million refund to reflect the lower federal income tax rate applicable to Entergy Texasfrom January 25, 2018 through the date new rates are implemented, $6 million of capitalized skylining tree hazard costs will not berecovered from customers, $242.5 million of protected412Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and Analysisexcess accumulated deferred income taxes, which includes a tax gross-up, will be returned to customers through base rates under theaverage rate assumption method over the lives of the associated assets, and $185.2 million of unprotected excess accumulated deferredincome taxes, which includes a tax gross-up, will be returned to customers through a rider. The unprotected excess accumulateddeferred income taxes rider will include carrying charges and will be in effect over a period of 12 months for large customers and overa period of four years for other customers. The settlement also provides for the deferral of $24.5 million of costs associated with theremaining book value of the Neches and Sabine 2 plants, previously taken out of service, to be recovered over a ten-year period andthe deferral of $20.5 million of costs associated with Hurricane Harvey to be recovered over a 12-year period, each beginning inOctober 2018. The settlement provides final resolution of all issues in the matter, including those related to the Tax Act. In October2018, the ALJ granted the unopposed motion for interim rates to be effective for service rendered on or after October 17, 2018. InDecember 2018 the PUCT issued an order approving the unopposed settlement.Distribution Cost Recovery Factor (DCRF) RiderIn June 2017, Entergy Texas filed an application to amend its DCRF rider by increasing the total collection from $8.65 millionto approximately $19 million. In July 2017, Entergy Texas, the PUCT staff, and the two other parties in the proceeding entered into anunopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million. InSeptember 2017 the PUCT issued its final order approving the unopposed stipulation and settlement agreement. The amended DCRFrider rates became effective for usage on and after September 1, 2017. DCRF rates were set to zero upon implementation of new baserates on October 17, 2018, as described above in the 2018 base rate case discussion. Transmission Cost Recovery Factor (TCRF) RiderIn September 2015, Entergy Texas filed for a TCRF rider requesting a $13 million increase, incremental to base rates.Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among otherthings, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately$2 million. In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request bereduced by an additional $3.4 million to account for load growth since base rates were last set. In February 2016 a State Office ofAdministrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 million fromEntergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In June 2016 the PUCTindicated that it would take up in a future rulemaking project the issue of whether a load growth adjustment should apply to a TCRF. InJuly 2016 the PUCT issued an order generally accepting the proposal for decision but declining to adjust the TCRF baseline in twoinstances as recommended by the ALJ, which resulted in a total annual allowance of approximately $10.5 million. The PUCT alsoordered its staff and Entergy Texas to track all spare autotransformer transfers going forward so that it could address the appropriateaccounting treatment and prudence of such transfers in Entergy Texas’s next base rate case. Entergy Texas implemented the TCRF riderbeginning with September 2016 bills.In September 2016, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed amended TCRF riderwas designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount included theapproximately $10.5 million annually that Entergy Texas was previously authorized to collect through the TCRF rider, as discussedabove. In December 2016, concurrent with the 2016 fuel reconciliation stipulation and settlement agreement discussed below, EntergyTexas and the PUCT staff reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million. Asdiscussed below, the terms of the two settlements are interdependent. The PUCT approved the settlement and issued a final order inMarch 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.TCRF rates were set to zero upon implementation of new base rates on October 17, 2018, as discussed above in the 2018 base rate casediscussion.413Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisIn December 2018, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The proposed new TCRF rider isdesigned to collect approximately $2.7 million annually from Entergy Texas’s retail customers. The proceeding is currently ongoing atthe PUCT.Fuel and Purchased Power Cost RecoveryEntergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including interest, notrecovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price ofnatural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge orrefund are subject to fuel reconciliation proceedings before the PUCT.In July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers anadditional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs. InOctober 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments berefunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed amotion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in FederalDistrict Court for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision.The pending appeals did not stay the PUCT’s decision. In April 2016, Entergy Texas filed with the PUCT an application to refund tocustomers approximately $56.2 million. The refund resulted from (i) $41.8 million of fuel cost recovery over-collections throughFebruary 2016, (ii) the $10.9 million in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendaryear 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008production costs. In June 2016, Entergy Texas filed an unopposed settlement agreement that added additional over-recovered fuel costsfor the months of March and April 2016. The settlement resulted in a $68 million refund. The ALJ approved the refund on an interimbasis and it was made to most customers over a four-month period beginning with the first billing cycle of July 2016. In July 2016 thePUCT issued an order approving the interim refund. The federal appeal of the PUCT’s January 2016 decision was heard in December2016, and the Federal District Court granted Entergy Texas’s requested relief. In January 2017 the PUCT and an intervenor filedpetitions for appeal to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held beforethe Fifth Circuit in February 2018. In April 2018 the Fifth Circuit reversed the decision of the Federal District Court, reinstating theoriginal PUCT decision. In October 2018, Entergy Texas filed a notice of nonsuit in its appeal to the Travis County District Courtregarding the PUCT’s January 2016 decision.In July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013through March 31, 2016. Under a recent PUCT rule change, a fuel reconciliation is required to be filed at least once every three yearsand outside of a base rate case filing. During the reconciliation period, Entergy Texas incurred approximately $1.77 billion in Texasjurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments.Entergy Texas estimated an over-recovery balance of approximately $19.3 million, including interest, which Entergy Texas requestedauthority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2016. Entergy Texas alsonoted, however, that the estimated $19.3 million over collection was being refunded to customers as a portion of the interim fuel refundbeginning with the first billing cycle of July 2016, discussed above. Entergy Texas also requested a prudence finding for each of thefuel-related contracts and arrangements entered into or modified during the reconciliation period that have not been reviewed by thePUCT in a prior proceeding. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting in a $6million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as ofNovember 30, 2016, to most customers beginning April 2017 through June 2017. This settlement was developed concurrently with thestipulation and settlement agreement in the 2016 transmission cost recovery factor rider amendment discussed above, and the terms andconditions in both settlements are interdependent. The fuel reconciliation settlement was approved by the PUCT in March 2017 and therefunds were made.414Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisIn June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December2016 through April 2017. For most customers, the refunds flowed through bills for the months of July 2017 through September 2017.The fuel refund was approved by the PUCT in August 2017.In December 2017, Entergy Texas filed an application for a fuel refund of approximately $30.5 million for the months of May2017 through October 2017. Also in December 2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers,the refunds flowed through bills January 2018 through March 2018. The fuel refund was approved by the PUCT in March 2018.Federal RegulationSee the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.Nuclear MattersSee the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisfor a discussion of nuclear matters.Industrial and Commercial CustomersEntergy Texas’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular,cogeneration is an option available to a portion of Entergy Texas’s industrial customer base. Entergy Texas responds by working withindustrial and commercial customers and negotiating electric service contracts to provide, under existing rate schedules, competitiverates that match specific customer needs and load profiles. Entergy Texas actively participates in economic development, customerretention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers.Environmental RisksEntergy Texas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction overair quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Managementbelieves that Entergy Texas is in substantial compliance with environmental regulations currently applicable to its facilities andoperations, with reference to possible exceptions noted in “Regulation of Entergy’s Business - Environmental Regulation” in Part I,Item 1. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.Critical Accounting EstimatesThe preparation of Entergy Texas’s financial statements in conformity with generally accepted accounting principles requiresmanagement to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect onreported financial position, results of operations, and cash flows. Management has identified the following accounting policies andestimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and thepotential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on thepresentation of Entergy Texas’s financial position or results of operations.415Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisUtility Regulatory AccountingSee “Utility Regulatory Accounting” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.Impairment of Long-lived Assets and Trust Fund InvestmentsSee “Impairment of Long-lived Assets and Trust Fund Investments” in the “Critical Accounting Estimates” section ofEntergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated withthe impairment of long-lived assets.Taxation and Uncertain Tax PositionsSee “Taxation and Uncertain Tax Positions” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for further discussion.Qualified Pension and Other Postretirement BenefitsEntergy Texas’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements,are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarialcalculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the“Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries’ Management’s Financial Discussion and Analysisfor further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance ofthe assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.Cost SensitivityThe following chart reflects the sensitivity of qualified pension and qualified projected benefit obligation cost to changes incertain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019 QualifiedPension Cost Impact on 2018 QualifiedProjected Benefit Obligation Increase/(Decrease) Discount rate (0.25%) $569 $8,976Rate of return on plan assets (0.25%) $807 $—Rate of increase in compensation 0.25% $308 $1,513The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligationchanges in certain actuarial assumptions (dollars in thousands).Actuarial Assumption Change in Assumption Impact on 2019Postretirement Benefit Cost Impact on 2018Accumulated PostretirementBenefit Obligation Increase/(Decrease) Discount rate (0.25%) ($5) $2,485Health care cost trend 0.25% $117 $2,074Each fluctuation above assumes that the other components of the calculation are held constant.416Table of ContentsEntergy Texas, Inc. and SubsidiariesManagement’s Financial Discussion and AnalysisCosts and FundingTotal qualified pension cost for Entergy Texas in 2018 was $4.2 million. Entergy Texas anticipates 2019 qualified pension costto be $5.7 million. Entergy Texas contributed $10.9 million to its qualified pension plans in 2018 and estimates 2019 pensioncontributions will be approximately $1.6 million, although the 2019 required pension contributions will be known with more certaintywhen the January 1, 2019 valuations are completed, which is expected by April 1, 2019.Total postretirement health care and life insurance benefit income for Entergy Texas in 2018 was $6.2 million. Entergy Texasexpects 2019 postretirement health care and life insurance benefit income to approximate $6.9 million. Entergy Texas contributed $3.8million to its other postretirement plans in 2018 and estimates 2019 contributions will be approximately $56 thousand.Federal Healthcare LegislationSee “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical AccountingEstimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion ofFederal Healthcare Legislation.Other ContingenciesSee “Other Contingencies” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and otherrisks.New Accounting PronouncementsSee “New Accounting Pronouncements” section of Note 1 to the financial statements for a discussion of new accountingpronouncements.417Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholder and Board of Directors ofEntergy Texas, Inc. and SubsidiariesOpinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Entergy Texas, Inc. and Subsidiaries (the “Company”) as ofDecember 31, 2018 and 2017, the related consolidated statements of income, cash flows, and changes in common equity (pages 419through 424 and applicable items in pages 53 through 237), for each of the three years in the period ended December 31, 2018, and therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all materialrespects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flowsfor each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in theUnited States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part ofour audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Company’s auditor since 2001.418Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING REVENUES Electric $1,605,902 $1,544,893 $1,615,619 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 204,830 225,517 271,968Purchased power 614,012 610,279 616,597Other operation and maintenance 238,400 230,437 221,620Taxes other than income taxes 82,033 79,254 70,973Depreciation and amortization 128,534 117,520 107,026Other regulatory charges - net 131,667 82,328 82,879TOTAL 1,399,476 1,345,335 1,371,063 OPERATING INCOME 206,426 199,558 244,556 OTHER INCOME Allowance for equity funds used during construction 9,723 6,722 7,617Interest and investment income 2,188 981 987Miscellaneous - net (655) 14 308TOTAL 11,256 7,717 8,912 INTEREST EXPENSE Interest expense 87,203 86,719 87,776Allowance for borrowed funds used during construction (5,513) (4,098) (4,943)TOTAL 81,690 82,621 82,833 INCOME BEFORE INCOME TAXES 135,992 124,654 170,635 Income taxes (26,243) 48,481 63,097 NET INCOME $162,235 $76,173 $107,538 See Notes to Financial Statements. 419Table of Contents(Page left blank intentionally)420Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands)OPERATING ACTIVITIES Net income $162,235 $76,173 $107,538Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation and amortization 128,534 117,520 107,026Deferred income taxes, investment tax credits, and non-current taxes accrued (39,545) 42,119 20,794Changes in assets and liabilities: Receivables (17,099) (15,934) (9,300)Fuel inventory 64 (25,054) 9,765Accounts payable 43,319 32,842 (22,462)Prepaid taxes and taxes accrued 7,854 30,308 10,018Interest accrued (1,201) (421) (3,229)Deferred fuel costs (47,604) 12,758 29,419Other working capital accounts 1,328 (7,852) (3,354)Provisions for estimated losses 3,741 2,531 (1,735)Other regulatory assets 63,350 184,574 74,389Other regulatory liabilities (19,336) 410,968 2,106Deferred tax rate change recognized as regulatory liability/asset — (520,547) —Pension and other postretirement liabilities (13,135) (49,445) (10,204)Other assets and liabilities 59,248 10,856 (4,170)Net cash flow provided by operating activities 331,753 301,396 306,601INVESTING ACTIVITIES Construction expenditures (451,988) (348,027) (337,963)Allowance for equity funds used during construction 9,861 6,874 7,743Proceeds from sale of assets 3,753 — —Insurance proceeds — 2,431 —Changes in money pool receivable - net 44,903 (44,222) (681)Changes in securitization account (2,502) (232) 710Net cash flow used in investing activities (395,973) (383,176) (330,191)FINANCING ACTIVITIES Proceeds from the issuance of long-term debt — 148,277 123,502Retirement of long-term debt (74,950)(71,683)(68,593)Capital contributions from parent — 115,000 —Change in money pool payable - net 22,389 — (22,068)Other 1,324 (482) (5,252)Net cash flow provided by (used in) financing activities (51,237) 191,112 27,589Net increase (decrease) in cash and cash equivalents (115,457) 109,332 3,999Cash and cash equivalents at beginning of period 115,513 6,181 2,182Cash and cash equivalents at end of period $56 $115,513 $6,181SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $85,719 $84,556 $88,489Income taxes $20,787 ($21,107) $28,523See Notes to Financial Statements. 421Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $26 $32Temporary cash investments 30 115,481Total cash and cash equivalents 56 115,513Securitization recovery trust account 40,185 37,683Accounts receivable: Customer 69,714 74,382Allowance for doubtful accounts (461) (463)Associated companies 64,441 90,629Other 12,275 9,831Accrued unbilled revenues 51,288 50,682Total accounts receivable 197,257 225,061Fuel inventory - at average cost 42,667 42,731Materials and supplies - at average cost 41,883 38,605Prepayments and other 15,903 19,710TOTAL 337,951 479,303 OTHER PROPERTY AND INVESTMENTS Investments in affiliates - at equity 448 457Non-utility property - at cost (less accumulated depreciation) 376 376Other 19,218 19,235TOTAL 20,042 20,068 UTILITY PLANT Electric 4,773,984 4,569,295Construction work in progress 325,193 102,088TOTAL UTILITY PLANT 5,099,177 4,671,383Less - accumulated depreciation and amortization 1,684,569 1,579,387UTILITY PLANT - NET 3,414,608 3,091,996 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Other regulatory assets (includes securitization property of $236,336 as of December 31, 2018 and $313,123 asof December 31, 2017) 598,048 661,398Other 29,371 26,973TOTAL 627,419 688,371 TOTAL ASSETS $4,400,020 $4,279,738 See Notes to Financial Statements. 422Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands)CURRENT LIABILITIES Currently maturing long-term debt $500,000 $—Accounts payable: Associated companies 119,371 59,347Other 150,679 126,095Customer deposits 43,387 40,925Taxes accrued 53,513 45,659Interest accrued 24,355 25,556Current portion of unprotected excess accumulated deferred income taxes 87,627 —Deferred fuel costs 19,697 67,301Other 6,353 8,132TOTAL 1,004,982 373,015 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 552,535 544,642Accumulated deferred investment tax credits 11,176 11,983Regulatory liability for income taxes - net 264,623 412,620Other regulatory liabilities 47,884 6,850Asset retirement cost liabilities 7,222 6,835Accumulated provisions 13,856 10,115Pension and other postretirement liabilities 4,834 17,853Long-term debt (includes securitization bonds of $283,659 as of December 31, 2018 and $358,104 as ofDecember 31, 2017) 1,013,735 1,587,150Other 56,771 48,508TOTAL 1,972,636 2,646,556 Commitments and Contingencies COMMON EQUITY Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2018and 2017 49,452 49,452Paid-in capital 596,994 596,994Retained earnings 775,956 613,721TOTAL 1,422,402 1,260,167 TOTAL LIABILITIES AND EQUITY $4,400,020 $4,279,738 See Notes to Financial Statements. 423Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Common Equity Common Stock Paid-in Capital Retained Earnings Total (In Thousands) Balance at December 31, 2015$49,452 $481,994 $430,010 $961,456Net income— — 107,538 107,538Balance at December 31, 2016$49,452 $481,994 $537,548 $1,068,994Net income— — 76,173 76,173Capital contributions from parent— 115,000 — 115,000Balance at December 31, 2017$49,452 $596,994 $613,721 $1,260,167Net income— — 162,235 162,235Balance at December 31, 2018$49,452 $596,994 $775,956 $1,422,402 See Notes to Financial Statements. 424Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESSELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (In Thousands) Operating revenues$1,605,902 $1,544,893 $1,615,619 $1,707,203 $1,851,982Net income$162,235 $76,173 $107,538 $69,625 $74,804Total assets$4,400,020 $4,279,738 $4,033,081 $3,898,582 $3,897,989Long-term obligations (a)$1,013,735 $1,587,150 $1,508,407 $1,451,967 $1,268,835 (a) Includes long-term debt (excluding currently maturing debt). 2018 2017 2016 2015 2014 (Dollars In Millions) Electric Operating Revenues: Residential$674 $636 $613 $633 $654Commercial381 378 356 369 384Industrial394 384 365 372 422Governmental25 25 24 25 26Total retail1,474 1,423 1,358 1,399 1,486Sales for resale: Associated companies59 58 178 259 316Non-associated companies39 22 40 14 23Other34 42 40 35 27Total$1,606 $1,545 $1,616 $1,707 $1,852 Billed Electric Energy Sales (GWh): Residential6,135 5,716 5,836 5,889 5,810Commercial4,747 4,548 4,570 4,548 4,471Industrial8,052 7,521 7,493 7,036 7,140Governmental286 273 283 276 277Total retail19,220 18,058 18,182 17,749 17,698Sales for resale: Associated companies1,516 1,534 4,625 5,853 4,763Non-associated companies962 729 1,086 254 200Total21,698 20,321 23,893 23,856 22,661425Table of ContentsSYSTEM ENERGY RESOURCES, INC.MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSISSystem Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf. The capacityand energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of thecapacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power SalesAgreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.Results of OperationsNet Income2018 Compared to 2017Net income increased $15.5 million primarily due to the increase in operating revenues resulting from changes in rate base, ascompared to prior year, and a lower effective income tax rate.2017 Compared to 2016Net income decreased $18.1 million primarily due to provisions against revenue recorded in 2017 in connection with thecomplaint against System Energy’s return on equity and a higher effective income tax rate in 2017. See “Federal Regulation -Complaints Against System Energy” below for further discussion of the complaint against System Energy.Income TaxesThe effective income tax rates for 2018, 2017, and 2016 were (102.7%), 47.1%, and 42.3%, respectively. The difference in theeffective income tax rate of (102.7%) versus the federal statutory rate of 21% for 2018 was primarily due to the amortization of excessaccumulated deferred income taxes. The difference in the effective income tax rate of 47.1% versus the federal statutory rate of 35% for2017 was primarily due to certain book and tax differences related to utility plant items and state income taxes. See Note 3 to thefinancial statements for a reconciliation of the federal statutory rates of 21% for 2018 and 35% for 2017 and 2016 to the effectiveincome tax rates.Income Tax LegislationSee the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion andAnalysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to thefinancial statements contains additional discussion of the effect of the Act on 2017 and 2018 results of operations and financialposition, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statementsdiscusses the regulatory proceedings that have considered the effects of the Act.426Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisLiquidity and Capital ResourcesCash FlowCash flows for the years ended December 31, 2018, 2017, and 2016 were as follows: 2018 2017 2016 (In Thousands)Cash and cash equivalents at beginning of period$287,187 $245,863 $230,661 Net cash provided by (used in): Operating activities101,328 371,278 341,939Investing activities(286,161) (174,250) (232,602)Financing activities(6,669) (155,704) (94,135)Net increase (decrease) in cash and cash equivalents(191,502) 41,324 15,202 Cash and cash equivalents at end of period$95,685 $287,187 $245,863Operating ActivitiesNet cash flow provided by operating activities decreased $270 million in 2018 primarily due to:•the return of unprotected excess accumulated deferred income taxes;•income tax payments of $54 million in 2018 compared to income tax refunds of $2.2 million in 2017. System Energy madeincome tax payments in 2018 and received income tax refunds in 2017 in accordance with an intercompany income taxallocation agreement. The income tax payments in 2018 were from the results of operations and the inclusion of taxabletemporary differences in the computation of taxable income; and•an increase in spending of $51.5 million on nuclear refueling outages in 2018 as compared to the prior year.Net cash flow provided by operating activities increased $29.3 million in 2017 primarily due to:•a decrease in spending of $35.7 million on nuclear refueling outages in 2017 as compared to the prior year;•the timing of collection of receivables; and•a decrease of $9.9 million in interest paid in 2017.The increase was partially offset by:•proceeds of $28.4 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storagecosts that were previously expensed. See Note 8 to the financial statements for a discussion of the spent nuclear fuel litigation;and•a decrease of $21.3 million in income tax refunds in 2017. System Energy received income tax refunds in 2017 and 2016 inaccordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 and 2016 resultedprimarily from the adoption of a new accounting method for income tax purposes in which System Energy will treat its nucleardecommissioning costs as production costs of electricity includable in cost of goods sold. See Note 3 to the financial statementsfor further discussion of the adoption of the new accounting method.427Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisInvesting ActivitiesNet cash flow used in investing activities increased $111.9 million in 2018 primarily due to:•an increase of $114.4 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in thetiming and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cashpayments during the nuclear fuel cycle; and•an increase of $110.4 million in nuclear construction expenditures primarily as a result of a higher scope of work performedduring the Grand Gulf outage in 2018.The increase was partially offset by money pool activity and changes in the decommissioning trust fund investments including portfoliorebalancing of the Grand Gulf decommissioning trust fund in 2018.Decreases in System Energy’s receivable from the money pool are a source of cash flow and System Energy’s receivable fromthe money pool decreased by $4.5 million in 2018 compared to increasing by $77.9 million in 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Net cash flow used in investing activities decreased $58.4 million in 2017 primarily due to a decrease of $159.4 million as aresult of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reloadrequirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle. Thedecrease was partially offset by money pool activity and proceeds of $15.8 million received in August 2016 from the DOE resultingfrom litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements fordiscussion of the spent nuclear fuel litigation.Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from themoney pool increased by $77.9 million in 2017 compared to decreasing by $6.1 million in 2016. Financing ActivitiesNet cash flow used in financing activities decreased $149 million in 2018 primarily due to:•the issuance in March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variableinterest entity;•an increase of net long-term borrowings of $63.9 million in 2018 on the nuclear fuel company variable interest entity’s creditfacility;•the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s4.02% Series H notes;•a decrease of $38.9 million in common stock dividends and distributions in 2018 in order to maintain the targeted capitalstructure; and•net repayments of short-term borrowings of $17.8 million on the nuclear fuel company variable interest entity’s credit facility in2018 compared to net repayments of short-term borrowings of $49.1 million on the nuclear fuel variable interest entity’s creditfacility in 2017.The decrease was offset by:•the payment in October 2018, at maturity, of $85 million of the System Energy nuclear fuel company variable interest entity’s3.78% Series I notes; and•net long-term borrowings of $50 million in 2017 on the nuclear fuel company variable interest entity’s credit facility.428Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisNet cash flow used in financing activities increased $61.6 million in 2017 primarily due to:•net repayments of short-term borrowings of $49.1 million on the nuclear fuel company variable interest entity’s credit facility in2017 as compared to net short-term borrowings of $66.9 million on the nuclear fuel variable interest entity’s credit facility in2016; and•the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s4.02% Series H notes.The increase was partially offset by:•net long-term borrowings of $50 million in 2017 on the nuclear fuel company variable interest entity’s credit facility;•a decrease of $32.4 million in common stock dividends and distributions in 2017 in order to maintain System Energy’s targetedcapital structure; and•the repayment in May 2016 of $22 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of SystemEnergy.See Note 5 to the financial statements for details of long-term debt.Capital StructureSystem Energy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for System Energyis primarily due to the issuance in March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel companyvariable interest entity. December 31, 2018 December 31, 2017Debt to capital46.1% 44.5%Effect of subtracting cash(4.0%) (16.0%)Net debt to net capital42.1% 28.5%Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including thecurrently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cashequivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful informationto its investors and creditors in evaluating System Energy’s financial condition. System Energy uses the net debt to net capital ratio inanalyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’sfinancial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash andcash equivalents on hand.System Energy seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost ofcapital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operatingcash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, inappropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to supportplanned investments, System Energy may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure.429Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisUses of CapitalSystem Energy requires capital resources for:•construction and other capital investments;•debt maturities or retirements;•working capital purposes, including the financing of fuel costs; and•dividend, distribution, and interest payments.Following are the amounts of System Energy’s planned construction and other capital investments. 2019 2020 2021 (In Millions)Planned construction and capital investment: Generation$145 $170 $65Utility Support10 10 10Total$155 $180 $75Following are the amounts of System Energy’s existing debt and lease obligations (includes estimated interest payments) andother purchase obligations. 2019 2020-2021 2022-2023 After 2023 Total (In Millions)Long-term debt (a)$43 $295 $433 $223 $994Purchase obligations (b)$11 $39 $34 $— $84(a)Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements.(b)Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchasegoods or services. For System Energy, it includes nuclear fuel purchase obligations.In addition to the contractual obligations given above, System Energy expects to contribute approximately $8.3 million to its qualifiedpension plans and approximately $20 thousand to other postretirement health care and life insurance plans in 2019, although the 2019required pension contributions will be known with more certainty when the January 1, 2019 valuations are completed, which isexpected by April 1, 2019. See “Critical Accounting Estimates – Qualified Pension and Other Postretirement Benefits” below for adiscussion of qualified pension and other postretirement benefits funding.Also in addition to the contractual obligations, System Energy has $425.3 million of unrecognized tax benefits and interest netof unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due touncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional informationregarding unrecognized tax benefits.In addition to routine spending to maintain operations, the planned capital investment estimate includes specific Grand Gulfinvestments and initiatives.As a wholly-owned subsidiary, System Energy dividends its earnings to Entergy Corporation at a percentage determinedmonthly. 430Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisSources of CapitalSystem Energy’s sources to meet its capital requirements include:•internally generated funds;•cash on hand;•debt issuances; and•bank financing under new or existing facilities.System Energy may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interestrates are favorable.All debt issuances by System Energy require prior regulatory approval. Debt issuances are also subject to issuance tests setforth in its bond indenture and other agreements. System Energy has sufficient capacity under these tests to meet its foreseeable capitalneeds.System Energy’s receivables from the money pool were as follows as of December 31 for each of the following years.2018 2017 2016 2015(In Thousands)$107,122 $111,667 $33,809 $39,926See Note 4 to the financial statements for a description of the money pool.The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled toexpire in September 2021. As of December 31, 2018, $113.9 million in letters of credit to support a like amount of commercial paperissued were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to thefinancial statements for additional discussion of the variable interest entity credit facility.System Energy obtained authorizations from the FERC through November 2020 for the following:•short-term borrowings not to exceed an aggregate amount of $200 million at any time outstanding;•long-term borrowings and security issuances; and•borrowings by its nuclear fuel company variable interest entity.See Note 4 to the financial statements for further discussion of System Energy’s short-term borrowing limits.Federal RegulationSee the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.Complaints Against System EnergyReturn on Equity ComplaintsIn January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reductionin the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacityand energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and431Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisEntergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, EntergyMississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreementis 10.94%, which was established in a rate proceeding that became final in July 2001.The APSC and MPSC complaint alleges that the return on equity is unjust and unreasonable because current capital market andother considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return onequity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017 as a refund effective date. Thecomplaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy isbetween 8.37% and 8.67%. System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint.System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERCestablished a refund effective date of January 23, 2017, consolidated the return on equity complaint with the proceeding described inUnit Power Sales Agreement below, and directed the parties to engage in settlement proceedings before an ALJ. The parties have beenunable to settle the return on equity issue and a FERC hearing judge was assigned in July 2018. The 15-month refund effective date inconnection with the APSC/MPSC complaint expired on April 23, 2018.In April 2018 the LPSC filed a complaint with the FERC against System Energy seeking an additional 15-month refund period. The LPSC complaint requests similar relief from the FERC with respect to System Energy’s return on equity and also requests the FERCto investigate System Energy’s capital structure. The APSC, MPSC, and City Council intervened in the proceeding, filed an answerexpressing support for the complaint, and asked the FERC to consolidate this proceeding with the proceeding initiated by the complaintof the APSC and MPSC in January 2017. System Energy answered the LPSC complaint in May 2018 and also filed a motion to dismissthe complaint. In July 2018 the LPSC answered System Energy’s motion to dismiss.In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure andsetting for hearing System Energy’s return on equity, with a refund effective date of April 2018. The portion of the LPSC’s complaintdealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearinghas been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding for NewEngland transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. InSeptember 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of theFERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capitalstructure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended complaint, and System Energysubmitted a response to the amended complaint in October 2018. In January 2019 the FERC set the amended complaint for settlementand hearing proceedings.Grand Gulf Sale-leaseback Renewal ComplaintIn May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal in2015 of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1.The complaint alleges that System Energy violated the filed rate and the FERC’s ratemaking and accounting requirements when itincluded in Unit Power Sales Agreement billings the cost of capital additions associated with the sale-leaseback interest, and that SystemEnergy is double-recovering costs by including both the lease payments and the capital additions in Unit Power Sales Agreementbillings. The complaint also claims that System Energy was imprudent in entering into the sale-leaseback renewal because the Utilityoperating companies that purchase Grand Gulf’s output from System Energy could have obtained cheaper capacity and energy in theMISO markets. The complaint further alleges that System Energy violated various other reporting and accounting requirements andshould have sought prior FERC approval of the lease renewal. The complaint seeks various forms of relief from the FERC. Thecomplaint seeks refunds for capital addition costs for all years in which they were recorded in allegedly non-formula accounts or,alternatively, the disallowance of the return on equity for the capital432Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and Analysisadditions in those years plus interest. The complaint also asks that the FERC disallow and refund the lease costs of the sale-leasebackrenewal on grounds of imprudence, investigate System Energy’s treatment of a DOE litigation payment, and impose certain forward-looking procedural protections, including audit rights for retail regulators of the Unit Power Sales Agreement formula rates. The APSC,MPSC, and City Council intervened in the proceeding.In June 2018, System Energy and Entergy Services filed a motion to dismiss and an answer to the LPSC complaint denying thatSystem Energy’s treatment of the sale-leaseback renewal and capital additions violated the terms of the filed rate or any other FERCratemaking, accounting, or legal requirements or otherwise constituted double recovery. The response also argued that the complaint isinconsistent with a FERC-approved settlement to which the LPSC is a party and that explicitly authorizes System Energy to recover itslease payments. Finally, the response argued that both the capital additions and the sale-leaseback renewal were prudent investmentsand the LPSC complaint fails to justify any disallowance or refunds. The response also offered to submit formula rate protocols for theUnit Power Sales Agreement similar to the procedures used for reviewing transmission rates under the MISO tariff. In September 2018the FERC issued an order setting the complaint for hearing and settlement proceedings. The FERC established a refund effective date ofMay 2018. The hearing has been scheduled for November 2019.Unit Power Sales AgreementIn August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant towhich System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, andEntergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use incalculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenuerequirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments wouldresult in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power SalesAgreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account therenewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept theamendments effective October 1, 2017.In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to furtherproceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, theFERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower thanproposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of thefurther settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the ratedecrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding described in“Return on Equity Complaints” above, and directed the parties to engage in settlement proceedings before an ALJ. In June 2018,System Energy filed with the FERC an uncontested settlement relating to the updated depreciation rates and nuclear decommissioningcost annual revenue requirements. In August 2018 the FERC issued an order accepting the settlement. In the third quarter 2018, SystemEnergy recorded a reduction in depreciation expense of approximately $26 million, representing the cumulative difference indepreciation expense resulting from the depreciation rates used from October 11, 2017 through September 30, 2018 and thedepreciation rates included in the settlement filing accepted by the FERC.Nuclear MattersSystem Energy owns and, through an affiliate, operates Grand Gulf. System Energy is, therefore, subject to the risks related toowning and operating a nuclear plant. These include risks related to: the use, storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capital investments and operational needs, to positionEntergy’s nuclear fleet to meet its operational goals, including the financial requirements to address emerging issues like stresscorrosion cracking of certain materials within the plant systems and the Fukushima event; regulatory requirements and potential futureregulatory changes, including changes affecting the regulations governing nuclear plant ownership, operations, license renewal andamendments, and433Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and Analysisdecommissioning; the performance and capacity factors of these nuclear plants; the availability of interim or permanent sites for thedisposal of spent nuclear fuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nucleardecommissioning trust fund assets and earnings to complete decommissioning of each site when required; and limitations on theamounts and types of insurance commercially available for losses in connection with nuclear plant operations and catastrophic eventssuch as a nuclear accident. In the event of an unanticipated early shutdown of Grand Gulf, System Energy may be required to provideadditional funds or credit support to satisfy regulatory requirements for decommissioning. Grand Gulf’s operating license expires in2044. Based on the plant’s performance indicators, in November 2016 the NRC placed Grand Gulf in the “regulatory responsecolumn,” or Column 2, of its Reactor Oversight Process Action Matrix. In August 2018 the NRC moved Grand Gulf into the “licenseeresponse column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections toreview Grand Gulf’s performance in addressing issues that had previously resulted in classification in Column 2. Based on performanceindicator data for the third quarter 2018, Grand Gulf moved back to Column 2 due to a reduction in power to address an operationalissue with a plant system that resulted in the threshold for one of the NRC’s performance indicators being exceeded.Environmental RisksSystem Energy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction overair quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Managementbelieves that System Energy is in substantial compliance with environmental regulations currently applicable to its facilities andoperations, with reference to possible exceptions noted in “Regulation of Entergy’s Business - Environmental Regulation” in Part I,Item 1. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.Critical Accounting EstimatesThe preparation of System Energy’s financial statements in conformity with generally accepted accounting principles requiresmanagement to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect onreported financial position, results of operations, and cash flows. Management has identified the following accounting policies andestimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is thepotential for future changes in the assumptions and measurements that could produce estimates that would have a material impact onthe presentation of System Energy’s financial position or results of operations. Nuclear Decommissioning CostsSee “Nuclear Decommissioning Costs” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nucleardecommissioning costs.Utility Regulatory AccountingSee “Utility Regulatory Accounting” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.Impairment of Long-lived Assets and Trust Fund InvestmentsSee “Impairment of Long-lived Assets and Trust Fund Investments” in the “Critical Accounting Estimates” section ofEntergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated withthe impairment of long-lived assets and trust fund investments.434Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and AnalysisTaxation and Uncertain Tax PositionsSee “Taxation and Uncertain Tax Positions” in the “Critical Accounting Estimates” section of Entergy Corporation andSubsidiaries Management’s Financial Discussion and Analysis for further discussion.Qualified Pension and Other Postretirement BenefitsSystem Energy’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements,are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarialcalculations, assumptions, and accounting mechanisms. See the “Qualified Pension and Other Postretirement Benefits” in the“Critical Accounting Estimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis forfurther discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of theassumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.Cost SensitivityThe following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes incertain actuarial assumptions (dollars in thousands).Actuarial Assumption Change inAssumption Impact on 2019 Qualified PensionCost Impact on 2018 ProjectedQualified Benefit Obligation Increase/(Decrease) Discount rate (0.25%) $705 $9,814Rate of return on plan assets (0.25%) $646 $—Rate of increase in compensation 0.25% $331 $1,472The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation tochanges in certain actuarial assumptions (dollars in thousands).Actuarial Assumption Change inAssumption Impact on 2019 PostretirementBenefit Cost Impact on 2018 AccumulatedPostretirement Benefit Obligation Increase/(Decrease) Discount rate (0.25%) $125 $1,543Health care cost trend 0.25% $195 $1,318Each fluctuation above assumes that the other components of the calculation are held constant.Costs and FundingTotal qualified pension cost for System Energy in 2018 was $14.9 million. System Energy anticipates 2019 qualified pensioncost to be $12.3 million. System Energy contributed $13.8 million to its pension plans in 2018 and estimates 2019 pensioncontributions will approximate $8.3 million, although the 2019 required pension contributions will be known with more certainty whenthe January 1, 2019 valuations are completed, which is expected by April 1, 2019.Total postretirement health care and life insurance benefit income for System Energy in 2018 was $490 thousand. SystemEnergy expects 2019 postretirement health care and life insurance benefit cost to approximate $1.7435Table of ContentsSystem Energy Resources, Inc.Management’s Financial Discussion and Analysismillion. System Energy contributed $569 thousand to its other postretirement plans in 2018 and expects 2019 contributions toapproximate $20 thousand.Federal Healthcare LegislationSee “Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical AccountingEstimates” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion ofFederal Healthcare Legislation.Other ContingenciesSee “Other Contingencies” in the “Critical Accounting Estimates” section of Entergy Corporation and SubsidiariesManagement’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and otherrisks.New Accounting PronouncementsSee “New Accounting Pronouncements” section of Note 1 to the financial statements for a discussion of new accountingpronouncements.436Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholder and Board of Directors ofSystem Energy Resources, Inc.Opinion on the Financial StatementsWe have audited the accompanying balance sheets of System Energy Resources, Inc. (the “Company”) as of December 31, 2018 and2017, the related statements of income, cash flows, and changes in common equity (pages 438 through 442 and applicable items inpages 53 through 237), for each of the three years in the period ended December 31, 2018, and the related notes (collectively referredto as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position ofthe Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in theperiod ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company AccountingOversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part ofour audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressingan opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidenceregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believethat our audits provide a reasonable basis for our opinion./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019We have served as the Company’s auditor since 2001.437Table of ContentsSYSTEM ENERGY RESOURCES, INC.INCOME STATEMENTS For the Years Ended December 31, 2018 2017 2016 (In Thousands) OPERATING REVENUES Electric $456,707 $633,458 $548,291 OPERATING EXPENSES Operation and Maintenance: Fuel, fuel-related expenses, and gas purchased for resale 64,778 71,700 27,416Nuclear refueling outage expenses 20,715 17,968 19,512Other operation and maintenance 196,505 207,344 147,976Decommissioning 34,336 43,347 50,797Taxes other than income taxes 28,090 26,180 25,195Depreciation and amortization 97,527 137,767 136,195Other regulatory credits - net (28,924) (37,831) (45,041)TOTAL 413,027 466,475 362,050 OPERATING INCOME 43,680 166,983 186,241 OTHER INCOME Allowance for equity funds used during construction 8,750 6,345 7,944Interest and investment income 35,985 17,538 14,793Miscellaneous - net (5,775) (6,711) (5,644)TOTAL 38,960 17,172 17,093 INTEREST EXPENSE Interest expense 38,424 37,141 37,529Allowance for borrowed funds used during construction (2,218) (1,551) (2,000)TOTAL 36,206 35,590 35,529 INCOME BEFORE INCOME TAXES 46,434 148,565 167,805 Income taxes (47,675) 69,969 71,061 NET INCOME $94,109 $78,596 $96,744 See Notes to Financial Statements. 438Table of ContentsSYSTEM ENERGY RESOURCES, INC.STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2018 2017 2016 (In Thousands)OPERATING ACTIVITIES Net income $94,109 $78,596 $96,744Adjustments to reconcile net income to net cash flow provided by operating activities: Depreciation, amortization, and decommissioning, including nuclear fuel amortization 186,719 240,962 224,879Deferred income taxes, investment tax credits, and non-current taxes accrued 24,040 7,827 99,531Changes in assets and liabilities: Receivables 18,169 9,210 (15,846)Accounts payable (7,067) 15,969 2,720Prepaid taxes and taxes accrued (51,999) 62,466 (6,555)Interest accrued (94) (660) (134)Other working capital accounts (45,415) 12,083 (15,470)Other regulatory assets (2,044) 60,012 (58,279)Other regulatory liabilities (156,802) 331,251 33,438Deferred tax rate change recognized as regulatory liability/asset — (325,707) —Pension and other postretirement liabilities (23,235) 4,024 5,586Other assets and liabilities 64,947 (124,755) (24,675)Net cash flow provided by operating activities 101,328 371,278 341,939INVESTING ACTIVITIES Construction expenditures (194,696) (91,705) (88,037)Allowance for equity funds used during construction 8,750 6,345 7,944Nuclear fuel purchases (125,272) (49,728) (151,068)Proceeds from the sale of nuclear fuel 30,634 69,516 11,467Proceeds from nuclear decommissioning trust fund sales 573,561 565,416 499,252Investment in nuclear decommissioning trust funds (583,683) (596,236) (534,083)Changes in money pool receivable - net 4,545 (77,858) 6,117Litigation proceeds for reimbursement of spent nuclear fuel storage costs — — 15,806Net cash flow used in investing activities (286,161) (174,250) (232,602)FINANCING ACTIVITIES Proceeds from the issuance of long-term debt 741,785 150,100 —Retirement of long-term debt (662,904) (150,103) (22,002)Changes in short-term credit borrowings - net (17,830) (49,063) 66,893Common stock dividends and distributions (67,720) (106,610) (139,000)Other — (28) (26)Net cash flow used in financing activities (6,669) (155,704) (94,135)Net increase (decrease) in cash and cash equivalents (191,502) 41,324 15,202Cash and cash equivalents at beginning of period 287,187 245,863 230,661Cash and cash equivalents at end of period $95,685 $287,187 $245,863SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the period for: Interest - net of amount capitalized $17,183 $26,251 $36,152Income taxes $53,956 ($2,227) ($23,565)See Notes to Financial Statements. 439Table of ContentsSYSTEM ENERGY RESOURCES, INC.BALANCE SHEETSASSETS December 31, 2018 2017 (In Thousands) CURRENT ASSETS Cash and cash equivalents: Cash $68 $78Temporary cash investments 95,617 287,109Total cash and cash equivalents 95,685 287,187Accounts receivable: Associated companies 148,571 170,149Other 5,390 6,526Total accounts receivable 153,961 176,675Materials and supplies - at average cost 97,225 88,424Deferred nuclear refueling outage costs 44,424 7,908Prepaid taxes 5,415 —Prepayments and other 2,985 2,489TOTAL 399,695 562,683 OTHER PROPERTY AND INVESTMENTS Decommissioning trust funds 869,543 905,686TOTAL 869,543 905,686 UTILITY PLANT Electric 4,433,346 4,327,849Property under capital lease 602,770 588,281Construction work in progress 70,156 69,937Nuclear fuel 234,889 207,513TOTAL UTILITY PLANT 5,341,161 5,193,580Less - accumulated depreciation and amortization 3,212,080 3,175,018UTILITY PLANT - NET 2,129,081 2,018,562 DEFERRED DEBITS AND OTHER ASSETS Regulatory assets: Other regulatory assets 446,371 444,327Other 4,124 7,629TOTAL 450,495 451,956 TOTAL ASSETS $3,848,814 $3,938,887 See Notes to Financial Statements. 440Table of ContentsSYSTEM ENERGY RESOURCES, INC.BALANCE SHEETSLIABILITIES AND EQUITY December 31, 2018 2017 (In Thousands) CURRENT LIABILITIES Currently maturing long-term debt $6 $85,004Short-term borrowings — 17,830Accounts payable: Associated companies 11,031 16,878Other 47,565 62,868Taxes accrued — 46,584Interest accrued 13,295 13,389Current portion of unprotected excess accumulated deferred income taxes 4,426 —Other 2,832 2,434TOTAL 79,155 244,987 NON-CURRENT LIABILITIES Accumulated deferred income taxes and taxes accrued 805,296 776,420Accumulated deferred investment tax credits 38,673 39,406Regulatory liability for income taxes - net 158,998 246,122Other regulatory liabilities 381,887 455,991Decommissioning 896,000 861,664Pension and other postretirement liabilities 98,639 121,874Long-term debt 630,744 466,484Other 22,224 15,130TOTAL 3,032,461 2,983,091 Commitments and Contingencies COMMON EQUITY Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2018 and2017 601,850 658,350Retained earnings 135,348 52,459TOTAL 737,198 710,809 TOTAL LIABILITIES AND EQUITY $3,848,814 $3,938,887 See Notes to Financial Statements. 441Table of ContentsSYSTEM ENERGY RESOURCES, INC.STATEMENTS OF CHANGES IN COMMON EQUITYFor the Years Ended December 31, 2018, 2017, and 2016 Common Equity Common Stock Retained Earnings Total (In Thousands) Balance at December 31, 2015$719,350 $61,729 $781,079Net income— 96,744 96,744Common stock dividends and distributions(40,000) (99,000) (139,000)Balance at December 31, 2016$679,350 $59,473 $738,823Net income— 78,596 78,596Common stock dividends and distributions(21,000) (85,610) (106,610)Balance at December 31, 2017$658,350 $52,459 $710,809Net income— 94,109 94,109Common stock dividends and distributions(56,500) (11,220) (67,720)Balance at December 31, 2018$601,850 $135,348 $737,198 See Notes to Financial Statements. 442Table of ContentsSYSTEM ENERGY RESOURCES, INC.SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON 2018 2017 2016 2015 2014 (Dollars In Thousands) Operating revenues$456,707 $633,458 $548,291 $632,405 $664,364Net income$94,109 $78,596 $96,744 $111,318 $96,334Total assets$3,848,814 $3,938,887 $3,927,712 $3,728,875 $3,826,193Long-term obligations (a)$630,744 $466,484 $501,129 $572,665 $630,603Electric energy sales (GWh)6,264 6,675 5,384 10,547 9,219 (a) Includes long-term debt (excluding currently maturing debt).443Table of ContentsItem 2. PropertiesInformation regarding the registrant’s properties is included in Part I. Item 1. - Entergy’s Business under the sections titled“Utility - Property and Other Generation Resources” and “Entergy Wholesale Commodities - Property” in this report.Item 3. Legal ProceedingsDetails of the registrant’s material environmental regulation and proceedings and other regulatory proceedings and litigation thatare pending or those terminated in the fourth quarter of 2018 are discussed in Part I. Item 1. - Entergy’s Business under the sectionstitled “Retail Rate Regulation,” “Environmental Regulation,” and “Litigation” and “Impairment of Long-lived Assets” in Note 14to the financial statements.Item 4. Mine Safety DisclosuresNot applicable.EXECUTIVE OFFICERS OF ENTERGY CORPORATIONExecutive OfficersName Age Position PeriodLeo P. Denault (a) 59 Chairman of the Board and Chief Executive Officer of EntergyCorporation 2013-Present A. Christopher Bakken, III (a) 57 Executive Vice President and Chief Nuclear Officer of EntergyCorporation, Entergy Arkansas, Entergy Louisiana, and SystemEnergy 2016-Present Project Director, Hinkley Point C of EDF Energy 2009-2016 Marcus V. Brown (a) 57 Executive Vice President and General Counsel of Entergy Corporation,Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, EntergyNew Orleans, Entergy Texas, and System Energy 2013-Present Andrew S. Marsh (a) 47 Executive Vice President and Chief Financial Officer of EntergyCorporation 2013-Present Director of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,Entergy New Orleans, Entergy Texas, and System Energy 2013-Present Chief Financial Officer of Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy 2014-Present444Table of ContentsName Age Position PeriodRoderick K. West (a) 50 Group President Utility Operations of Entergy Corporation, EntergyArkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, and Entergy Texas 2017-Present President, Chief Executive Officer, and Director of System Energy 2017-Present Director of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,Entergy New Orleans, Entergy Texas, and System Energy 2017-Present President and Chief Executive Officer of Entergy New Orleans 2018 Executive Vice President of Entergy Corporation 2010-2017 Chief Administrative Officer of Entergy Corporation 2010-2016 Paul D. Hinnenkamp (a) 57 Executive Vice President and Chief Operating Officer of EntergyCorporation 2017-Present Director of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,Entergy New Orleans, and Entergy Texas 2015-Present Senior Vice President and Chief Operating Officer of EntergyCorporation 2015-2017 Senior Vice President, Capital Project Management and Technology ofEntergy Services, Inc. 2015 Vice President, Capital Project Management and Technology of EntergyServices, Inc. 2013-2015 Alyson M. Mount (a) 48 Senior Vice President and Chief Accounting Officer of EntergyCorporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy 2012-Present Peter S. Norgeot, Jr. (a) 53 Senior Vice President, Transformation of Entergy Corporation 2018-Present Senior Vice President, Power Generation of Entergy Services 2017-2018 Vice President, Fossil Generation of Entergy Services 2015-2017 Vice President, Power Plant Operations, Steam of Entergy Services 2014-2015 Donald W. Vinci (a) 60 Executive Vice President and Chief Administrative Officer of EntergyCorporation 2016-Present Senior Vice President, Human Resources and Chief Diversity Officer ofEntergy Corporation 2013-2016(a)In addition, this officer is an executive officer and/or director of various other wholly owned subsidiaries of EntergyCorporation and its operating companies.Each officer of Entergy Corporation is elected yearly by the Board of Directors. Each officer’s age and title is provided as ofDecember 31, 2018.445Table of ContentsPART IIItem 5. Market for Registrants’ Common Equity and Related Stockholder Matters Entergy CorporationThe shares of Entergy Corporation’s common stock are listed on the New York Stock and Chicago Stock Exchanges under theticker symbol ETR. As of January 31, 2019, there were 24,919 stockholders of record of Entergy Corporation.Unregistered Sales of Equity Securities and Use of ProceedsIssuer Purchases of Equity Securities (1)Period Total Number ofShares Purchased Average PricePaid per Share Total Number of SharesPurchased as Part of aPublicly Announced Plan Maximum $ Amount ofShares that May Yet bePurchased Under aPlan (2) 10/01/2018 - 10/31/2018 — $— — $350,052,91811/01/2018 - 11/30/2018 — $— — $350,052,91812/01/2018 - 12/31/2018 — $— — $350,052,918Total — $— — In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees,which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares,treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on theopen market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to this authority, the Boardhas authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 theBoard granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may varyas a result of material changes in business results or capital spending or new investment opportunities. In addition, in the first quarter2018, Entergy withheld 70,517 shares of its common stock at $76.83 per share, 43,342 shares of its common stock at $78.29 per share,and 16,660 shares of its common stock at $78.51 per share to pay income taxes due upon vesting of restricted stock granted and payoutof performance units as part of its long-term incentive program.(1)See Note 12 to the financial statements for additional discussion of the stock-based compensation plans.(2)Maximum amount of shares that may yet be repurchased relates only to the $500 million plan does not include an estimate ofthe amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, andSystem EnergyThere is no market for the common equity of the Registrant Subsidiaries. Information with respect to restrictions that limit theability of the Registrant Subsidiaries to pay dividends or distributions is presented in Note 7 to the financial statements.446Table of ContentsItem 6. Selected Financial DataRefer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION ANDSUBSIDIARIES, ENTERGY ARKANSAS, LLC AND SUBSIDIARIES, ENTERGY LOUISIANA, LLC AND SUBSIDIARIES,ENTERGY MISSISSIPPI, LLC, ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES, ENTERGY TEXAS, INC. ANDSUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.” which follow each company’s financial statements in this report, forinformation with respect to selected financial data and certain operating statistics.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsRefer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION ANDSUBSIDIARIES, ENTERGY ARKANSAS, LLC AND SUBSIDIARIES, ENTERGY LOUISIANA, LLC AND SUBSIDIARIES,ENTERGY MISSISSIPPI, LLC, ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES, ENTERGY TEXAS, INC. ANDSUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.”Item 7A. Quantitative and Qualitative Disclosures About Market RiskRefer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION ANDSUBSIDIARIES - Market and Credit Risk Sensitive Instruments.”Item 8. Financial Statements and Supplementary DataRefer to “TABLE OF CONTENTS - Entergy Corporation and Subsidiaries, Entergy Arkansas, LLC and Subsidiaries,Entergy Louisiana, LLC and Subsidiaries, Entergy Mississippi, LLC, Entergy New Orleans, LLC and Subsidiaries, EntergyTexas, Inc. and Subsidiaries, and System Energy Resources, Inc.”Item 9. Changes In and Disagreements With Accountants On Accounting and Financial DisclosureNo event that would be described in response to this item has occurred with respect to Entergy Corporation, Entergy Arkansas,Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, or System Energy.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresAs of December 31, 2018, evaluations were performed under the supervision and with the participation of Entergy Corporation,Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually“Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) andPrincipal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls andprocedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serveas PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required tobe disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed,summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that theRegistrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information isaccumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, asappropriate to allow timely decisions regarding required disclosure.447Table of ContentsInternal Control over Financial Reporting (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, EntergyNew Orleans, Entergy Texas, and System Energy)The managements of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) are responsible for establishing andmaintaining adequate internal control over financial reporting for the Registrants. Each Registrant’s internal control system is designedto provide reasonable assurance regarding the preparation and fair presentation of each Registrant’s financial statements presented inaccordance with generally accepted accounting principles.All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determinedto be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.Each Registrant’s management assessed the effectiveness of each Registrant’s internal control over financial reporting as ofDecember 31, 2018. In making this assessment, each Registrant’s management used the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. The 2013 COSOFramework was utilized for management’s assessment.Based on each management’s assessment and the criteria set forth by the 2013 COSO Framework, each Registrant’smanagement believes that each Registrant maintained effective internal control over financial reporting as of December 31, 2018.The report of Deloitte & Touche LLP, Entergy Corporation’s independent registered public accounting firm, regarding EntergyCorporation’s internal control over financial reporting is included herein. The report of Deloitte & Touche LLP is not applicable toEntergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy because theseRegistrants are non-accelerated filers.Changes in Internal Controls over Financial ReportingUnder the supervision and with the participation of each Registrant’s management, including its respective PEO and PFO, eachRegistrant evaluated changes in internal control over financial reporting that occurred during the quarter ended December 31, 2018 andfound no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.448Table of ContentsAttestation Report of Registered Public Accounting FirmREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholders and Board of Directors ofEntergy Corporation and SubsidiariesOpinion on Internal Control over Financial ReportingWe have audited the internal control over financial reporting of Entergy Corporation and Subsidiaries (the “Corporation”) as ofDecember 31, 2018, based on criteria established in Internal Control -Integrated Framework (2013) issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Corporation maintained, in all material respects,effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - IntegratedFramework (2013) issued by COSO.We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB),the consolidated financial statements as of and for the year ended December 31, 2018 of the Corporation and our report dated February26, 2019 expressed an unqualified opinion on those consolidated financial statements.Basis for OpinionThe Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessmentof the effectiveness of internal control over financial reporting, included in Item 9A, Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a publicaccounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with theU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing suchother procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effecton the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projectionsof any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes inconditions, or that the degree of compliance with the policies or procedures may deteriorate./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019449Table of ContentsPART IIIItem 10. Directors and Executive Officers of the Registrants (Entergy Corporation, Entergy Arkansas, Entergy Louisiana,Entergy Mississippi, Entergy New Orleans, and Entergy Texas)Information required by this item concerning directors of Entergy Corporation is set forth under the heading “Item 1 – Electionof Directors” contained in the Proxy Statement of Entergy Corporation, to be filed in connection with its Annual Meeting ofStockholders to be held May 3, 2019, and is incorporated herein by reference.All officers and directors listed below held the specified positions with their respective companies as of the date of filing thisreport, unless otherwise noted.Name Age Position PeriodEntergy Arkansas, LLC Directors Laura R. Landreaux 45 President and Chief Executive Officer of Entergy Arkansas 2018-Present Director of Entergy Arkansas 2018-Present Operational Finance Director of Entergy Arkansas 2017-2018 Vice President, Regulatory Affairs of Entergy Arkansas 2014-2017 Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. Officers A. Christopher Bakken, III See information under the Entergy Corporation Officers Section in PartI. Marcus V. Brown See information under the Entergy Corporation Officers Section in PartI. Leo P. Denault See information under the Entergy Corporation Officers Section in PartI. Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Laura R. Landreaux See information under the Entergy Arkansas Directors Section above. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Alyson M. Mount See information under the Entergy Corporation Officers Section in PartI. Donald W. Vinci See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. 450Table of ContentsENTERGY LOUISIANA, LLCDirectors Phillip R. May, Jr. 56 President and Chief Executive Officer of Entergy Louisiana 2013-Present Director of Entergy Louisiana 2013-Present Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. Officers A. Christopher Bakken, III See information under the Entergy Corporation Officers Section in PartI. Marcus V. Brown See information under the Entergy Corporation Officers Section in PartI. Leo P. Denault See information under the Entergy Corporation Officers Section in PartI. Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Phillip R. May, Jr. See information under the Entergy Louisiana Directors Section above. Alyson M. Mount See information under the Entergy Corporation Officers Section in PartI. Donald W. Vinci See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. ENTERGY MISSISSIPPI, LLCDirectors Haley R. Fisackerly 53 President and Chief Executive Officer of Entergy Mississippi 2008-Present Director of Entergy Mississippi 2008-Present Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. 451Table of ContentsOfficers Marcus V. Brown See information under the Entergy Corporation Officers Section in PartI. Leo P. Denault See information under the Entergy Corporation Officers Section in PartI. Haley R. Fisackerly See information under the Entergy Mississippi Directors Section above. Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Alyson M. Mount See information under the Entergy Corporation Officers Section in PartI. Donald W. Vinci See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. ENTERGY NEW ORLEANS, LLCDirectors David D. Ellis 51 President and Chief Executive Officer of Entergy New Orleans 2018-Present Director of Entergy New Orleans 2018-Present President and Chief Executive Officer, Global Power Technologies 2018 Managing Director and Chairman of Comverge International, Inc. 2010-2017 Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. 452Table of ContentsOfficers Marcus V. Brown See information under the Entergy Corporation Officers Section in PartI. Leo P. Denault See information under the Entergy Corporation Officers Section in PartI. David D. Ellis See information under the Entergy New Orleans Directors Sectionabove. Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Alyson M. Mount See information under the Entergy Corporation Officers Section in PartI. Donald W. Vinci See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. ENTERGY TEXAS, INC.Directors Sallie T. Rainer 57 President and Chief Executive Officer of Entergy Texas 2012-Present Director of Entergy Texas 2012-Present Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. Officers Marcus V. Brown See information under the Entergy Corporation Officers Section in PartI. Leo P. Denault See information under the Entergy Corporation Officers Section in PartI. Paul D. Hinnenkamp See information under the Entergy Corporation Officers Section in PartI. Andrew S. Marsh See information under the Entergy Corporation Officers Section in PartI. Alyson M. Mount See information under the Entergy Corporation Officers Section in PartI. Sallie T. Rainer See information under the Entergy Texas Directors Section above. Donald W. Vinci See information under the Entergy Corporation Officers Section in PartI. Roderick K. West See information under the Entergy Corporation Officers Section in PartI. The directors and officers of Entergy Texas are elected annually to serve by the unanimous consent of its sole commonstockholder. The directors and officers of Entergy Louisiana, LLC and Entergy New Orleans, LLC are, and in the case of EntergyArkansas, LLC and Entergy Mississippi, LLC will be, elected annually to serve by the unanimous453Table of Contentsconsent of the sole common membership owner, Entergy Utility Holding Company, LLC. Entergy Corporation’s directors are electedannually at the annual meeting of shareholders. Entergy Corporation’s officers are elected at the annual organizational meeting of theBoard of Directors, which immediately follows the annual meeting of shareholders. The age of each officer and director for whominformation is presented above is as of December 31, 2018.Corporate Governance Guidelines and Committee ChartersEach of the Audit, Corporate Governance, and Personnel Committees of Entergy Corporation’s Board of Directors operatesunder a written charter. In addition, the Board has adopted Corporate Governance Guidelines. Each charter and the guidelines areavailable through Entergy’s website (www.entergy.com) or upon written request.Audit Committee of the Entergy Corporation BoardThe following directors are members of the Audit Committee of Entergy Corporation’s Board of Directors:Patrick J. Condon (Chairman)Philip L. FredericksonBlanche L. LincolnKaren A. PuckettAll Audit Committee members are independent. In addition to the general independence requirements of the NYSE, all AuditCommittee members must meet the heightened independence standards imposed by the SEC and NYSE. All Audit Committeemembers possess the level of financial literacy required by the NYSE rules and the Board has determined that Messrs. Condon andFrederickson satisfy the financial expertise requirements of the NYSE and have the requisite experience to be designated an auditcommittee financial expert as that term is defined by the rules of the SEC.Code of EthicsEffective October 2018, the Entergy Corporation Board of Directors adopted a Code of Business Conduct and Ethics thatapplies to members of the Entergy Corporation Board of Directors and all Entergy officers and employees. The Code of BusinessConduct and Ethics combined two separate but similarly worded codes that applied to members of the Entergy Corporation Board ofDirectors and to officers and employees, respectively. The Code of Business Conduct and Ethics includes Special Provisions Relatingto Principal Executive Officer and Senior Financial Officers. It is to be read in conjunction with Entergy’s omnibus code of integrityunder which Entergy operates, called the Code of Entegrity, as well as system policies. All employees are expected to abide by theCodes. Non-bargaining employees are required to acknowledge annually that they understand and abide by the Code ofEntegrity. The Code of Business Conduct and Ethics, including any amendments or any waivers thereto, and the Code of Entegrity areavailable through Entergy’s website (www.entergy.com) or upon written request.Nominations to the Entergy Corporation Board of Directors; Nominating ProcedureThe Corporate Governance Committee will consider candidates identified by current directors, management, third-party searchfirms engaged by the Corporate Governance Committee and Entergy Corporation’s shareholders. Shareholders wishing to recommend acandidate to the Corporate Governance Committee should do so by submitting the recommendation in writing to Entergy Corporation’sSecretary at 639 Loyola Avenue, P.O. Box 61000, New Orleans, LA 70161, and it will be forwarded to the Corporate GovernanceCommittee members for their consideration. Any recommendation should include:•the number of shares of Entergy Corporation stock held by the shareholder;•the name and address of the candidate;454Table of Contents•a brief biographical description of the candidate, including his or her occupation for at least the last five years, and a statementof the qualifications of the candidate, taking into account the qualification requirements discussed in the Proxy Statement under“Board of Directors - Identifying Director Candidates”; and•the candidate’s signed consent to be named in the Proxy Statement and a representation of such candidates’ intent to serve as adirector for the entire term if elected. Once the Corporate Governance Committee receives the recommendation, it may request additional information from thecandidate about the candidate’s independence, qualifications, and other information that would assist the Corporate GovernanceCommittee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in the Proxy Statement,if nominated. The Corporate Governance Committee will apply the same standards in considering director candidates recommended byshareholders as it applies to other candidates.Section 16(a) Beneficial Ownership Reporting ComplianceInformation called for by this item concerning the directors and officers of Entergy Corporation is set forth in the ProxyStatement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders to be held on May 3, 2019, underthe heading “Section 16(a) Beneficial Ownership Reporting Compliance,” which information is incorporated herein by reference.455Table of ContentsItem 11. Executive CompensationENTERGY CORPORATIONInformation concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement under the headings“Compensation Discussion and Analysis,” “Executive Compensation Tables,” “2019 Director Nominees,” “Personnel CommitteeInterlocks and Insider Participation,” and “2018 Non-Employee Director Compensation,” all of which information is incorporatedherein by reference.ENTERGY ARKANSAS, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, AND ENTERGYTEXASCOMPENSATION DISCUSSION AND ANALYSISIn this section, the compensation earned in 2018 by the following executive officers (referred to herein as “Named ExecutiveOfficers”) is discussed.Name(1)TitleA. Christopher Bakken, IIIExecutive Vice President, Nuclear Operations/Chief Nuclear OfficerMarcus V. BrownExecutive Vice President and General CounselLeo P. DenaultChairman of the Board and Chief Executive OfficerDavid D. Ellis(2)President and Chief Executive Officer, Entergy New OrleansHaley R. FisackerlyPresident and Chief Executive Officer, Entergy MississippiLaura R. Landreaux(3)President and Chief Executive Officer, Entergy ArkansasAndrew S. MarshExecutive Vice President and Chief Financial Officer Entergy Arkansas, EntergyLouisiana, Entergy Mississippi, Entergy New Orleans, and Entergy TexasPhillip R. May, Jr.President and Chief Executive Officer, Entergy LouisianaSallie T. RainerPresident and Chief Executive Officer, Entergy TexasCharles L. Rice, Jr.(2)Former President and Chief Executive Officer, Entergy New OrleansRichard C. Riley(3)Former President and Chief Executive Officer, Entergy ArkansasRoderick K. West(2)Group President Utility Operations(1)Messrs. Bakken, Brown, Denault, Marsh, and West hold the positions referenced above as executive officers of EntergyCorporation and are members of Entergy Corporation’s Office of the Chief Executive. No additional compensation was paid in2018 to any of these officers for their service as Named Executive Officers of the Utility operating companies.(2)Mr. Rice is included in the Executive Compensation section of this Form 10-K because he served as President and ChiefExecutive Officer, Entergy New Orleans for a portion of 2018. Mr. Ellis became President and Chief Executive Officer, NewOrleans in December 2018, and for a portion of 2018, Mr. West served as interim President and Chief Executive Officer,Entergy New Orleans.(3)Mr. Riley is included in the Executive Compensation section of this Form 10-K because he served as President and ChiefExecutive Officer, Entergy Arkansas for a portion of 2018. Ms. Landreaux succeeded Mr. Riley as President and ChiefExecutive Officer, Entergy Arkansas in July 2018.456Table of ContentsEntergy Corporation’s Executive Compensation Programs and Practices Entergy Corporation regularly reviews its executive compensation programs to align them with commonly viewed best practicesin the market and to reflect feedback from discussions with investors on executive compensation. Executive Compensation Best Practices:What EntergyCorporation Does*Executive compensation programs are highly correlated to performance and focused on long-term valuecreation*Double trigger for cash severance payments and equity acceleration in the event of a change in control*Clawback policy*Maximum payout capped at 200% of target under the Annual Incentive Plan and Long-Term PerformanceUnit Program for members of the Office of the Chief Executive*Minimum vesting periods for equity-based awards*Long-term compensation mix weighted more toward performance units than service-based equity awards*All long-term performance units settled in shares of Entergy Corporation common stock*Rigorous stock ownership requirements*Executives required to hold substantially all equity compensation received by Entergy Corporation untilstock ownership guidelines are met*Annual Say on Pay voteWhat EntergyCorporationDoesn’t Do*No 280G tax “gross up” payments in the event of a change in control*No tax “gross up” payments on any executive perquisites, other than relocation benefits available to alleligible employees, and club dues for some of the Named Executive Officers.*No option repricing or cash buy-outs for underwater options*No agreements providing for severance payments to executive officers that exceed 2.99 times annual basesalary and annual incentive awards without shareholder approval*No hedging or pledging of Entergy Corporation common stock*No unusual or excessive perquisites*No new officer participation in the System Executive Retirement Plan*No grants of supplemental service credit to newly-hired officers under any of Entergy Corporation’s non-qualified retirement plansEntergy Corporation’s Pay for Performance PhilosophyEntergy Corporation’s executive compensation programs are based on a philosophy of pay for performance that is embodied inthe design of its annual and long-term incentive plans. It believes the executive pay programs described in this section and in theaccompanying tables have played a significant role in the ability to drive strong financial and operational results and to attract andretain a highly experienced and successful management team.•Annual Incentive Plan incentivizes and rewards the achievement of financial metrics that are deemed by the EntergyCorporation Personnel Committee to be consistent with the overall goals and strategic direction that the Entergy CorporationBoard has approved for Entergy Corporation.•Long-term incentive programs further align the interests of the executives and Entergy Corporation’s shareholders by directlytying the value of equity awards granted to executives under these programs to Entergy Corporation’s stock price performance,relative total shareholder return, and beginning in 2018, cumulative adjusted utility earnings growth. The long-term incentivesconsist of three components - performance units, stock options and restricted stock.457Table of ContentsBy incentivizing officers to achieve important financial and operational objectives and create long-term shareholder value,Entergy Corporation believes these programs play a key role in creating sustainable value for the benefit of all of its stakeholders,including its owners, customers, employees, and communities.2018 Incentive Pay Outcomes Entergy Corporation believes the 2018 incentive pay outcomes for the Named Executive Officers demonstrated the applicationof Entergy Corporation’s pay for performance philosophy.Annual Incentive Plan Awards under the Executive Annual Incentive Plan, or Annual Incentive Plan, are tied to Entergy Corporation’s financial andoperational performance through the Entergy Achievement Multiplier (EAM), which is the performance metric used to determine themaximum funding available for awards under the plan. The 2018 EAM was determined based in equal part on Entergy Corporation’ssuccess in achieving its consolidated operational earnings per share and consolidated operational operating cash flow goals set at thebeginning of the year. These goals were approved by the Personnel Committee based on Entergy Corporation’s financial plan and theBoard’s overall goals for Entergy Corporation and were consistent with its published earnings guidance.2018 Annual Incentive Plan PayoutFor 2018, the Personnel Committee, based on the recommendation of the Finance Committee, determined that managementexceeded its consolidated operational earnings per share goal of $6.55 per share by $2.03 per share, but fell short of its consolidatedoperational operating cash flow goal of $3.000 billion by approximately $180 million. Based on the targets and ranges previouslyestablished by the Personnel Committee, these results resulted in a calculated EAM of 134%.After considering individual performance, including not only the role played by each of the Named Executive Officers who aremembers of the Office of the Chief Executive in advancing Entergy Corporation’s strategies and delivering the strong financial resultsachieved in 2018, but also each such individual’s degree of accountability for certain operational and regulatory challenges EntergyCorporation experienced in 2018, the Personnel Committee approved payouts ranging from 115% to 122% of target for each of theNamed Executive Officers who are members of the Office of the Chief Executive.After the EAM was established to determine overall funding for the Annual Incentive Plan, Entergy Corporation’s ChiefExecutive Officer allocated incentive award funding to individual business units based on business unit results. Individual awards weredetermined for the Named Executive Officers who are not members of the Office of the Chief Executive by their immediate supervisorbased on the individual officer’s key accountabilities, accomplishments, and performance. This resulted in payouts that ranged from 0%of target to 118% of target for the Named Executive Officers who are not members of Entergy Corporation’s Office of the ChiefExecutive.Long-Term Incentives Long term incentives consist of three components:•Long-Term Performance Unit Program - Units are granted with performance measured over a three-year period based onEntergy Corporation’s total shareholder return in relation to the total shareholder return of the companies included in thePhiladelphia Utility Index, and beginning with the 2018-2020 performance period, a cumulative utility earnings metric. Payouts,if any, are based on Entergy Corporation’s performance on these measures against pre-established performance goals.•Stock Options - Incentivizes executives to take actions that increase the market value of Entergy Corporation’s common stockand directly aligns with the value shareholders receive over the same period of time; and458Table of Contents•Restricted Stock - Increases executive stock ownership and is an effective retention mechanism.Long-Term Performance Unit Program Payout For the three-year performance period ending in 2018, Entergy Corporation’s total shareholder return was ninth out of the twentycompanies in the Philadelphia Utility Index, resulting in a payout of 111% of target for the executive officers. Payouts were made inshares of Entergy Corporation stock which are required to be held by the executive officers until they satisfy the executive stockownership guidelines.What Entergy Corporation Pays and WhyHow Entergy Corporation Sets Target PayThe Personnel Committee annually reviews compensation data from two sources:Use of Competitive DataTo develop marketplace compensation levels for Entergy Corporation’s executive officers, the Personnel Committee primarilyuses the following types of data to compare the current compensation opportunities provided to each of the executive officers againstthe compensation opportunities provided to executives holding similar positions at companies with corporate revenues similar toEntergy Corporation’s:•Published and private compensation survey data compiled by Pay Governance;•Both utility and general industry data to determine total cash compensation (base salary and annual incentive) for non-industryspecific roles;•Data from utility companies to determine total cash compensation for management roles that are utility-specific, such as GroupPresident, Utility Operations; and•Utility market data to determine long-term incentives for all positions.The Personnel Committee uses this survey data to develop compensation opportunities that are designed to deliver total targetcompensation within a targeted range of approximately the 50th percentile of the surveyed companies in the aggregate. In most cases,the committee considers its objectives to have been met if Entergy Corporation’s Chief Executive Officer and the six other executiveofficers (including all of the Named Executive Officers) who constitute the Office of the Chief Executive each has a targetcompensation opportunity that falls within a targeted range of 85% - 115% of the 50th percentile of the survey data. In general,compensation levels for an executive officer who is new to a position tend to be at the lower end of the competitive range, whileseasoned executive officers with strong performance who are viewed as critical to retain would be positioned at the higher end of thecompetitive range. Actual compensation received by an individual officer may be above or below the targeted range based on anindividual officer’s skills, performance, experience and responsibilities, corporate performance and internal pay equity. Proxy AnalysisAlthough the survey data described above are the primary data used in benchmarking compensation, the committee reviewsdata derived from the proxy statements of companies included in the Philadelphia Utility Index to evaluate the overall reasonableness ofEntergy Corporation’s compensation programs. The Personnel Committee identified the Philadelphia Utility Index as the appropriateindustry peer group because the companies included in this index, in the aggregate, are comparable to Entergy Corporation in terms ofbusiness and scale. Companies included in the Philadelphia Utility Index at the time the proxy data was compiled were as follows:459Table of ContentsŸAES CorporationŸEl Paso Electric Co.ŸAmeren CorporationŸEversource EnergyŸAmerican Electric Power Co. Inc.ŸExelon CorporationŸAmerican Water WorksŸFirstEnergy CorporationŸCenterPoint Energy Inc.ŸNextEra Energy, Inc.ŸConsolidated Edison Inc.ŸPG&E CorporationŸDominion EnergyŸPublic Service Enterprise Group, Inc.ŸDTE Energy CompanyŸSouthern CompanyŸDuke Energy CorporationŸXcel Energy, Inc.ŸEdison International Principal Executive Compensation ElementsThe following table summarizes the elements of total direct compensation (TDC) granted or paid to the executive officers underthe 2018 executive compensation programs. The programs use a mix of fixed and variable compensation elements and are designed toprovide alignment with both short- and long-term business goals through annual and long-term incentives. An executive officer’s TDCis based primarily on corporate performance, market-based compensation levels and individual performance with each of theseelements reviewed annually for each Named Executive Officer. CompensationComponentPrimary PurposePerformance MeasuredKey CharacteristicCash/EquityPerformancePeriodBase SalaryProvides a base level ofcompetitive cash compensation forexecutive talent.Role, experience, job scope,market data, and individualperformanceFixedCashOngoingAnnual IncentiveMotivates and rewards executivesfor performance on key financialmeasures during the year.Consolidated operationalearnings per share andoperational operating cash flowVariableCash1 yearLong-TermPerformanceUnitProgramFocuses executives on growingearnings and building long-termshareholder value and increasesexecutives’ ownership of EntergyCorporation common stock.Total shareholder return andutility earnings growthVariableEquity3 yearsStockOptionsAlign interests of executives withlong-term shareholder value,provide competitivecompensation, and increase theexecutives’ ownership in EntergyCorporation’s common stock.Job scope, market data,individual and EntergyCorporation performance.Variable Equity3 yearsRestricted StockAligns interests of executives withlong-term shareholder value,provides competitivecompensation, retains executivetalent and increases the executives’ownership in EntergyCorporation’s common stock.Job scope, market data, andindividual performanceVariableEquity3 years460Table of ContentsFixed CompensationBase SalaryThe Personnel Committee determines the base salaries for all of the Named Executive Officers who are members of the Officeof the Chief Executive based on competitive compensation data, performance considerations, and advice provided by the committee’sindependent compensation consultant. For the other Named Executive Officers, their salaries are established by their immediatesupervisors using the same criteria. In addition, in determining base salary adjustments, the Personnel Committee considered internalpay equity, although the Personnel Committee has not established any predetermined formula by which an individual’s base salary ismeasured or evaluated in relation to other employees. In 2018, all of the Named Executive Officers received merit increases in theirbase salaries ranging from approximately 2.4% to 4.2% other than Mr. Ellis. The increases in base salary were based on the market datapreviously discussed in this CD&A under “What Entergy Corporation Pays and Why - How Entergy Corporation Sets Target Pay.” The following table sets forth the 2017 and 2018 base salaries for the Named Executive Officers. Except as indicated below,changes in base salaries for 2018 were effective in April.Named Executive Officer 2017 Base Salary 2018 Base SalaryA. Christopher Bakken, III $620,125 $638,125Marcus V. Brown $630,000 $650,000Leo P. Denault $1,230,000 $1,260,000David D. Ellis(1) $— $305,000Haley R. Fisackerly $355,300 $365,959Laura R. Landreaux(2) $186,339 $308,000Andrew S. Marsh $600,000 $622,000Phillip R. May, Jr. $366,150 $381,550Sallie T. Rainer $328,275 $338,123Charles L. Rice, Jr.(3) $286,424 $230,000Richard C. Riley(4) $344,200 $375,000Roderick K. West $675,598 $696,598(1)When Mr. Ellis joined Entergy in December 2018, his base salary was set at $305,000 based on competitive market datadiscussed above, as well as internal pay equity considerations.(2)In July 2018, Ms. Landreaux’s salary was increased when she became President and Chief Executive Officer, Entergy Arkansasand assumed the increased responsibilities of that role.(3)Mr. Rice’s salary was adjusted when he transitioned into Entergy Corporation’s legal department.(4)Mr. Riley’s salary was increased when he became Senior Vice President, Distribution Operations and Asset Management andassumed the increased responsibilities of that role.Variable CompensationShort-Term Incentive CompensationAnnual Incentive PlanEntergy Corporation includes performance-based incentives in the Named Executive Officers’ compensation packages becauseit believes performance-based incentives encourage the Named Executive Officers to pursue objectives consistent with the overall goalsand strategic direction that the Board has approved for Entergy Corporation. The EAM is the performance metric used to determine themaximum percentage of target annual plan opportunities that will be paid each year to each Named Executive Officer who is a memberof the Office of the Chief Executive461Table of Contentsunder the Annual Incentive Plan. Once the EAM has been determined, individual awards for the Office of the Chief Executive membersmay be adjusted downward, but not upward, from the EAM at the Personnel Committee’s discretion, based on individual performanceand other factors deemed relevant by the Personnel Committee.Target award opportunities are set based on an executive officer’s position and executive management level within the Entergyorganization. Executive management levels at Entergy Corporation range from Level 1 through Level 5. At December 31, 2018, Mr.Denault held a Level 1 position, Messrs. Bakken, Brown, Marsh, and West held positions in Level 2, Mr. May and Mr. Riley held Level3 positions, Mr. Ellis, Mr. Fisackerly, Ms. Landreaux and Ms. Rainer held Level 4 positions and Mr. Rice held a Level 5 position.Accordingly, their respective incentive award opportunities differ from one another based on their management level and the externalmarket data developed by the Committee’s independent compensation consultant.Setting TargetsAnnual Review of Performance Measures to Determine EAM Pool:In December 2017, the Personnel Committee decided to retain consolidated operational earnings per share and consolidatedoperational operating cash flow, with each measure weighted equally, as the performance measures for determining the EAM pool.Other measures were considered, but the Personnel Committee determined that consolidated operational earnings per share andoperational operating cash flow continued to be the best metrics to use for this purpose because:•They represent objective measures that Entergy Corporation and its investors consider to be important in evaluating itsfinancial performance;•They align with Entergy Corporation’s internal and external financial reporting; and•They provide both discipline and transparency.Establishing Target Achievement LevelsThe Personnel Committee annually engages in a rigorous process with a goal of establishing target achievement levels that areconsistent with Entergy Corporation’s strategy and business objectives for the upcoming year, as reflected in its financial plan andsufficient to drive results that represent a high level of achievement. These targets are approved based on a comprehensive review bythe full Board of Entergy Corporation’s financial plan, conducted in December of the preceding year and updated in January to reflectthe most current information concerning changes in commodity market conditions and other key drivers of anticipated changes inperformance from the preceding year. The Personnel Committee also seeks to assure that the targets:•Take into account changes in the business environment and specific challenges facing Entergy Corporation;•Reflect an appropriate balancing of the various risks and opportunities recognized at the time the targets are set; and•Are aligned with external expectations communicated to Entergy Corporation’s shareholders.2018 TargetsIn January 2018, the Personnel Committee followed the process described above in setting 2018 performance targets.Consistent with its authority and past practice, the Personnel Committee determined that the effect of the following would be excludedfrom the reported results:•Any major storms that may occur during the year;•Certain impacts that may occur as a result of the implementation of the Tax Cuts and Jobs Act enacted in December 2017;•Certain unresolved litigation initiated in the late 1990s and early 2000s relating to an agreement among the Utilityoperating company subsidiaries that has since been terminated; and462Table of Contents•Unrealized gains and losses on equity securities different than assumed in the plan.The Personnel Committee viewed the exclusion of major storms as appropriate because although estimates for storm costs areincluded in Entergy Corporation’s financial plan, it does not include estimates for a major storm event, such as a hurricane. Theadjustment for unanticipated impacts of the Tax Cuts and Jobs Act was limited to the impact of any deviations from regulatoryassumptions incorporated into the plan relating to (a) the timing of the adjustment of retail electric rates due to the change in the federaltax rate, and (b) the timing and amount of deferred income taxes that may be refunded to customers. However, the impacts of taxreform were only to be excluded to the extent that they cumulatively impacted consolidated operational earnings per share by morethan $0.10 per share in 2018. The Personnel Committee considered the exclusion of tax reform to be appropriate because of thesubstantial uncertainty around the outcomes of the applicable discussions and proceedings with regulators, which had not yetcommenced, and because of the potential that there could be significant adverse impacts on 2018 results from such outcomes thatwould be in the long-term best interest of Entergy Corporation. The Personnel Committee approved the other exclusions from reportedresults, for the impact of the legacy system agreement litigation and unrealized gains and losses on securities held by EntergyCorporation’s nuclear decommissioning trusts, primarily because of management’s inability to influence either of the related outcomes.In determining the targets to set for 2018, the Personnel Committee reviewed anticipated drivers for consolidated operationalearnings per share and consolidated operational operating cash flow for 2018 as set forth in Entergy Corporation’s financial plan, aswell as factors driving the strong financial performance achieved in 2017. The Personnel Committee noted that a substantial portion of2017 operational earnings per share was attributable to a major restructuring tax benefit at the Entergy Wholesale Commoditiesbusiness. The committee also noted that 2017 operational earnings per share had been adversely impacted by unusual weather. Afteradjusting to eliminate the impact on 2017 operational results of both the tax item and weather, the committee confirmed that theproposed plan target for operational earnings per share reflected substantial growth in core operational earnings.The Personnel Committee also considered the potential impact of certain risks and opportunities, including differences fromplan in wholesale energy prices and capacity factors at the Entergy Wholesale Commodities business, utility sales, operations andmaintenance costs, interest expense and certain tax and regulatory outcomes. This evaluation indicated that there was significantly moredownside risk than upside opportunity in the targets and, as a result, that there was a reasonable degree of challenge embedded in thetargets. 2018 Performance AssessmentThe following table shows the 2018 Incentive Plan targets established by the Personnel Committee and 2018 results:Annual Incentive Plan Targets and Results Performance Goals(1) MinimumTargetMaximum2018 Results(2)Consolidated Operational Earnings Per Share$5.90$6.55$7.20$8.58Consolidated Operational Operating Cash Flow ($billion)$2.580$3.000$3.420$2.820EAM as % of Target25%100%200%134%(1)Payouts for performance between minimum and target achievement levels and between target and maximum levels arecalculated using straight-line interpolation. There is no payout for performance below minimum.(2) These results are adjusted to reflect the pre-determined exclusions approved by the Personnel Committee in January 2018 anddescribed above.In January 2019, the Finance and Personnel Committees jointly reviewed Entergy Corporation’s financial results against theperformance objectives reflected in the table above. Management discussed with the committees Entergy Corporation’s consolidatedoperational earnings per share and consolidated operational operating cash flow463Table of Contentsresults for 2018, including primary factors explaining how those results compared to the 2018 business plan and Annual Incentive Plantargets set in January. Consolidated operational earnings per share, adjusted as determined by the committee when targets were set atthe beginning of the year, exceeded Entergy Corporation’s consolidated operational earnings per share goal of $6.55 per share by$2.03, due in large part to a favorable tax item and a pre-determined adjustment made for the impact of below-plan market performanceby the investment securities in Entergy Corporation’s nuclear decommissioning trusts, but management fell short of achieving itsconsolidated operational operating cash flow goal of $3.000 billion by approximately $180 million, on an adjusted basis, leading to acalculated EAM of 134%.Operational results for 2018 excluded the impact of certain special items that were excluded from as-reported (GAAP)consolidated earnings per share and operating cash flow to determine operational earnings per share and operating cash flow, includingitems related to tax reform legislation, the shutdown and disposition of Entergy Wholesale Commodities business nuclear plants, theaccelerated return of unprotected accumulated deferred income taxes as a result of tax reform, Entergy Wholesale Commoditiesbusiness net revenue and nuclear decommissioning trust tax payments. These were not adjustments made by the committee indetermining the EAM, but were all considered special items and therefore excluded from the operational results reported to investorsand from the financial measures used in the plan targets. To determine individual executive officer awards under the Annual Incentive Plan for the Named Executive Officers who aremembers of the Office of the Chief Executive, the Personnel Committee considered not only each executive’s role in executing onEntergy Corporation’s strategies and delivering the strong financial performance achieved in 2018, but also the individual’saccountability for certain operational and regulatory challenges it experienced during the year. With these considerations in mind, thecommittee exercised negative discretion to determine individual awards that ranged from 115% to 122% of target for each of theNamed Executive Officers who are members of the Office of the Chief Executive, with the extent of the negative discretion appliedvarying based on the executive’s specific accountabilities and accomplishments. After the EAM was established to determine overall funding for the Annual Incentive Plan, Entergy Corporation’s ChiefExecutive Officer allocated incentive award funding to individual business units based on business unit results. Individual awards weredetermined for the remaining Named Executive Officers who are not members of the Office of the Chief Executive by their immediatesupervisor based on the individual officer’s key accountabilities, accomplishments, and performance. This resulted in payouts thatranged from 0% of target to 118% of target for the Named Executive Officers who are not members of the Office of the ChiefExecutive.Based on the foregoing evaluation of management performance, the Named Executive Officers received the following AnnualIncentive Plan payouts for 2018:Named Executive OfficerBase Salary (1)Target as Percentageof Base SalaryPayout as Percentageof Target(2)2018 AnnualIncentive AwardA. Christopher Bakken, III$638,12570%122%$544,959Marcus V. Brown$650,00070%120%$546,000Leo P. Denault$1,260,000135%120%$2,041,200David D. Ellis(3)$——%—%$—Haley R. Fisackerly$365,95940%117%$172,000Laura R. Landreaux$308,00040%101%$124,000Andrew S. Marsh$622,00070%122%$531,188Phillip R. May, Jr.$381,55060%118%$270,000Sallie T. Rainer$338,12340%118%$159,000Charles L. Rice, Jr.$230,00030%—%$—Richard C. Riley$375,00060%100%$225,000Roderick K. West$696,59870%115%$560,762464Table of Contents(1)The target opportunities, as a percentage of salary, were determined based on the individual’s position and salary at the end of2018. Such target opportunities for the Named Executive Officers did not change from the levels set in 2017, except for Ms.Landreaux’s and Mr. Riley’s, whose target opportunities increased due to their promotions during the year, and Mr. Rice’swhose target opportunities decreased, as he was no longer serving in an officer position at year-end.(2)The Named Executive Officers, who are members of the Office of the Chief Executive, may earn a maximum payout rangingfrom 0% to 200% of their target opportunity, not to exceed the EAM.(3)As a new hire, Mr. Ellis was not eligible to participate in the Annual Incentive Plan for 2018. Nuclear Retention PlanMr. Bakken participates in the Nuclear Retention Plan, a retention plan for officers and other leaders with expertise in thenuclear industry. The Personnel Committee authorized this plan to attract and retain key management and employee talent in thenuclear power field, a field that requires unique technical and other expertise that is in great demand in the utility industry. The planprovides for bonuses to be paid annually over a three-year service period with the bonus opportunity dependent on the participant’smanagement level and continued employment. Each annual payment is equal to an amount ranging from 15% to 30% of theemployee’s base salary as of their date of enrollment in the plan. Mr. Bakken’s participation in the plan commenced in May 2016, andin accordance with the terms and conditions of the plan, in May 2017 and 2018, Mr. Bakken received, and in May 2019, subject to hiscontinued employment, Mr. Bakken will receive a cash bonus equal to $181,500 or 30% of his May 1, 2016 base salary. This plan doesnot provide for accelerated or prorated payout upon termination of any kind.Long-Term Incentive CompensationEntergy Corporation’s goal for its long-term incentive compensation is to focus the executive officers on building shareholdervalue and to increase the executive officers’ ownership of Entergy Corporation’s common stock in order to more closely align theirinterest with those of Entergy Corporation’s shareholders. In general, Entergy Corporation seeks to allocate the total value of long-termincentive compensation 60% to performance units and 40% to a combination of stock options and restricted stock, equally divided invalue, based on the value the compensation model seeks to deliver. Awards for individual Named Executive Officers may vary fromthis target as a result of individual performance, promotions, and internal pay equity.All of the outstanding performance units and all of the shares of restricted stock and stock options granted to the NamedExecutive Officers in 2018 were granted pursuant to the 2015 Equity Ownership Plan or 2015 Equity Plan. The 2015 Equity Planrequires both a change in control and an involuntary job loss or substantial diminution of duties (a “double trigger”) for the accelerationof these awards upon a change in control.Performance Unit ProgramThe Named Executive Officers are issued performance unit awards under the Long-Term Performance Unit Program.•Each performance unit represents one share of Entergy Corporation’s common stock at the end of the three-yearperformance period, plus dividends accrued during the performance period.•The performance units and accrued dividends on any shares earned during the performance period are settled in sharesof Entergy Corporation common stock.•The Personnel Committee sets payout opportunities for the program at the outset of each performance period, withpayouts only occurring if the performance goals are met.•Payouts under this program are not made if minimum performance goals are not achieved.•All shares paid out under the Long-Term Performance Unit Program are required to be retained by EntergyCorporation’s officers until applicable executive stock ownership requirements are met.The Long-Term Performance Unit Program specifies a minimum, target and maximum achievement level, the achievement ofwhich will determine the number of performance units that may be earned by each participant. For the465Table of Contents2016-2018 and 2017-2019 performance periods, performance will be measured by assessing Entergy Corporation’s total shareholderreturn relative to the total shareholder return of the companies in the Philadelphia Utility Index. The Personnel Committee identified thePhiladelphia Utility Index as the appropriate industry peer group for this purpose because the companies included in this index, in theaggregate, are comparable to Entergy Corporation in terms of business and scale. The Personnel Committee chose relative totalshareholder return as a performance measure because it reflects Entergy Corporation’s creation of shareholder value relative to otherelectric utilities over the performance period. It also takes into account dividends paid by the companies in this index and normalizescertain events that affect the industry as a whole. Minimum, target and maximum performance levels are determined by reference to theranking of Entergy Corporation’s total shareholder return against the total shareholder return of the companies in the PhiladelphiaUtility Index.For the 2018-2020 performance period, performance will be measured using two performance measures - total shareholderreturn and cumulative adjusted Utility, Parent & Other earnings per share (UP&O Adjusted EPS), with each performance measureweighted equally. UP&O Adjusted EPS, which adjusts Entergy Corporation’s operational Utility, Parent & Other results to eliminate theimpact of tax items and weather, was added as a performance measure since delivering steady, predictable growth at the Utility is anintegral component of executing Entergy Corporation’s strategy, and it aligns with externally communicated Utility guidance. Similar tothe way targets are established for the Annual Incentive Plan, targets for the UP&O Adjusted EPS performance measure wereestablished by the Personnel Committee after the Board’s review of Entergy Corporation’s financial plan. These targets also incorporateexclusions similar to those used with the Annual Incentive Plan. Given the economic and market conditions at the time the targets wereset, the target payout levels for the UP&O Adjusted EPS goal were designed to be challenging but achievable, while payouts at themaximum levels were designed to be stretch goals. Payout is based on achieving the performance goals established for eachperformance measure by the committee at the beginning of the performance period.Performance Unit Program Grants. At any given time, a participant in the Long-Term Performance Unit Program may beparticipating in up to three performance periods. During 2018, eligible participants were participating in the 2016-2018, 2017-2019 and2018-2020 performance periods. Subject to achievement of the applicable performance levels as described below, the PersonnelCommittee established the following target performance unit payout opportunities for each of the 2016-2018, 2017-2019 and 2018-2020 performance periods.Named Executive Officer2016-2018Target2017-2019 Target2018-2020 TargetA. Christopher Bakken, III (1)7,2898,3007,900Marcus V. Brown8,2008,3007,900Leo P. Denault41,70048,70042,700David D. Ellis(2)———Haley R. Fisackerly1,8001,8501,650Laura R. Landreaux(3)—9251,375Andrew S. Marsh8,2008,3007,900Phillip R. May, Jr.2,7003,1502,550Sallie T. Rainer1,8001,8501,650Charles L. Rice, Jr.(4)1,500976321Richard C. Riley(4)1,9502,5002,400Roderick K. West8,2008,3007,900(1)As a new hire in 2016, Mr. Bakken received a pro-rated target award opportunity for the 2016-2018 performance period.(2)As of December 31, 2018, Mr. Ellis was not a participant in the Long-Term Performance Unit Program.(3)When Ms. Landreaux became President, Entergy Arkansas, she received pro-rated target award opportunities for the 2017-2019and 2018-2020 performance periods. As a new officer in 2018, Ms. Landreaux was not eligible to participate in the 2016-2018performance period.466Table of Contents(4)Mr. Rice and Mr. Riley’s target opportunities were modified in connection with their change in positions in 2018.The range of potential payouts for the 2016-2018 and 2017-2019 performance periods under the program is shown below.Performance Level(1)ZeroMinimumTargetMaximumTotal Shareholder ReturnFourth QuartileBottom of ThirdQuartileMedian percentileTop QuartilePayoutNo PayoutMinimum Payout of25% of target100% of target200% of Target(1)Payouts for performance between achievement levels are calculated using straight-line interpolation, with no payouts forperformance below the minimum achievement level. As noted above, for the 2018-2020 performance period, performance will be measured using two performance measures - totalshareholder return and UP&O Adjusted EPS with each performance measure weighted equally. Under the 2018-2020 performanceperiod, the performance goals and the payout opportunities associated with the relative total shareholder return metric are consistentwith the 2016-2018 and 2017-2019 performance periods, as described above. Based on performance, the performance units allocatedto the UP&O Adjusted EPS goal could range from 25% to 200% of the target opportunity, with no payment for performance below theminimum performance goal. The Personnel Committee established the performance goals and range of potential payouts for the 2018-2020 performance period to encourage strong, focused performance.Payout for the 2016-2018 Performance Period. In January 2019, the Personnel Committee reviewed Entergy Corporation’s totalshareholder return for the 2016-2018 performance period in order to determine the payout to participants. The committee comparedEntergy Corporation’s total shareholder return against the total shareholder return of the companies that comprise the PhiladelphiaUtility Index, with the performance measures and range of potential payouts for the 2016-2018 performance period as discussed above.As recommended by the Finance Committee, the Personnel Committee concluded that Entergy Corporation’s relative total shareholderreturn for the 2016-2018 performance period fell in the second quartile, yielding a payout of 111% of target for the Named ExecutiveOfficers.Named Executive Officer2016-2018TargetNumber ofShares IssuedValue of SharesActually Issued(1)Grant Date FairValueA. Christopher Bakken, III(2)7,2898,998$774,098$616,066Marcus V. Brown8,20010,212$878,538$693,064Leo P. Denault41,70051,933$4,467,796$3,524,484David D. Ellis(3)——$—$—Haley R. Fisackerly1,8002,241$192,793$152,136Laura R. Landreaux(4)——$—$—Andrew S. Marsh8,20010,212$878,538$693,064Phillip R. May, Jr.2,7003,362$289,233$228,204Sallie T. Rainer1,8002,241$192,793$152,136Charles L. Rice, Jr.(5)1,5001,894$162,941$126,780Richard C. Riley(5)1,9502,411$207,418$164,814Roderick K. West8,20010,212$878,538$693,064467Table of Contents(1)Value determined based on the closing price of Entergy Corporation’s common stock on January 17, 2019 ($86.03), the datethe Personnel Committee certified the 2016-2018 performance period results.(2)As a new hire in 2016, Mr. Bakken received a pro-rated target award opportunity for the 2016-2018 performance period.(3)As a new hire in 2018, Mr. Ellis was not eligible to participate in 2016-2018 performance period.(4)As a new officer in 2018, Ms. Landreaux was not a participant in the 2016-2018 performance period.(5)Mr. Rice and Mr. Riley experienced a change in officer status in 2018, and accordingly, each received a pro-rated awardopportunity for the 2016-2018 performance period.Stock Options and Restricted StockFactors used by the Personnel Committee to determine the number of stock options and shares of restricted stock it will grantto Entergy Corporation’s Named Executive Officers include Entergy Corporation and individual performance, internal pay equity,prevailing market practice, with the committee’s assessment of individual performance of each Named Executive Officer other thanEntergy Corporation’s Chief Executive Officer being the most important factor in determining the number of shares of restricted stockand stock options awarded and comparative market data being the most important factor in determining Entergy Corporation’s ChiefExecutive Officer’s award levels. The Personnel Committee, in consultation with Entergy Corporation’s Chief Executive Officer,reviews each other Named Executive Officer’s performance, role and responsibilities, strengths and developmental opportunities. Stockoption and restricted stock awards for Entergy Corporation’s Chief Executive Officer are determined solely by the Personnel Committeeon the basis of the same considerations. The following table sets forth the number of stock options and shares of restricted stock granted to each Named ExecutiveOfficer in 2018. The exercise price for each option was $78.08, which was the closing price of Entergy Corporation’s common stock onthe date of grant.Named Executive OfficerStock OptionsShares of Restricted StockA. Christopher Bakken, III40,5005,000Marcus V. Brown40,5005,000Leo P. Denault167,10015,700David D. Ellis(1)——Haley R. Fisackerly6,600800Laura R. Landreaux(2)—1,200Andrew S. Marsh49,0005,200Phillip R. May, Jr.9,9001,000Sallie T. Rainer6,600800Charles L. Rice, Jr.400600Richard C. Riley9,9001,100Roderick K. West42,5005,200(1)As a new hire, Mr. Ellis was not eligible to receive stock options or restricted stock in 2018.(2)Stock options are awarded only to individuals who are officers at the time of grant. Ms. Landreaux was not eligible to receivestock options in 2018 because she was not an officer when the grants were made in 2018.468Table of ContentsBenefits and PerquisitesEntergy Corporation’s Named Executive Officers are eligible to participate in or receive the following benefits:Plan TypeDescriptionRetirement PlansEntergy Corporation-sponsored:Entergy Retirement Plan - a tax-qualified final average pay defined benefit pensionplan that covers a broad group of employees hired before July 1, 2014.Cash Balance Plan - a tax-qualified cash balance defined benefit pension plan thatcovers a broad group of employees hired on or after July 1, 2014.Pension Equalization Plan - a non-qualified pension restoration plan for a select groupof management or highly compensated employees who participate in the Entergy RetirementPlan.Cash Balance Equalization Plan - a non-qualified restoration plan for a select group ofmanagement or highly compensated employees who participate in the Cash Balance Plan.System Executive Retirement Plan - a non-qualified supplemental retirement plan forindividuals who became executive officers before July 1, 2014.See the 2018 Pension Benefits Table for additional information regarding the operation of the plansdescribed above.Savings PlanEntergy Corporation-sponsored 401(k) Savings Plan that covers a broad group of employees.Health & WelfareBenefitsMedical, dental, and vision coverage, life and accidental death and dismemberment insurance,business travel accident insurance, and long-term disability insurance.Eligibility, coverage levels, potential employee contributions, and other plan design features are thesame for the Named Executive Officers as for the broad employee population.2018 PerquisitesCorporate aircraft usage, annual mandatory physical exams, relocation assistance, and event tickets.The Named Executive Offices who are members of the Office of the Chief Executive do not receivetax gross ups on any benefits, except for relocation assistance. Named Executive Officers who are not members of the Office of the Chief Executive also wereprovided in 2018 with club dues and tax gross up payments on some perquisites.For additional information regarding perquisites, see the “All Other Compensation” column in the2018 Summary Compensation Table.DeferredCompensationThe Named Executive Officers are eligible to defer up to 100% of their base salary and AnnualIncentive Plan awards into the Entergy Corporation sponsored Executive Deferred CompensationPlan.Executive DisabilityPlanEligible individuals who become disabled under the terms of the plan are eligible for 65% of thedifference between their annual base salary and $276,923 (i.e. the annual base salary that producesthe maximum $15,000 monthly disability payment under the general long-term disability plan).Entergy Corporation provides these benefits to the Named Executive Officers as part of providing a competitive executivecompensation program and because it believes that these benefits are important retention and recruitment tools since many of thecompanies with which it competes for executive talent provide similar arrangements to their senior executive officers.469Table of ContentsSeverance and Other Compensation ArrangementsThe Personnel Committee believes that retention and transitional compensation arrangements are an important part of overallcompensation as they help to secure the continued employment and dedication of the Named Executive Officers, notwithstanding anyconcern that they might have at the time of a change in control regarding their own continued employment. In addition, the PersonnelCommittee believes that these arrangements are important as recruitment and retention devices, as many of the companies with whichEntergy Corporation competes for executive talent have similar arrangements in place for their senior employees.To achieve these objectives, Entergy Corporation has established a System Executive Continuity Plan under which executiveofficers, defined as ML level 1 through 4 officers (ML 1-4 Officers), are entitled to receive “change in control” payments and benefits ifsuch officer’s employment is involuntarily terminated in connection with a change in control of Entergy Corporation and itssubsidiaries. Severance payments under the System Executive Continuity Plan generally are based on a multiple of the sum of anexecutive officer’s annual base salary plus his or her average Annual Incentive Plan award for the two calendar years immediatelypreceding the calendar year in which the termination of employment occurs. Under the policy, under no circumstances can this multipleexceed 2.99 times the sum of the executive officer’s annual base salary and his or her annual incentive, calculated in accordance withthis policy. Entergy Corporation strives to ensure that the benefits and payment levels under the System Executive Continuity Plan areconsistent with market practices. Entergy Corporation’s executive officers, including the Named Executive Officers, are not entitled toany tax gross up payments on any severance benefits received under this plan. For more information regarding the System ExecutiveContinuity Plan, see “2018 Potential Payments Upon Termination or Change in Control.”In certain cases, the Personnel Committee may approve the execution of a retention agreement with an individual executiveofficer. These decisions are made on a case by case basis to reflect specific retention needs or other factors, including market practice.If a retention agreement is entered into with an individual officer, the committee considers the economic value associated with thatagreement in making overall compensation decisions for that officer. Entergy Corporation has voluntarily adopted a policy that anyemployment or severance agreements providing severance benefits in excess of 2.99 times the sum of an officer’s annual base salaryand annual incentive award (other than the value of the vesting or payment of an outstanding equity-based award or the pro rata vestingor payment of an outstanding long-term incentive award) must be approved by Entergy Corporation’s shareholders.Mr. DenaultEntergy Corporation currently has a retention agreement with Mr. Denault. In general, Mr. Denault’s retention agreementprovides for certain payments and benefits in the event of his termination of employment by his Entergy employer other than for cause,by Mr. Denault for good reason or on account of his death or disability. See “2018 Potential Payments Upon Termination or Change inControl - Mr. Denault’s 2006 Retention Agreement.” Because Mr. Denault has reached age 55, certain severance payment provisions inhis retention agreement no longer apply. Mr. Denault is not entitled to receive tax gross up payments on any payments or benefits hemay receive under his agreement. Mr. Denault’s retention agreement was entered into in 2006 when he was Entergy Corporation’sChief Financial Officer and was designed to reflect the competition for chief financial officer talent in the marketplace at that time andthe Personnel Committee’s assessment of the critical role this position played in executing Entergy Corporation’s long-term financialand other strategic objectives. Based on the market data provided by its former independent compensation consultant, the committee, atthe time the agreement was entered into, believed the benefits and payment levels under Mr. Denault’s retention agreement wereconsistent with market practices.Mr. BakkenIn connection with the commencement of his employment, Entergy Corporation provided Mr. Bakken relocation assistance tofacilitate his move to Jackson, Mississippi where Entergy Corporation’s nuclear fleet corporate headquarters is located. As part of thatrelocation assistance, Entergy Corporation agreed to provide Mr. Bakken with certain relocation benefits, including the purchase of Mr.Bakken’s house at a fixed price which the Personnel Committee470Table of Contentsdetermined was necessary to facilitate Mr. Bakken’s transition to Entergy Corporation and to mitigate the expenses associated with hisrelocation. The terms of Mr. Bakken’s employment, including the relocation assistance, were reviewed by the Personnel Committee,were determined based on competitive market data, and were designed to reflect the competition for chief nuclear officer talent in themarketplace and the committee’s assessment of the critical role this position plays in transforming the nuclear fleet and to encourageretention of his leadership in light of his marketability as a chief nuclear officer.Mr. EllisIn connection with the commencement of his employment as President, Entergy New Orleans, Mr. Ellis is eligible for certainrelocation benefits pursuant to our Relocation Assistance Policy including assistance with moving expenses, transportation ofhousehold goods and assistance with the sale of his home. Mr. Ellis also received a sign-on bonus of $200,000 when he assumed thisrole. Mr. Ellis’s sign-on bonus and certain of his relocation benefits are subject to forfeiture under certain circumstances if Mr. Ellis’employment is terminated within two years of the commencement of his employment.Mr. Ellis is eligible to participate in our annual and long-term incentive plans at the same level as the other Chief ExecutiveOfficers of the Utility operating companies, except Mr. May. Mr. Ellis was not eligible to participate in the 2016-2018 performanceperiod, but received pro-rated target award opportunities for the 2017- 2019 and 2018-2020 performance periods in January 2019, inaccordance with the terms of the program. Mr. Ellis also participates in our Cash Balance Plan and our Cash Balance Equalization Plan,retirement plans that are available to all eligible executive officers hired on or after July 1, 2014. For more information about the CashBalance Plan and our Cash Balance Equalization Plan, see “2018 Pension Benefits.” Beginning in 2019, Mr. Ellis also is eligible toparticipate in our annual stock option and restricted stock programs.Mr. RileyWhen Mr. Riley assumed the position of Senior Vice President, Distribution Operations and Asset Management, EntergyServices, LLC, he was required to relocate from Arkansas to Entergy Corporation’s corporate office in New Orleans. To facilitate thetransition to this new role, Entergy Corporation provided Mr. Riley relocation assistance pursuant to our Relocation Assistance Policy,including assistance with moving expenses, transportation of household goods and assistance with the sale of his home.Compensation Policies and PracticesEntergy Corporation strives to ensure that its compensation philosophy and practices are in line with the best practices ofcompanies in its industry as well as other companies in the S&P 500. Some of these practices include the following:Clawback ProvisionsEntergy Corporation has adopted a clawback policy that covers all individuals subject to Section 16 of the Exchange Act,including the members of the Office of the Chief Executive, and the other Named Executive Officers. Under the policy, which goesbeyond the requirements of Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), the Personnel Committee will require reimbursement ofincentives paid to these executive officers where:•(i) the payment was predicated upon the achievement of certain financial results with respect to the applicable performanceperiod that were subsequently determined to be the subject of a material restatement other than a restatement due to changes inaccounting policy; or (ii) a material miscalculation of a performance award occurs, whether or not the financial statements wererestated and, in either such case, a lower payment would have been made to the executive officer based upon the restatedfinancial results or correct calculation; or•in the Board of Directors’ view, the executive officer engaged in fraud that caused or partially caused the need for a restatementor caused a material miscalculation of a performance award, in each case, whether or not the financial statements were restated.471Table of ContentsThe amount the Personnel Committee requires to be reimbursed is equal to the excess of the gross incentive payment made overthe gross payment that would have been made if the original payment had been determined based on the restated financial results orcorrect calculation. Further, following a material restatement of Entergy Corporation’s financial statements, Entergy Corporation willseek to recover any compensation received by Entergy Corporation’s Chief Executive Officer and Chief Financial Officer that isrequired to be reimbursed under Sarbanes-Oxley.Stock Ownership Guidelines and Share Retention RequirementsFor many years, Entergy Corporation has had stock ownership guidelines for executives, including the Named ExecutiveOfficers. These guidelines are designed to align the executives’ long-term financial interests with the interests of Entergy Corporation’sshareholders. Annually, the Personnel Committee monitors the executive officers’ compliance with these guidelines.The ownership guidelines are as follows:RoleValue of Common Stock to be OwnedChief Executive Officer6 times base salaryExecutive Vice Presidents3 times base salarySenior Vice Presidents2 times base salaryVice Presidents1 time base salaryFurther, to facilitate compliance with the guidelines, until an executive officer satisfies the stock ownership guidelines, theofficer must retain:•all net after-tax shares paid out under the Long-Term Performance Unit Program;•all net after-tax shares of the restricted stock and restricted stock units received upon vesting; and•at least 75% of the after-tax net shares received upon the exercise of Entergy Corporation stock options.Trading Controls and Anti-Pledging and Anti-Hedging PoliciesExecutive officers, including the Named Executive Officers, are required to receive the permission of Entergy Corporation’sGeneral Counsel prior to entering into any transaction involving Entergy Corporation securities, including gifts, other than the exerciseof employee stock options. Trading is generally permitted only during specified open trading windows beginning immediatelyfollowing the release of earnings. Employees, who are subject to trading restrictions, including the Named Executive Officers, mayenter into trading plans under Rule 10b5-1 of the Exchange Act, but these trading plans may be entered into only during an opentrading window and must be approved by Entergy Corporation. The Named Executive Officer bears full responsibility if he or sheviolates Entergy Corporation’s policy by permitting shares to be bought or sold without pre-approval or when trading is restricted.Entergy Corporation also prohibits directors and executive officers, including the Named Executive Officers, from pledging anyEntergy Corporation securities or entering into margin accounts involving Entergy Corporation securities. Entergy Corporation prohibitsthese transactions because of the potential that sales of Entergy Corporation securities could occur outside trading periods and withoutthe required approval of the General Counsel.Entergy Corporation also has adopted an anti-hedging policy that prohibits officers, directors, and employees from entering intohedging or monetization transactions involving Entergy Corporation’s common stock. Prohibited transactions include, withoutlimitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivativesthat are directly linked to Entergy Corporation’s stock or transactions involving “short-sales” of its common stock. The Board adoptedthis policy to require officers, directors, and employees to continue to own Entergy Corporation stock with the full risks and rewards ofownership, thereby ensuring continued alignment of their objectives with those of Entergy Corporation’s other shareholders.472Table of ContentsHow Entergy Corporation Makes Compensation DecisionsRole of the Personnel CommitteeThe Personnel Committee is responsible for overseeing the development and administration of the compensation and benefitspolicies and programs. The committee, which consists of three independent directors, is responsible for the review and approval of allaspects of the executive compensation programs. Among its duties, the Personnel Committee is responsible for formulating thecompensation recommendations for Entergy Corporation’s Chief Executive Officer and approving all compensation recommendationsfor all members of the Office of Chief Executive, including:•Annual review of the compensation elements and mix of elements for the following year;•Annual review and approval of incentive program design, goals and objectives for alignment with Entergy Corporation’scompensation and business strategies;•Evaluation of company and individual performance results in light of these goals and objectives;•Evaluation of the competitiveness of each executive officer’s total compensation package;•Approval of any changes to Entergy Corporation’s officers’ total compensation package, including but not limited to, basesalary, annual and long-term incentive award opportunities, and retention programs;•Evaluation of the performance of Entergy Corporation’s Chairman and Chief Executive Officer; and•Reporting, at least annually, to the Board on succession planning.The Personnel Committee is supported in its work by its independent compensation consultant and executive management toensure that the compensation policies and practices are consistent with Entergy Corporation’s values and support the successfulrecruitment, development and retention of executive talent so that Entergy Corporation can achieve its business objectives and optimizeits long-term financial returns.Role of the Chief Executive OfficerWithin the framework of the compensation programs approved by the Personnel Committee and competitive data, each yearEntergy Corporation’s Chief Executive Officer makes recommendations with respect to compensation decisions for the members of theOffice of the Chief Executive. Entergy Corporation’s Chief Executive Officer provides the Personnel Committee with an assessment ofthe performance of each of the other Named Executive Officers and recommends compensation levels to be awarded to each of them.In addition, the committee may request that the Chief Executive Officer provide management feedback and recommendations onchanges in the design of the executive compensation programs, such as special retention plans or changes in incentive programstructure. However, Entergy Corporation’s Chief Executive Officer does not play any role with respect to any matter affecting his owncompensation, and is not present when the committee discusses and formulates his compensation. The Personnel Committee also relieson the recommendations of the most senior Human Resources’ officer with respect to compensation decisions, policies and practices.Entergy Corporation’s Chief Executive Officer may attend meetings of the Personnel Committee only at the invitation of thechair of the Personnel Committee and cannot call a meeting of the committee. Since he is not a member of the committee, he has novote on matters submitted to the committee. During 2018, Mr. Denault attended 6 meetings of the Personnel Committee.Role of the Compensation ConsultantThe Personnel Committee conducts an annual review of the compensation consultant, and in 2018, it retained Pay GovernanceLLC as its independent compensation consultant to assist it in, among other things, evaluating different compensation practices andprograms and developing market data to assess Entergy Corporation’s compensation programs. Also in 2018, the CorporateGovernance Committee retained Pay Governance to review and perform a competitive analysis of non-employee directorcompensation.473Table of ContentsDuring 2018, Pay Governance assisted the Personnel Committee with its responsibilities related to Entergy Corporation’scompensation programs for its executives. The committee directed Pay Governance to: (i) regularly attend meetings of the committee;(ii) conduct studies of competitive compensation practices; (iii) identify Entergy Corporation’s market surveys and proxy peer group;(iv) review base salary, annual incentives, and long-term incentive compensation opportunities relative to competitive practices; and(v) develop conclusions and recommendations related to the executive compensation programs for consideration by the committee. Asenior consultant from Pay Governance attended all Personnel Committee meetings to which he was invited in 2018.The Personnel Committee has the sole authority to hire the compensation consultant, approve its compensation, determine thenature and scope of its services evaluate its performance and terminate its engagement.Compensation Consultant IndependenceTo maintain the independence of the Personnel Committee’s compensation consultant, the Board has adopted a policy that anyconsultant (including its affiliates) retained by the Board of Directors or any committee of the Board of Directors to provide advice orrecommendations on the amount or form of executive or director compensation should not be retained by Entergy Corporation or anyof its affiliates to provide other services in an aggregate amount that exceeds $120,000 in any year. Pay Governance did not provideany services to management in 2018.Annually, the Personnel Committee reviews the relationship with its compensation consultant, including services provided,quality of those services, and fees associated with services in its evaluation of the compensation consultant’s independence. Thecommittee also assesses Pay Governance’s independence under NYSE rules and has concluded that no conflicts of interest exist thatwould prevent Pay Governance from independently advising the Personnel CommitteePERSONNEL COMMITTEE REPORTThe Personnel Committee Report included in the Entergy Corporation Proxy Statement is incorporated by reference, but will notbe deemed to be “filed” in this Annual Report on Form 10-K. None of the Subsidiaries has a compensation committee or other boardcommittee performing equivalent functions. The board of directors of each of the Subsidiaries is comprised of individuals who areofficers or employees of Entergy Corporation or one of the Subsidiaries. These boards do not make determinations regarding thecompensation paid to executive officers of the Subsidiaries.474Table of ContentsEXECUTIVE COMPENSATION TABLES2018 Summary Compensation TablesThe following table summarizes the total compensation paid or earned by each of the Named Executive Officers for the fiscalyear ended December 31, 2018, and to the extent required by SEC executive compensation disclosure rules, the fiscal years endedDecember 31, 2017 and 2016. For information on the principal positions held by each of the Named Executive Officers, see Item 10,“Directors and Executive Officers of the Registrants.” The compensation set forth in the table represents the aggregate compensation paid by all Entergy System companies. Foradditional information regarding the material terms of the awards reported in the following tables, including a general description of theformula or criteria to be applied in determining the amounts payable, see “Compensation Discussion and Analysis.”(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Name and PrincipalPosition(1) Year Salary(2) Bonus(3) StockAwards (4) OptionAwards (5) Non-EquityIncentivePlanCompen-sation(6) Change inPensionValue andNon-qualifiedDeferredCompen-sationEarnings (7) AllOtherCompens-ation (8) Total A. Christopher Bakken,III 2018 $632,967 $181,500 $1,041,479 $283,095 $544,959 $108,700 $452,012 $3,244,712Executive VicePresident and 2017 $615,791 $181,500 $959,376 $245,904 $559,973 $33,000 $114,494 $2,710,038Chief Nuclear Officerof Entergy Corp. 2016 $426,990 $650,000 $3,292,700 $— $529,375 $27,900 $140,601 $5,067,566 Marcus V. Brown 2018 $644,231 $— $1,041,479 $283,095 $546,000 $371,800 $61,885 $2,948,490Executive VicePresident and 2017 $622,788 $— $1,022,853 $287,760 $568,890 $1,217,200 $43,269 $3,762,760General Counsel ofEntergy Corp. 2016 $563,208 $— $1,144,648 $333,000 $550,550 $934,600 $34,381 $3,560,387 Leo P. Denault 2018 $1,251,346 $— $4,744,977 $1,168,029 $2,041,200 $982,800 $138,104 $10,326,456Chairman of the 2017 $1,221,346 $— $4,676,190 $1,173,276 $2,142,045 $3,819,500 $125,863 $13,158,220Board and CEO - 2016 $1,191,462 $— $4,632,276 $1,235,800 $2,154,600 $4,166,800 $97,786 $13,478,724Entergy Corp. David D. Ellis 2018 $7,258 $200,000 $— $— $— $600 $35,308 $243,166CEO - Entergy New Orleans Haley R. Fisackerly 2018 $363,089 $— $198,449 $46,134 $172,000 $— $35,982 $815,654CEO - Entergy 2017 $354,451 $— $192,041 $49,704 $169,123 $406,300 $35,724 $1,207,343Mississippi 2016 $320,067 $— $229,752 $49,580 $168,000 $268,600 $34,243 $1,070,242 Laura R. Landreaux 2018 $246,136 $— $273,062 $— $124,000 $21,500 $10,741 $675,439CEO - Entergy Arkansas 475Table of Contents(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) Name and PrincipalPosition(1) Year Salary(2) Bonus(3) StockAwards (4) OptionAwards (5) Non-EquityIncentivePlanCompen-sation(6) Change inPensionValue andNon-qualifiedDeferredCompen-sationEarnings (7) AllOtherCompens-ation (8) Total Andrew S. Marsh 2018 $615,654 $— $1,057,095 $342,510 $531,188 $— $57,638 $2,604,085Executive Vice 2017 $588,291 $— $1,022,853 $287,760 $541,800 $801,900 $51,647 $3,294,251President and CFO - 2016 $553,284 $— $1,144,648 $333,000 $509,061 $593,700 $47,484 $3,181,177Entergy Corp., Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas Phillip R. May, Jr. 2018 $377,108 $— $288,238 $69,201 $270,000 $— $26,874 $1,031,421CEO - Entergy 2017 $363,410 $— $302,493 $68,670 $300,000 $503,400 $26,981 $1,564,954Louisiana 2016 $353,690 $— $326,988 $71,040 $224,690 $600,000 $26,018 $1,602,426 Sallie T. Rainer 2018 $335,263 $— $198,449 $46,134 $159,000 $— $35,379 $774,225CEO - Entergy 2017 $325,737 $— $195,567 $51,012 $156,259 $435,900 $35,785 $1,200,260Texas 2016 $316,003 $— $229,752 $49,580 $153,348 $346,300 $53,797 $1,148,780 Charles L. Rice, Jr. 2018 $272,519 $— $182,833 $2,796 $— $12,700 $28,886 $499,734Former CEO - 2017 $284,681 $— $170,882 $25,506 $91,000 $221,200 $30,842 $824,111Entergy New Orleans 2016 $276,998 $— $229,752 $49,580 $67,302 $177,600 $33,807 $835,039 Richard C. Riley 2018 $355,187 $— $342,772 $69,201 $225,000 $150,400 $163,463 $1,306,023Former CEO - 2017 $341,723 $— $202,620 $52,320 $280,661 $437,700 $38,695 $1,353,719Entergy Arkansas 2016 $325,020 $— $226,224 $34,780 $167,500 $277,900 $102,112 $1,133,536 Roderick K. West 2018 $690,581 $— $1,057,095 $297,075 $560,762 $— $67,234 $2,672,747Group President 2017 $670,876 $— $818,316 $190,968 $610,065 $867,200 $52,220 $3,209,645Utility Operations of 2016 $654,514 $— $1,116,424 $303,400 $461,384 $601,000 $73,706 $3,210,428Entergy Corp. (1)Mr. Bakken was named Executive Vice President and Chief Nuclear Officer in April 2016. Mr. Ellis was named Chief ExecutiveOfficer, Entergy New Orleans in December 2018, and Ms. Landreaux was named Chief Executive Officer, Entergy Arkansas inJuly 2018.(2)The amounts in column (c) represent the actual base salary paid to the Named Executive Officers in the applicable year. Exceptas otherwise provided, the 2018 changes in base salaries noted in the Compensation Discussion and Analysis were effective inApril 2018.(3)The amount in column (d) in 2018 and 2017 for Mr. Bakken represents the cash bonus paid to him pursuant to the NuclearRetention Plan. See “Nuclear Retention Plan” in Compensation Discussion and Analysis. The amount in column (d) in 2016 forMr. Bakken represents a cash sign-on bonus paid to Mr. Bakken in connection with his commencement of employment withEntergy Corporation. The amount in column (d) in 2018 for Mr. Ellis represents a cash sign-on bonus paid in connection withhis commencement of employment with Entergy New Orleans.(4)The amounts in column (e) represent the aggregate grant date fair value of restricted stock, performance units, and restrictedstock units granted under the 2015 Equity Plan, each calculated in accordance with FASB ASC Topic 718, without taking intoaccount estimated forfeitures. The grant date fair value of the restricted stock and476Table of Contentsrestricted stock units is based on the closing price of Entergy Corporation common stock on the date of grant. The grant datefair value of the portion of the performance units with vesting based on the total shareholder return was measured using a MonteCarlo simulation valuation model. The simulation model applies a risk-free interest rate and an expected volatilityassumption. The risk-free interest rate is assumed to equal the yield on a three-year treasury bond on the grant date. Volatilityis based on historical volatility for the 36-month period preceding the grant date. The performance units in the table are alsovalued based on the probable outcome of the applicable performance condition at the time of grant. The maximum value ofshares that will be received if the highest achievement level is attained with respect to both the total shareholder return andUP&O Adjusted EPS, for performance units granted in 2018 are as follows: Mr. Bakken, $1,233,664; Mr. Brown, $1,233,664;Mr. Denault, $6,668,032; Mr. Fisackerly, $257,664; Ms. Landreaux $365,366; Mr. Marsh, $1,233,664; Mr. May, $398,208; Ms.Rainer, $257,664; Mr. Rice, $257,664; Mr. Riley, $505,072; and Mr. West, $1,233,664. The amount in 2016 for Mr. Bakkenincludes restricted stock units granted to him in connection with his commencement of employment as Chief Nuclear Officer.(5)The amounts in column (f) represent the aggregate grant date fair value of stock options granted under the 2015 Equity Plancalculated in accordance with FASB ASC Topic 718. For a discussion of the relevant assumptions used in valuing these awards,see Note 12 to the financial statements.(6)The amounts in column (g) represent cash payments made under the Annual Incentive Plan.(7)For all Named Executive Officers, the amounts in column (h) include the annual actuarial increase in the present value of theseNamed Executive Officers’ benefits under all pension plans established by Entergy Corporation using interest rate and mortalityrate assumptions consistent with those used in Entergy Corporation’s financial statements and include amounts which theNamed Executive Officers may not currently be entitled to receive because such amounts are not vested (see “2018 PensionBenefits”). For 2018, the aggregate change in the actuarial present value was a decrease of pension benefits of $52,000 for Mr.Fisackerly, $163,000 for Mr. Marsh,$700 for Mr. May, $110,700 for Ms. Rainer, and $149,300 for Mr. West. None of theincreases for any of the Named Executive Officers is attributable to above-market or preferential earnings on non-qualifieddeferred compensation (see “2018 Non-qualified Deferred Compensation”).(8)The amounts in column (i) for 2018 include (a) matching contributions by Entergy Corporation under the Savings Plan to eachof the Named Executive Officers; (b) dividends paid on restricted stock when vested; (c) life insurance premiums; (d) tax grossup payments on club dues and relocation expenses; and (e) perquisites and other compensation as described further below. Theamounts are listed in the following table:Named Executive OfficerCompanyContribution –Savings PlanDividends Paidon RestrictedStockLifeInsurancePremiumTax GrossUpPaymentsPerquisites andOtherCompensation TotalA. Christopher Bakken, III$16,500$6,028$11,919$1,235$416,330$452,012Marcus V. Brown$11,550$41,159$7,482$—$1,694$61,885Leo P. Denault$11,550$102,475$7,482$—$16,597$138,104David D. Ellis$—$—$—$8,078$27,230$35,308Haley R. Fisackerly$11,550$6,857$2,370$4,145$11,060$35,982Laura R. Landreaux$—$6,947$359$1,073$2,362$10,741Andrew S. Marsh$11,550$41,159$4,929$—$—$57,638Phillip R. May, Jr.$11,550$7,860$5,596$—$1,868$26,874Sallie T. Rainer$11,550$6,550$6,677$2,753$7,849$35,379Charles L. Rice, Jr.$11,446$6,158$4,447$1,714$5,121$28,886Richard C. Riley$11,550$7,859$5,364$16,885$121,805$163,463Roderick K. West$11,550$35,795$4,002$—$15,887$67,234477Table of ContentsPerquisites and Other CompensationThe amounts set forth in column (i) also include perquisites and other personal benefits that Entergy Corporation provides to itsNamed Executive Officers as part of providing a competitive executive compensation programs and for employee retention. Thefollowing perquisites were provided to the Named Executive Officers in 2018.Named Executive OfficerRelocationPersonal Use ofCorporateAircraftClub DuesExecutivePhysicalExamsEvent TicketsA. Christopher Bakken, IIIXX X Marcus V. Brown X Leo P. Denault X XXDavid D. EllisX Haley R. Fisackerly XX Laura R. Landreaux X Andrew S. Marsh X Phillip R. May, Jr. XSallie T. Rainer X Charles L. Rice, Jr. XX Richard C. RileyX X Roderick K. West X X For security and business reasons, Entergy Corporation’s Chief Executive Officer is permitted to use its corporate aircraft forpersonal use at the expense of Entergy Corporation. The other Named Executive Officers may use the corporate aircraft for personaltravel subject to the approval of Entergy Corporation’s Chief Executive Officer. The Personnel Committee reviews the level of usagethroughout the year. Entergy Corporation believes that its officers’ ability to use its plane for limited personal use saves time andprovides additional security for them, thereby benefiting Entergy Corporation. The amounts included in column (i) for the personal useof corporate aircraft, reflect the incremental cost to Entergy Corporation for use of the corporate aircraft, determined on the basis of thevariable operational costs of each flight, including fuel, maintenance, flight crew travel expense, catering, communications, and fees,including flight planning, ground handling, and landing permits. In addition, Entergy Corporation offers its executives comprehensiveannual physical exams at Entergy Corporation’s expense. Tickets to cultural and sporting events are purchased for business purposes,and if not utilized for business purposes, the tickets are made available to the employees, including the Named Executive Officers, forpersonal use.Entergy Corporation also provides relocation benefits to a broad base of employees which include assistance with movingexpenses, transportation of household goods and in certain circumstances, assistance with the sale of the employee’s home. Inconnection with employment, and in accordance with its relocation policies, Entergy Corporation paid $27,230 and $114,928 inrelocation expense for Messrs. Ellis and Riley, respectively, in 2018. The relocation assistance amounts reported above represent theamount paid to Entergy’s relocation service provider or Messrs. Ellis or Riley, as applicable. Certain of Mr. Ellis’s relocation benefitsare subject to forfeiture if Mr. Ellis terminates his service prior to the two year anniversary of his date of hire. In connection with hisemployment and as an inducement for Mr. Bakken to join Entergy Corporation and relocate to Jackson, Mississippi, and in accordancewith its relocation policies and pursuant to certain additional relocation benefits, Entergy Corporation agreed to purchase Mr. Bakken’shome at a fixed price. In 2018, Entergy Corporation sold the purchased property. The amount reported in this column above includes$400,074 from the loss on the sale of Mr. Bakken’s home, which was calculated based on the agreed upon price Entergy Corporationpaid for the home as compared to the price Entergy Corporation received upon disposition.None of the other perquisites referenced above exceeded $25,000 for any of the other Named Executive Officers. 478Table of Contents2018 Grants of Plan-Based AwardsThe following table summarizes award grants during 2018 to the Named Executive Officers. Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) Estimated Future Payoutsunder Equity Incentive PlanAwards (2) (a) (b) (c)(d)(e) (f)(g)(h) (i) (j) (k) (l)Name GrantDate Thresh-oldTargetMaximum Thresh-oldTargetMaximum All OtherStockAwards:Number ofShares ofStock orUnits All OtherOptionAwards:Number ofSecuritiesUnder-lyingOptions Exercise orBase Priceof OptionAwards Grant DateFair Value ofStock andOption Awards ($)($)($) (#)(#)(#) (#)(3) (#)(4) ($/Sh) ($)(5)A.Christopher 1/25/18 $-$446,688$893,376 Bakken, III 1/25/18 1,9757,90015,800 $651,079 1/25/18 5,000 $390,400 1/25/18 40,500 $78.08 $283,095 Marcus V. 1/25/18 $-$455,000$910,000 Brown 1/25/18 1,9757,90015,800 $651,079 1/25/18 5,000 $390,400 1/25/18 40,500 $78.08 $283,095 Leo P. 1/25/18 $-$1,701,000$3,402,000 Denault 1/25/18 10,67542,70085,400 $3,519,121 1/25/18 15,700 $1,225,856 1/25/18 167,100 $78.08 $1,168,029 Haley R. 1/25/18 $-$146,384$292,768 Fisackerly 1/25/18 4131,6503,300 $135,985 1/25/18 800 $62,464 1/25/18 6,600 $78.08 $46,134 Laura R. 1/25/18 $-$123,200$246,400 Landreaux (6) 7/1/18 3441,3752,750 $113,321 7/1/18 2319251,850 $66,045 1/25/18 1,200 $93,696 Andrew S. 1/25/18 $-$435,400$870,800 Marsh 1/25/18 1,9757,90015,800 $651,079 1/25/18 5,200 $406,016 1/25/18 49,000 $78.08 $342,510 Phillip R. 1/25/18 $-$228,930$457,860 May, Jr. 1/25/18 6382,5505,100 $210,158 1/25/18 1,000 $78,080 1/25/18 9,900 $78.08 $69,201 479Table of Contents Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1) Estimated Future Payouts underEquity Incentive Plan Awards (2) (a) (b) (c)(d)(e) (f)(g)(h) (i) (j) (k) (l)Name GrantDate Thresh-oldTargetMaximum Thresh-oldTargetMaximum All OtherStockAwards:Number ofShares ofStock orUnits All OtherOptionAwards:Number ofSecuritiesUnder-lyingOptions Exerciseor BasePrice ofOptionAwards Grant DateFair Value ofStock andOptionAwards ($)($)($) (#)(#)(#) (#)(3) (#)(4) ($/Sh) ($)(5)Sallie T. 1/25/18 $-$135,249$270,498 Rainer 1/25/18 4131,6503,300 $135,985 1/25/18 800 $62,464 1/25/18 6,600 $78.08 $46,134 Charles L. 1/25/18 $-$69,000$138,000 Rice, Jr.(6) 1/25/18 4131,6503,300 $135,985 1/25/18 600 $46,848 1/25/18 400 $78.08 $2,796 Richard C. 1/25/18 $-$225,000$450,000 Riley(6) 1/25/18 6002,4004,800 $197,796 7/1/18 1636501,300 $46,410 7/1/18 38150300 $12,678 1/25/18 1,100 $85,888 1/25/18 9,900 $78.08 $69,201 Roderick K. 1/25/18 $-$487,619$975,238 West 1/25/18 1,9757,90015,800 $651,079 1/25/18 5,200 $406,016 1/25/18 42,500 $78.08 $297,075(1)The amounts in columns (c), (d), and (e) represent minimum, target, and maximum payment levels under the Annual IncentivePlan. The actual amounts awarded are reported in column (g) of the Summary Compensation Table.(2)The amounts in columns (f), (g), and (h) represent the minimum, target, and maximum payment levels under the Long-TermPerformance Unit Program. Performance under the program is measured by Entergy Corporation’s total shareholder returnrelative to the total shareholder returns of the companies included in the Philadelphia Utility Index and UP&O Adjusted EPSwith each performance measure weighted equally. There is no payout under the program if Entergy Corporation’s totalshareholder return falls within the lowest quartile of the peer companies in the Philadelphia Utility Index and UP&O AdjustedEPS is below the minimum performance goal. Subject to the achievement of performance targets, each unit will be convertedinto one share of Entergy Corporation’s common stock on the last day of the performance period (December 31,2020.) Accrued dividends on the shares earned will also be paid in Entergy Corporation common stock.(3)The amounts in column (i) represent shares of restricted stock granted under the 2015 Equity Plan. Shares of restricted stockvest one-third on each of the first through third anniversaries of the grant date, have voting rights, and accrue dividends duringthe vesting period.(4)The amounts in column (j) represent options to purchase shares of Entergy Corporation’s common stock. The options vest one-third on each of the first through third anniversaries of the grant date and have a ten-year term from the date of grant. Theoptions were granted under the 2015 Equity Plan.480Table of Contents(5)The amounts in column (l) are valued based on the aggregate grant date fair value of the award calculated in accordance withFASB ASC Topic 718 and, in the case of the performance units, are based on the probable outcome of the applicableperformance conditions. See Notes 4 and 5 to the 2018 Summary Compensation Table for a discussion of the relevantassumptions used in calculating the grant date fair value.(6)Ms. Landreaux’s and Messrs. Rice’s and Riley’s awards were modified in connection with their changes in position.2018 Outstanding Equity Awards at Fiscal Year-EndThe following table summarizes, for each Named Executive Officer, unexercised options, restricted stock that has not vested,and equity incentive plan awards outstanding as of December 31, 2018. Option Awards Stock Awards(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable EquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions OptionExercisePrice OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested Market Valueof Shares orUnits ofStock ThatHave NotVested EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested EquityIncentivePlan Awards:Market orPayout Valueof UnearnedShares, Unitsor OtherRights ThatHave NotVested (#) (#) (#) ($) (#) ($) (#) ($)A. ChristopherBakken, III — 40,500(1) $78.08 1/25/2028 12,533 25,067(2) $70.53 1/26/2027 15,800(4) $1,359,906 16,600(5) $1,428,762 5,000(6) $430,350 3,467(9) $298,405 30,000(10) $2,582,100 Marcus V.Brown — 40,500(1) $78.08 1/25/2028 14,666 29,334(2) $70.53 1/26/2027 20,000 15,000(3) $70.56 1/28/2026 24,000 — $89.90 1/29/2025 20,500 — $63.17 1/30/2024 10,800 — $64.60 1/31/2023 4,600 — $71.30 1/26/2022 2,800 — $72.79 1/27/2021 4,500 — $77.10 1/28/2020 15,800(4) $1,359,906 16,600(5) $1,428,762 5,000(6) $430,350 4,067(7) $350,047 2,134(8) $183,673 481Table of Contents Option Awards Stock Awards(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable EquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions OptionExercisePrice OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested Market Valueof Shares orUnits ofStock ThatHave NotVested EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested EquityIncentivePlan Awards:Market orPayout Valueof UnearnedShares, Unitsor OtherRights ThatHave NotVested (#) (#) (#) ($) (#) ($) (#) ($)Leo P. Denault — 167,710(1) $78.08 1/25/2028 59,800 119,600(2) $70.53 1/26/2027 111,333 55,667(3) $70.56 1/28/2026 88,000 — $89.90 1/29/2025 106,000 — $63.17 1/30/2024 50,000 — $64.60 1/31/2023 30,000 — $71.30 1/26/2022 25,000 — $72.79 1/27/2021 50,000 — $77.10 1/28/2020 85,400(4) $7,350,378 97,400(5) $8,383,218 15,700(6) $1,351,299 11,334(7) $975,517 5,234(8) $450,490 Haley R.Fisackerly — 6,600(1) $78.08 1/25/2028 — 5,067(2) $70.53 1/26/2027 2,233 2,234(3) $70.56 1/28/2026 4,500 — $89.90 1/29/2025 3,300(4) $284,031 3,700(5) $318,459 800(6) $68,856 567(7) $48,802 367(8) $31,588 Laura R.Landreaux 1,200(6) $103,284 1,000(7) $86,070 467(8) $40,195 2,750(4) $236,693 1,850(5) $159,230482Table of Contents Option Awards Stock Awards(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable EquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions OptionExercisePrice OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested Market Valueof Shares orUnits ofStock ThatHave NotVested EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested EquityIncentive PlanAwards:Market orPayout Valueof UnearnedShares, Unitsor OtherRights ThatHave NotVested (#) (#) (#) ($) (#) ($) (#) ($)Andrew S.Marsh — 49,000(1) $78.08 1/25/2028 14,666 29,334(2) $70.53 1/26/2027 30,000 15,000(3) $70.56 1/28/2026 24,000 — $89.90 1/29/2025 35,000 — $63.17 1/30/2024 32,000 — $64.60 1/31/2023 10,000 — $71.30 1/26/2022 4,000 — $72.79 1/27/2021 9,100 — $77.10 1/28/2020 8,000 — $77.53 1/29/2019 15,800(4) $1,359,906 16,600(5) $1,428,762 5,200(6) $447,564 4,067(7) $350,047 2,134(8) $183,673 21,100(9) $1,816,077 Phillip R.May, Jr. — 9,900(1) $78.08 1/25/2028 500 7,000(2) $70.53 1/26/2027 3,400 3,200(3) $70.56 1/28/2026 5,000 — $89.90 1/29/2025 2,000 — $63.17 1/30/2024 2,000 — $64.60 1/31/2023 5,100(4) $438,957 6,300(5) $542,241 1,000(6) $86,070 734(7) $63,175 467(8) $40,195 Sallie T.Rainer — 6,600(1) $78.08 1/25/2028 2,600 5,200(2) $70.53 1/26/2027 2,233 2,234(3) $70.56 1/28/2026 3,800 — $89.90 1/29/2025 3,300(4) $284,031 3,700(5) $318,459483Table of Contents Option Awards Stock Awards(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)Name Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable EquityIncentive PlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions OptionExercisePrice OptionExpirationDate Number ofShares orUnits ofStock ThatHave NotVested Market Valueof Shares orUnits ofStock ThatHave NotVested EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested EquityIncentivePlan Awards:Market orPayout Valueof UnearnedShares, Unitsor OtherRights ThatHave NotVested (#) (#) (#) ($) (#) ($) (#) ($) 800(6) $68,856 600(7) $51,642 367(8) $31,588 Charles L.Rice, Jr. — 400(1) $78.08 1/25/2028 — 2,600(2) $70.53 1/26/2027 — 2,234(3) $70.56 1/28/2026 4,500 — $89.90 1/29/2025 642(4) $55,257 1,952(5) $168,009 600(6) $51,642 367(7) $31,588 367(8) $31,588 Richard C.Riley — 9,900(1) $78.08 1/25/2028 2,666 5,334(2) $70.53 1/26/2027 1,633 1,567(3) $70.56 1/28/2026 4,500 — $89.90 1/29/2025 4,800(4) $413,136 5,000(5) $430,350 1,100(6) $94,677 667(7) $57,409 350(8) $30,125 Roderick K.West — 42,500(1) $78.08 1/25/2028 — 19,467(2) $70.53 1/26/2027 — 13,666(3) $70.56 1/28/2026 23,000 — $89.90 1/29/2025 15,800(4) $1,359,906 16,600(5) $1,428,762 5,200(6) $447,564 2,134(7) $183,673 2,000(8) $172,140 484Table of Contents(1)Consists of options granted under the 2015 Equity Plan that vested or will vest as follows: 1/3 of the options granted vest oneach of January 25, 2019, January 25, 2020 and January 25, 2021.(2)Consists of options granted under the 2015 Equity Plan that vested or will vest as follows: 1/2 of the remaining unexercisableoptions vest on each of January 26, 2019 and January 26, 2020.(3)Consists of options granted under the 2015 Equity Plan that vested on January 28, 2019.(4)Consists of performance units granted under the 2015 Equity Plan that will vest on December 31, 2020 based on twoperformance measures: 1) Entergy Corporation’s total shareholder return performance over the 2018-2020 performance periodand 2) UP&O Adjusted EPS with each performance measure weighted equally, as described under “What Entergy CorporationPays and Why - Executive Compensation Elements - Variable Compensation - Long-Term Incentive Compensation -Performance Unit Program” in the Compensation Discussion and Analysis.(5)Consists of performance units granted under the 2015 Equity Plan that will vest on December 31, 2019 based on EntergyCorporation’s total shareholder return performance over the 2017-2019 performance period.(6)Consists of shares of restricted stock granted under the 2015 Equity Plan that vested or will vest as follows: 1/3 of the shares ofrestricted stock granted vest on each of January 25, 2019, January 25, 2020, and January 25, 2021.(7)Consists of shares of restricted stock granted under the 2015 Equity Plan that vested or will vest as follows: 1/2 of the shares ofrestricted stock granted vest on each of January 26, 2019 and January 26, 2020.(8)Consists of shares of restricted stock granted under the 2015 Equity Plan that vested on January 28, 2019.(9)Consists of restricted stock units granted under the 2015 Equity Plan which will vest on August 3, 2020.(10)Consists of restricted stock units granted under the 2015 Equity Plan which will vest one third on April 6, 2019, April 6, 2022,and April 6, 2025.2018 Option Exercises and Stock VestedThe following table provides information concerning each exercise of stock options and each vesting of stock during 2018 forthe Named Executive Officers. Options Awards Stock Awards(a) (b) (c) (d) (e)Name Number ofShares Acquiredon Exercise Value Realizedon Exercise Number ofShares Acquiredon Vesting Value Realizedon Vesting (1) (#) ($) (#) ($)A. Christopher Bakken, III — $— 10,808 $915,803 Marcus V. Brown 28,200 $633,480 16,579 $1,370,815 Leo P. Denault 45,000 $402,179 68,161 $5,723,234 Haley R. Fisackerly 15,200 $214,488 3,264 $271,822 Laura R. Landreaux — $— 1,224 $94,802 Andrew S. Marsh — $— 16,579 $1,370,815 Phillip R. May, Jr. 34,200 $500,989 4,581 $383,446 Sallie T. Rainer 6,233 $135,404 3,242 $270,157 Charles L. Rice, Jr. 5,766 $70,011 2,773 $230,753 Richard C. Riley 8,168 $169,477 3,563 $296,435 Roderick K. West 91,066 $1,379,491 36,310 $2,977,673(2)(1)Represents the value of performance units for the 2016-2018 performance period (payable solely in shares based on the closingstock price of Entergy Corporation on the date of vesting) under the Performance Unit Program and the vesting of shares ofrestricted stock in 2018.485Table of Contents(2)Includes the May 1, 2018 cash settlement of 21,000 restricted stock units granted under the 2011 Equity Ownership Plan.2018 Pension BenefitsThe following table shows the present value as of December 31, 2018, of accumulated benefits payable to each of the NamedExecutive Officers, including the number of years of service credited to each Named Executive Officer, under the retirement planssponsored by Entergy Corporation, determined using interest rate and mortality rate assumptions set forth in Note 11 to the financialstatements. Additional information regarding these retirement plans follows this table. Name Plan Name Number ofYearsCreditedService Present Value ofAccumulatedBenefit PaymentsDuring 2018A. Christopher Bakken, III Cash Balance Equalization Plan 2.74 $121,600 $— Cash Balance Plan 2.74 $48,000 $— Marcus V. Brown(1) System Executive Retirement Plan 23.74 $5,189,800 $— Entergy Retirement Plan 23.74 $883,300 $— Leo P. Denault (1)(2) System Executive Retirement Plan 34.83 $23,059,200 $— Entergy Retirement Plan 19.83 $797,900 $— David D. Ellis Cash Balance Equalization Plan 0.06 $— $— Cash Balance Plan 0.06 $600 $— Haley R. Fisackerly System Executive Retirement Plan 23.08 $1,355,000 $— Entergy Retirement Plan 23.08 $752,200 $— Laura R. Landreaux Pension Equalization Plan 11.48 $23,200 $— Entergy Retirement Plan 11.48 $253,100 $— Andrew S. Marsh System Executive Retirement Plan 20.37 $3,376,500 $— Entergy Retirement Plan 20.37 $502,600 $— Phillip R. May, Jr. (1) System Executive Retirement Plan 32.56 $2,450,400 $— Entergy Retirement Plan 32.56 $1,175,100 $— Sallie T. Rainer (1)(3) System Executive Retirement Plan 34.38 $1,301,300 $— Entergy Retirement Plan 34.00 $1,359,200 $— Charles L. Rice, Jr.(5) System Executive Retirement Plan 9.10 $614,600 $— Entergy Retirement Plan 9.47 $315,000 $— Richard C. Riley (1)(4) System Executive Retirement Plan 29.01 $1,867,500 $— Entergy Retirement Plan 23.55 $837,100 $— Roderick K. West System Executive Retirement Plan 19.75 $4,523,600 $— Entergy Retirement Plan 19.75 $557,400 $—(1)As of December 31, 2018, Mr. Brown, Mr. Denault, Mr. May, Ms. Rainer, and Mr. Riley were retirement eligible.(2)In 2006, Mr. Denault entered into a retention agreement granting him an additional 15 years of service and permission to retireunder the non-qualified System Executive Retirement Plan in the event his employment is terminated by his Entergy employerother than for cause (as defined in the retention agreement), by Mr. Denault for good reason (as defined in the retentionagreement), or on account of his death or disability. His retention agreement also provides that if he terminates employment forany other reason, he shall be entitled to the additional486Table of Contents15 years of service under the non-qualified System Executive Retirement Plan only if his Entergy employer grants himpermission to retire. The additional 15 years of service increases the present value of his benefit by $3,742,900.(3)Service under the non-qualified System Executive Retirement Plan is granted from the date of hire. Qualified plan benefitservice is granted from the later of the date of hire or the plan participation date.(4)Mr. Riley separated from Entergy Corporation and was subsequently rehired in June 1995. The Entergy Retirement Plan doesnot include any credit service prior to his rehire date; however, the System Executive Retirement Plan reflects a net creditedservice date of December 28, 1989.(5)Mr. Rice’s benefit accruals in the System Executive Retirement Plan ceased with his change in position. He continues to accruebenefits under the Entergy Retirement Plan and the Pension Equalization Plan.The tables below contain summaries of the pension benefit plans sponsored by Entergy Corporation that the Named ExecutiveOfficers participated in during 2018. Benefits for the Named Executive Officers who participate in these plans are determined using thesame formulas as for other eligible employees.Qualified Retirement Benefits Entergy Retirement PlanCash Balance PlanEligible NamedExecutive OfficersMarcus V. BrownHaley R. FisackerlyLeo P. DenaultAndrew S. MarshLaura R. LandreauxPhillip R. May, Jr.Sallie T. RainerCharles L. Rice, Jr.Richard C. RileyRoderick K. WestA. Christopher Bakken, IIIDavid D. EllisEligibilityNon-bargaining employees hired before July 1, 2014Non-bargaining employees hired on or after July 1,2014VestingA participant becomes vested in the EntergyRetirement Plan upon attainment of at least 5 years ofvesting service or upon attainment of age 65 whileactively employed by an Entergy system company.A participant becomes vested in the Cash BalancePlan upon attainment of at least 3 years of vestingservice or upon attainment of age 65 while activelyemployed by an Entergy system company.Form of PaymentUpon RetirementBenefits are payable as an annuity. For employeeswho separate from service on or after January 1,2018, a single lump sum distribution may be electedby the participant if eligibility criteria are met.Benefits are payable as an annuity or single lumpsum distribution.487Table of ContentsRetirement BenefitFormulaBenefits are calculated as a single life annuity payableat age 65 and generally are equal to 1.5% of aparticipant’s Final Average Monthly Earnings (FAME)multiplied by years of service (not to exceed 40).“Earnings” for the purpose of calculating FAMEgenerally includes the employee’s base salary andeligible annual incentive awards subject to InternalRevenue Code limitations, and excludes all otherbonuses. Executive Annual Incentive Awards are noteligible for inclusion in Earnings under this plan.FAME is calculated using the employee’s averagemonthly Earnings for the 60 consecutive months inwhich the employee’s earnings were highest duringthe 120 month period immediately preceding the employee’sretirement and includes up to 5 eligible annualincentive awards paid during the 60 month period.The normal retirement benefit at age 65 isdetermined by converting the sum of an employee’sannual pay credits and his or her annual interestcredits, into an actuarially equivalent annuity.Pay credits ranging from 4-8% of an employee’seligible Earnings are allocated annually to a notionalaccount for the employee based on an employee’sage and years of service. Earnings for purposes ofcalculating an employee’s pay credit include theemployee’s base salary and annual incentive awardssubject to Internal Revenue Code limitations andexclude all other bonuses. Executive AnnualIncentive Awards are eligible for inclusion inEarnings under this plan.Interest credits are calculated based upon the annualrate of interest on 30-year U.S. Treasury securities,as specified by the Internal Revenue Service, for themonth of August preceding the first day of theapplicable calendar year subject to a minimum rateof 2.6% and a maximum rate of 9%.Benefit TimingNormal retirement age under the plan is 65.A reduced terminated vested benefit may becommenced as early as age 55. The amount of thisbenefit is determined by reducing the normalretirement benefit by 7% per year for the first 5 yearscommencement precedes age 65, and 6% per year foreach additional year commencement precedes age 65.A subsidized early retirement benefit may becommenced by employees who are at least age 55with 10 years of service at the time they separate fromservice. The amount of this benefit is determined byreducing the normal retirement benefit by 2% per yearfor each year that early retirement precedes age 65.Normal retirement age under the plan is 65.A vested cash balance benefit can be commenced asearly as the first day of the month followingseparation from service. The amount of the benefit isdetermined in the same manner as the normalretirement benefit described above in the“Retirement Benefit Formula” section.Non-qualified Retirement BenefitsThe Named Executive Officers are eligible to participate in certain non-qualified retirement benefit plans that provide retirementincome, including the Pension Equalization Plan, the Cash Balance Equalization Plan, and the System Executive Retirement Plan. Eachof these plans is an unfunded non-qualified defined benefit pension plan that provides benefits to key management employees. In theseplans, as described below, an executive may participate in one or more non-qualified plans, but is only paid the amount due under theplan that provides the highest benefit. In general, upon disability, participants in the Pension Equalization Plan and the SystemExecutive Retirement Plan remain eligible for continued service credits until the earlier of recovery, separation from service due todisability, or retirement eligibility. Generally, spouses of participants who die before commencement of benefits may be eligible for aportion of the participant’s accrued benefit.488Table of Contents Pension Equalization PlanCash Balance EqualizationPlanSystem Executive Retirement PlanEligibleNamedExecutiveOfficersMarcus V. BrownHaley R. FisackerlyLeo P. DenaultLaura R. LandreauxAndrew S. MarshPhillip R. May, Jr.Sallie T. RainerCharles L. Rice, Jr.Richard C. RileyRoderick K. WestA. Christopher Bakken, IIIDavid D. EllisMarcus V. BrownHaley R. FisackerlyLeo P. DenaultAndrew S. MarshPhillip R. May, Jr.Sallie T. RainerCharles L. Rice, Jr.Richard C. RileyRoderick K. WestEligibilityManagement or highly compensatedemployees who participate in the EntergyRetirement PlanManagement or highlycompensated employeeswho participate in the CashBalance PlanCertain individuals who became executiveofficers before July 1, 2014Form ofPayment UponRetirementSingle lump sum distributionSingle lump sum distributionSingle lump sum distributionRetirementBenefitFormulaBenefits generally are equal to the actuarialpresent value of the difference between (1)the amount that would have been payableas an annuity under the Entergy RetirementPlan, including Executive Annual IncentiveAwards as eligible earnings and withoutapplying Internal Revenue Code limitationson pension benefits and earnings that maybe considered in calculating tax-qualifiedpension benefits, and (2) the amountactually payable an annuity under theEntergy Retirement Plan. Executive Annual Incentive Awards aretaken into account as eligible earningsunder this plan.Benefits generally are equalto the difference between theamount that would havebeen payable as a lump sumunder the Cash BalancePlan, but for InternalRevenue Code limitations onpension benefits andearnings that may beconsidered in calculatingtax-qualified cash balanceplan benefits, and theamount actually payable as alump sum under the CashBalance Plan.Benefits generally are equal to the actuarialpresent value of a specified percentage,based on the participant’s years of service(including supplemental service grantedunder the plan) and management level ofthe participant’s “Final Average MonthlyCompensation” (which is generally 1/36thof the sum of the participant’s base salaryand Annual Incentive Plan award for the 3highest years during the last 10 yearspreceding separation from service), afterfirst being reduced by the value of theparticipant’s Entergy Retirement Planbenefit.Benefit timingPayable at age 65Benefits payable prior to age 65 are subjectto the same reduced terminated vested orearly retirement reduction factors asbenefits payable under the EntergyRetirement Plan as described above.An employee with supplemental creditedservice who terminates employment prior toage 65 must receive prior written consent ofthe Entergy employer in order to receive theportion of their benefit attributable to theirsupplemental credited service agreement.Benefits payable upon separation fromservice subject to the 6 month delayrequired under Code Section 409A.Payable upon separationfrom service subject to 6month delay required underCode Section 409A.Payable at age 65Prior to age 65, vesting is conditioned onthe prior written consent of the officer’sEntergy employer.Benefits payable prior to age 65 are subjectto the same reduced terminated vested orsubsidized early retirement reductionfactors as benefits payable under theEntergy Retirement Plan as describedabove.Benefits payable upon separation fromservice subject to the 6 month delayrequired under Internal Revenue CodeSection 409A.Additional Information(1)Effective July 1, 2014, (a) no new grants of supplemental service may be provided to participants in the Pension EqualizationPlan; (b) supplemental credited service granted prior to July 1, 2014 was grandfathered; and (c) participants in EntergyCorporation’s Cash Balance Plan are not eligible to participate in the Pension Equalization Plan and instead may be eligible toparticipate in the Cash Balance Equalization Plan.489Table of Contents(2)Benefits accrued under the System Executive Retirement Plan, Pension Equalization Plan, and Cash Balance Equalization Plan, ifany, will become fully vested if a participant is involuntarily terminated without cause or terminates his or her employment forgood reason in connection with a change in control with payment generally made in a lump-sum payment as soon as reasonablypracticable following the first day of the month after the termination of employment, unless delayed 6 months under InternalRevenue Code Section 409A.(3)The System Executive Retirement Plan was closed to new executive officers effective July 1, 2014.2018 Non-qualified Deferred CompensationAs of December 31, 2018, Mr. May had a deferred account balance under a frozen Defined Contribution Restoration Plan. Theamount is deemed invested, as chosen by the participant, in certain T. Rowe Price investment funds that are also available to theparticipant under the Savings Plan. Mr. May has elected to receive the deferred account balance after he retires. The DefinedContribution Restoration Plan, until it was frozen in 2005, credited eligible employees’ deferral accounts with employer contributions tothe extent contributions under the qualified savings plan in which the employee participated were subject to limitations imposed by theInternal Revenue Code.Defined Contribution Restoration PlanName ExecutiveContributions in2018 RegistrantContributions in2018 AggregateEarnings in2018(1) AggregateWithdrawals/Distributions AggregateBalance atDecember 31,2018(a) (b) (c) (d) (e) (f) Phillip R. May,Jr. $— $— $69 $— $2,182(1)Amounts in this column are not included in the Summary Compensation Table.2018 Potential Payments Upon Termination or Change in ControlEntergy Corporation has plans and other arrangements that provide compensation to a Named Executive Officer if his or heremployment terminates under specified conditions, including following a change in control of Entergy Corporation or its subsidiaries.Change in ControlUnder Entergy Corporation’s System Executive Continuity Plan (the “Continuity Plan”), ML 1-4 Officers are eligible to receivethe severance benefits described below if their employment is terminated by their Entergy System employer other than for cause or ifthey terminate their employment for good reason during a period beginning with a potential change in control and ending 24 monthsfollowing the effective date of a change in control (a “Qualifying Termination”). A participant will not be eligible for benefits under theContinuity Plan if such participant: accepts employment with Entergy Corporation or any of its subsidiaries; elects to receive thebenefits of another severance or separation program; removes, copies or fails to return any property belonging to Entergy Corporationor any of its subsidiaries or violates his or her non-compete provision (which generally runs for two years but extends to three years ifpermissible under applicable law). Entergy Corporation does not have any plans or agreements that provide for payments or benefits toany of the Named Executive Officers solely upon a change in control.In the event of a Qualifying Termination, executive officers, including the Named Executive Officers, generally will receive thebenefits set forth below:490Table of ContentsCompensation ElementPaymentSeverance*A lump sum severance payment equal to a multiple of the sum of: (a) the participant’s annual base salary asin effect at any time within one year prior to the commencement of a change of control period or, if higher,immediately prior to a circumstance constituting good reason, plus (b) the participant’s annual incentive,calculated using the average annual target opportunity derived under the Annual Incentive Plan for the twocalendar years immediately preceding the calendar year in which termination occurs.Performance UnitsParticipants will forfeit outstanding performance units, and in lieu of any payment for any outstandingperformance period, will receive a single-lump sum payment calculated by multiplying the targetperformance units for the most recent performance period preceding (but not including) the calendar year inwhich termination occurs by the closing price of Entergy’s common stock as of the later of the date of suchtermination or the date of the Change in Control.Equity AwardsAll unvested stock options, shares of restricted stock and restricted stock units will vest immediately upon a“double trigger” Qualifying Termination pursuant to the terms of the Equity Ownership Plan.Retirement BenefitsBenefits already accrued under the System Executive Retirement Plan, Pension Equalization Plan and CashBalance Equalization Plan, if any, will become fully vested.Welfare BenefitsParticipants who are not retirement-eligible would be eligible to receive Entergy-subsidized COBRA benefitsfor a period ranging from 12 to 18 months.*Cash severance payments are capped at 2.99 times the sum of (a) an executive’s annual base salary plus (b) the higher of his orher actual annual incentive payment under the Annual Incentive Plan or his or her annual incentive, calculated using the averageannual target opportunity derived under the Annual Incentive Plan for the two calendar years immediately preceding the calendaryear in which termination occurs. Any cash severance payments to be paid under the Continuity Plan in excess of this cap will beforfeited by the participant.To protect shareholders and Entergy Corporation’s business model, executives are required to comply with non-compete, non-solicitation, confidentiality and non-denigration provisions. If an executive discloses non-public data or information concerning EntergyCorporation or any of its subsidiaries or violates his or her non-compete provision, he or she will be required to repay any benefitspreviously received under the Continuity Plan. For purposes of the Continuity Plan the following events are generally defined as:•Change in Control: (a) the purchase of 30% or more of either Entergy Corporation’s common stock or the combined votingpower of Entergy Corporation’s voting securities; (b) the merger or consolidation of Entergy Corporation (unless its Boardmembers constitute at least a majority of the board members of the surviving entity); (c) the liquidation, dissolution or sale of allor substantially all of Entergy Corporation’s assets; or (d) a change in the composition of Entergy Corporation’s Board suchthat, during any two-year period, the individuals serving at the beginning of the period no longer constitute a majority ofEntergy Corporation’s Board at the end of the period.•Potential Change in Control: (a) Entergy Corporation or an affiliate enters into an agreement the consummation of which wouldconstitute a Change in Control; (b) the Entergy Corporation Board adopts resolutions determining that, for purposes of theContinuity Plan, a potential Change in Control has occurred; (c) a System Company or other person or entity publiclyannounces an intention to take actions that would constitute a Change in Control; or (d) any person or entity becomes thebeneficial owner (directly or indirectly) of Entergy Corporation’s outstanding shares of common stock constituting 20% or moreof the voting power or value of the Entergy Corporation’s outstanding common stock.•Cause: The participant’s (a) willful and continuous failure to perform substantially his or her duties after written demand forperformance; (b) engagement in conduct that is materially injurious to Entergy Corporation or any of its subsidiaries; (c)conviction or guilty or nolo contendere plea to a felony or other crime that materially and adversely affects either his or herability to perform his or her duties or Entergy Corporation’s reputation; (d)491Table of Contentsmaterial violation of any agreement with Entergy Corporation or any of its subsidiaries; or (e) disclosure of any of EntergyCorporation’s confidential information without authorization.•Good Reason: The participant’s (a) nature or status of duties and responsibilities is substantially altered or reduced; (b) salary isreduced by 5% or more; (c) primary work location is relocated outside the continental United States; (d) compensation plans arediscontinued without an equitable replacement; (e) benefits or number of vacation days are substantially reduced; or (f) anEntergy employer purports to terminate his employment other than in accordance with the Continuity Plan.Other Termination EventsFor termination events, other than in connection with a Change in Control, the executive officers, including the NamedExecutive Officers, generally will receive the benefits set forth below:TerminationEventCompensation ElementSeveranceAnnual IncentiveStock OptionsRestrictedStockPerformance UnitsVoluntaryResignationNoneForfeited*Unvested options areForfeitedVested options expire on theearlier of (i) 90 days fromthe last day of activeemployment and (ii) theoption’s normal expirationdate.ForfeitedForfeited**Termination forCauseNoneForfeitedForfeitedForfeitedForfeitedRetirementNonePro-rated based onnumber of daysemployed during theperformance periodUnvested stock options veston the retirement date andexpire the earlier of (i) fiveyears from theRetirement date and (ii) theoption’s normal expirationdate.ForfeitedOfficers with aminimum of 12months of participationare eligible for a pro-rated award based onactual performanceand full months ofservice during theperformance periodDeath/DisabilityNonePro-rated based onnumber of daysemployed during theperformance periodUnvested stock options veston the termination date andexpire the earlier of (i) fiveyears from the terminationdate and (ii) the option’snormal expiration dateFully VestOfficers are eligible forpro-rated award basedon actual performanceand full months ofservice during theperformance period*If an officer resigns after the completion of an Annual Incentive Plan, he or she may receive, at the Company’s discretion, anannual incentive payment.**If an officer resigns after the completion of a Long-Term Performance Unit Program performance period, he or she may receive apayout under the Long-Term Performance Unit Program based on the outcome of the performance period.492Table of ContentsMr. Denault’s 2006 Retention AgreementIn 2006, Entergy Corporation entered into a retention agreement with Mr. Denault that provides benefits to him in addition to, orin lieu of, the benefits described above. Specifically, in the event of a Termination Event (as defined in his agreement): 1) Mr. Denaultis entitled to a Target LTIP Award calculated by using the average annual number of performance units with respect to the two mostrecent performance periods preceding the calendar year in which his employment termination occurs, assuming all performance goalswere achieved at target; and 2) all of Mr. Denault’s unvested stock options and shares of restricted stock will immediately vest.In the event of death or disability, Mr. Denault would receive the greater of the Target LTIP Award calculated as describedabove or the pro-rated number of performance units for all open performance periods, based on the number of months of hisparticipation in each open performance period.Under the terms of his 2006 retention agreement, Mr. Denault’s employment may be terminated for cause upon Mr. Denault’s:(a) continuing failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice oftermination for good reason) that remains uncured for 30 days after receiving a written notice from the Personnel Committee; (b)willfully engaging in conduct that is demonstrably and materially injurious to Entergy; (c) conviction of or entrance of a plea of guiltyor nolo contendere to a felony or other crime that has or may have a material adverse effect on his ability to carry out his duties or uponEntergy’s reputation; (d) material violation of any agreement that he has entered into with Entergy; or (e) unauthorized disclosure ofEntergy’s confidential information.Mr. Denault may terminate his employment for good reason upon: (a) the substantial reduction in the nature or status of hisduties or responsibilities from those in effect immediately prior to the date of the retention agreement, other than de minimis acts thatare remedied after notice from Mr. Denault; (b) a reduction of 5% or more in his base salary as in effect on the date of the retentionagreement; (c) the relocation of his principal place of employment to a location other than the corporate headquarters; (d) the failure tocontinue to allow him to participate in programs or plans providing opportunities for equity awards, incentive compensation and otherplans on a basis not materially less favorable than enjoyed at the time of the retention agreement (other than changes similarly affectingall senior executives); (e) the failure to continue to allow him to participate in programs or plans with opportunities for benefits notmaterially less favorable than those enjoyed by him under any of the pension, savings, life insurance, medical, health and accident,disability or vacation plans or policies at the time of the retention agreement (other than changes similarly affecting all seniorexecutives); or (f) any purported termination of his employment not taken in accordance with his retention agreement.Aggregate Termination PaymentsThe tables below reflect the amount of compensation each of the Named Executive Officers would have received if his or heremployment had been terminated as of December 31, 2018 under the various scenarios described above. For purposes of these tables, astock price of $86.07 was used, which was the closing market price on December 31, 2018, the last trading day of the year.493Table of ContentsBenefits and Payments UponTerminationVoluntaryResignationFor CauseTermination for GoodReason or Not forCauseRetirementDisabilityDeathTerminationRelated to aChange inControlA. Christopher Bakken, III(1) Severance Payment——————$3,254,438Performance Units(3)————$702,847$702,847$1,127,518Stock Options————$713,136$713,136$713,136Restricted Stock————$775,045$775,045$775,045Welfare Benefits(5)——————$22,248Unvested Restricted Stock Units(7)——$860,700—$860,700$860,700$2,582,100 Marcus V. Brown(2) Severance Payment——————$3,315,000Performance Units(3)———$702,847$702,847$702,847$1,127,518Stock Options———$1,012,080$1,012,080$1,012,080$1,012,080Restricted Stock————$1,041,237$1,041,237$1,041,237Welfare Benefits(6)——————— Leo P. Denault(2) Severance Payment——————$10,172,115Performance Units(3)(4)——$3,145,859$4,019,469$4,019,469$4,019,469$5,697,834Stock Options——$4,057,108$4,057,108$4,057,108$4,057,108$4,057,108Restricted Stock——$2,990,370—$2,990,370$2,990,370$2,990,370Welfare Benefits(6)——————— David D. Ellis(1) Severance Payment——————$305,000Performance Units(3)———————Stock Options———————Restricted Stock———————Welfare Benefits(5)——————$19,908 Haley R. Fisackerly(1) Severance Payment——————$512,343Performance Units(3)————$153,463$153,463$249,604Stock Options————$166,109$166,109$166,109Restricted Stock————$161,250$161,250$161,250Welfare Benefits(5)——————$19,908 Laura R. Landreaux(1) Severance Payment——————$392,700Performance Units(3)(4)————$92,525$92,525$249,604Stock Options———————Restricted Stock————$247,702$247,702$247,702Welfare Benefits(5)——————$19,908494Table of ContentsBenefits and Payments UponTerminationVoluntaryResignationFor CauseTermination forGood Reason or Notfor CauseRetirementDisabilityDeathTerminationRelated to aChange inControlAndrew S. Marsh(1) Severance Payment——————$3,172,200Performance Units(3)————$702,847$702,847$1,127,518Stock Options————$1,079,995$1,079,995$1,079,995Restricted Stock————$1,059,217$1,059,217$1,059,217Welfare Benefits(5)——————$29,862Unvested Restricted Stock Units(8)————$1,816,077$1,816,077$1,816,077 Phillip R. May, Jr.(2) Severance Payment——————$1,220,960Performance Units(3)———$253,907$253,907$253,907$352,888Stock Options———$237,513$237,513$237,513$237,513Restricted Stock————$204,746$204,746$204,746Welfare Benefits(6)——————— Sallie T. Rainer(2) Severance Payment——————$473,373Performance Units(3)———$153,463$153,463$153,463$249,604Stock Options———$168,176$168,176$168,176$168,176Restricted Stock————$164,349$164,349$164,349Welfare Benefits(6)——————— Charles R. Rice, Jr(1) Severance Payment———————Performance Units(3)————$65,241$65,241—Stock Options————$78,234$78,234—Restricted Stock————$124,490$124,490—Welfare Benefits(5)——————— Richard C. Riley(2) Severance Payment——————$1,050,000Performance Units(3)———$212,335$212,335$212,335$352,888Stock Options———$186,280$186,280$186,280$186,280Restricted Stock————$195,937$195,937$195,937Welfare Benefits(6)——————— Roderick K. West(1) Severance Payment——————$3,552,650Performance Units(3)————$702,847$702,847$1,127,518Stock Options————$854,067$854,067$854,067Restricted Stock————$864,531$864,531$864,531Welfare Benefits(5)——————$29,8621)See “2018 Pension Benefits” for a description of the pension benefits Mr. Bakken, Mr. Ellis, Mr. Fisackerly, Ms. Landreaux, Mr.Marsh, Mr. Rice, and Mr. West may receive upon the occurrence of certain termination events. 495Table of Contents2)As of December 31, 2018, Mr. Brown, Mr. Denault, Mr. May, Mr. Riley, and Ms. Rainer are retirement eligible and would retirerather than voluntarily resign, and in addition to the payments and benefits in the table, Mr. Brown, Mr. Denault, Mr. Riley, andMs. Rainer also would be entitled to receive their vested pension benefits under the Entergy Retirement Plan. For a description ofthese benefits, see “2018 Pension Benefits.”3)For purposes of the table, the value of Mr. Denault’s payments was calculated by multiplying the target performance units for the2015-2017 Performance Unit Program (33,100) by the closing price of Entergy stock on December 31, 2018 ($86.07), whichwould equal a payment of $2,848,917 for the forfeited performance units for each performance period. The value of Mr.Bakken’s, Mr. Brown’s, Mr. Marsh’s, and Mr. West’s payments was calculated by multiplying the target performance units forthe 2015-2017 Performance Unit Program (6,550) by the closing price of Entergy stock on December 31, 2018 ($86.07), whichwould equal a payment of $563,759 for the forfeited performance units for each performance period. The value of Mr. May’sand Mr. Riley’s payment was calculated by multiplying the target performance units for the 2015-2017 Performance UnitProgram (2,050) by the closing price of Entergy stock on December 31, 2018 ($86.07), which would equal a payment of$176,444 for the forfeited performance units for each performance period. The value of the payments for the other NamedExecutives Officers, other than Mr. Ellis and Mr. Rice, was calculated by multiplying the target performance units for the 2015-2017 Performance Unit Program (1,450) by the closing price of Entergy stock on December 31, 2018 ($86.07), which wouldequal a payment of $124,802 for the forfeited performance units for each performance period. At December 31, 2018, Mr. Elliswas not eligible to participate in the long-term performance unit program, and Mr. Rice was not a participant in the SystemExecutive Continuity Plan.For purposes of the table, the values of the awards payable in the event of retirement in the case of Mr. Brown, Mr. Denault, Mr.May, Ms. Rainer, or Mr. Riley or upon death or disability, other than Mr. Denault, for each Named Executive Officer werecalculated as follows:Mr. Denault’s:2017-2019 Plan: 32,467 (24/36 × 48,700) performance units at target, assuming a stock price of $86.072018-2020 Plan: 14,233 (12/36 × 42,700) performance units at target, assuming a stock price of $86.07 Messrs. Bakken’s, Brown’s, Marsh’s, and West’s:2017-2019 Plan: 5,533 (24/36 × 8,300) performance units at target, assuming a stock price of $86.072018-2020 Plan: 2,633 (12/36 × 7,900) performance units at target, assuming a stock price of $86.07Mr. May’s:2017-2019 Plan: 2,100 (24/36 × 3,150) performance units at target, assuming a stock price of $86.072018-2020 Plan: 850 (12/36 × 2,550) performance units at target, assuming a stock price of $86.07Mr. Riley’s:2017-2019 Plan: 1,667 (24/36 × 2,500) performance units at target, assuming a stock price of $86.072018-2020 Plan: 800 (12/36 × 2,400) performance units at target, assuming a stock price of $86.07Mr. Fisackerly’s and Ms. Rainer’s:2017-2019 Plan: 1,233 (24/36 × 1,850) performance units at target, assuming a stock price of $86.072018-2020 Plan: 545 (12/36 × 1,650) performance units at target, assuming a stock price of $86.07Ms. Landreaux’s:2017-2019 Plan: 617 (24/36 × 925) performance units at target, assuming a stock price of $86.072018-2020 Plan: 458 (12/36 × 1,375) performance units at target, assuming a stock price of $86.07Mr. Rice’s:496Table of Contents2017-2019 Plan: 651 (24/36 × 976) performance units at target, assuming a stock price of $86.072018-2020 Plan: 107 (12/36 × 321) performance units at target, assuming a stock price of $86.074)For purposes of the table, the value of Mr. Denault’s retention payment was calculated by taking an average of the targetperformance units from the 2014-2016 Performance Unit Program (40,000) and from the 2015-2017 Performance Unit Program(33,100). This average number of units (36,550) multiplied by the closing price of Entergy stock on December 31, 2018($86.07) would equal a payment of $3,145,859.5)Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Bakken, Mr.Marsh, and Mr. West would be eligible to receive Entergy-subsidized COBRA benefits for 18 months and Mr. Ellis, Mr.Fisackerly, and Ms. Landreaux would be eligible to receive Entergy-subsidized COBRA benefits for 12 months.6)Upon retirement, Mr. Brown, Mr. Denault, Mr. May, Mr. Riley, and Ms. Rainer would be eligible for retiree medical and dentalbenefits, the same as all other retirees.7)Mr. Bakken’s 30,000 restricted stock units vest 1/3rd on each of April 6, 2019, April 6, 2022, and April 6, 2025. Pursuant to hisrestricted stock unit agreement, if Mr. Bakken’s employment terminates due to total disability or death or, prior to April 6, 2019,Mr. Bakken’s employment is terminated by his Entergy employer other than for cause, he will vest in and be paid the 10,000restricted stock units that otherwise would have vested had he satisfied the vesting conditions of the restricted stock unitagreement through the next vesting date to occur following his date of total disability, death or termination other than for causeprior to April 6, 2019 subject, in the case of a termination without cause, to Mr. Bakken timely executing and not revoking arelease of claims against Entergy and its affiliates. In the event of a change in control, the unvested restricted stock units will fullyvest upon Mr. Bakken’s Qualifying Termination during a change in control period. Pursuant to his restricted stock unitagreement, Mr. Bakken is subject to certain restrictions on his ability to compete with Entergy and its affiliates or solicit itsemployees or customers during and for 12 months after his employment with his Entergy employer. In addition, the restrictedstock unit agreement limits Mr. Bakken’s ability to disparage Entergy and its affiliates. In the event of a breach of theserestrictions, other than following certain constructive terminations of his employment, Mr. Bakken will forfeit any restricted stockunits that are not yet vested and paid, and must repay to Entergy any shares of Entergy stock paid to him in respect of therestricted stock units and any amounts he received upon the sale or transfer of any such shares.8)Mr. Marsh’s 21,100 restricted stock units vest 100% in 2020. Pursuant to his restricted stock unit agreement, any unvestedrestricted stock units will vest immediately in the event of his termination of employment due to Mr. Marsh’s total disability ordeath or a Qualifying Termination during a change in control period. Pursuant to his restricted stock unit agreement, Mr. Marsh issubject to certain restrictions on his ability to compete with Entergy and its affiliates during and for 12 months after hisemployment with Entergy, or to solicit its employees or customers during and for 24 months after his employment with Entergy.In addition, the restricted stock unit agreement limits Mr. Marsh’s ability to disparage Entergy and its affiliates. In the event of abreach of these restrictions, Mr. Marsh will forfeit any restricted stock units that are not yet vested and paid, and must repay toEntergy any shares of Entergy stock paid to him in respect of the restricted stock units and any amounts he received upon thesale or transfer of any such shares.Pay RatioAs required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the following disclosure isbeing provided about the relationship of the annual total compensation of the employees of each of the Utility operating companies tothe annual total compensation of their respective Presidents and Chief Executive Officers. The pay ratio estimate for each of the Utilityoperating companies has been calculated in a manner consistent with Item 402(u) of Regulation S-K.497Table of ContentsIdentification of Median EmployeeFor each of the Utility operating companies, October 5, 2018 was selected as the date on which to determine the medianemployee. This date is different from the date used in the prior year; however, the methodology used to determine the date is consistentwith that used in the prior year. Both dates correspond to the first day of the three month period prior to fiscal year-end for whichinformation can be obtained about employees and all subsidiaries have the same number of pay cycles. To identify the medianemployee from each of the Utility operating companies’ employee population base, all compensation included in Box 5 of Form W-2was considered with all before-tax deductions added back to this compensation (Box 5 Compensation”). For purposes of determiningthe median employee of each Utility operating company, Box 5 Compensation was selected as it is believed it is representative of thecompensation received by the employees of each respective Utility operating company and is readily available. The calculation ofannual total compensation of the median employee for each Utility operating company is the same calculation used to determine totalcompensation for purposes of the 2018 Summary Compensation Table with respect to each of the Named Executive Officers.Entergy Arkansas RatioFor purposes of this disclosure and to reflect the Chief Executive Officer transition discussed earlier in the CD&A, thecompensation amounts paid to each of Mr. Riley and Ms. Landreaux for the time he and she respectively served as Entergy Arkansas’Chief Executive Officer during 2018 have been pro-rated and combined.For 2018,•The median of the annual total compensation of all of Entergy Arkansas’ employees, other than Entergy Arkansas’ ChiefExecutive Officer, was $113,820.•The combined annual total compensation of Entergy Arkansas’ previous Chief Executive Officer, Mr. Riley, and its currentChief Executive Officer, Ms. Landreaux, as reported in the Total column of the 2018 Summary Compensation Table (pro-ratedfor the time each served as Entergy Arkansas’ Chief Executive Officer in 2018) was $990,731.•Based on this information, the ratio of the annual total compensation of Entergy Arkansas’ Chief Executive Officer to themedian of the annual total compensation of all employees is estimated to be 9:1.Entergy Louisiana RatioFor 2018,•The median of the annual total compensation of all of Entergy Louisiana’s employees, other than Mr. May, was $108,115.•Mr. May’s annual total compensation, as reported in the Total column of the 2018 Summary Compensation Table, was$1,031,421.•Based on this information, the ratio of the annual total compensation of Mr. May to the median of the annual total compensationof all employees is estimated to be 10:1.Entergy Mississippi RatioFor 2018,•The median of the annual total compensation of all of Entergy Mississippi’s employees, other than Mr. Fisackerly, was$113,046.•Mr. Fisackerly’s annual total compensation, as reported in the Total column of the 2018 Summary Compensation Table, was$815,654.•Based on this information, the ratio of the annual total compensation of Mr. Fisackerly to the median of the annual totalcompensation of all employees is estimated to be 7:1.498Table of ContentsEntergy New Orleans RatioFor purposes of this disclosure and to reflect the Chief Executive Officer transition discussed earlier in the CD&A, thecompensation amounts we paid to each of Mr. Ellis, Mr. Rice and Mr. West for the time they served as Entergy New Orleans’ ChiefExecutive Officer during 2018 have been pro-rated and combined.For 2018,•The median of the annual total compensation of all of Entergy New Orleans’ employees, other than Entergy New Orleans’ ChiefExecutive Officer, was $93,562.•The combined annual total compensation of Entergy New Orleans’ previous Chief Executive Officers, Mr. Rice and Mr. West,and its current Chief Executive Officer, Mr. Ellis, as reported in the Total column of the 2018 Summary Compensation Table(pro-rated for the time each served as Entergy New Orleans’ Chief Executive Officer in 2018) was $1,382,688.•Based on this information, the ratio of the annual total compensation of Entergy New Orleans’ Chief Executive Officer to themedian of the annual total compensation of all employees is estimated to be 15:1.Entergy Texas RatioFor 2018,•The median of the annual total compensation of all of Entergy Texas’ employees, other than Ms. Rainer, was $104,839.•Ms. Rainer’s annual total compensation, as reported in the Total column of the 2018 Summary Compensation Table, was$774,225.•Based on this information, the ratio of the annual total compensation of Ms. Rainer to the median of the annual totalcompensation of all employees is estimated to be 7:1.499Table of ContentsItem 12. Security Ownership of Certain Beneficial Owners and ManagementEntergy Corporation owns 100% of the outstanding common stock of registrants Entergy Texas and indirectly 100% of theoutstanding common membership interests of registrant Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy NewOrleans. The information with respect to persons known by Entergy Corporation to be beneficial owners of more than 5% of EntergyCorporation’s outstanding common stock is included under the heading “Entergy Share Ownership - Beneficial Owners of More ThanFive Percent” in the Proxy Statement, which information is incorporated herein by reference. The registrants know of no contractualarrangements that may, at a subsequent date, result in a change in control of any of the registrants.The following table sets forth the beneficial ownership of common stock of Entergy Corporation and stock-based units as ofJanuary 31, 2019 for all directors and Named Executive Officers. Unless otherwise noted, each person had sole voting and investmentpower over the number of shares of common stock and stock-based units of Entergy Corporation set forth across from his or her name.500Table of ContentsName Shares (1)(2) Options Exercisable Within 60Days Stock Units (3)Entergy Corporation A. Christopher Bakken, III** 19,880 38,566 —Marcus V. Brown** 32,692 145,033 —John R. Burbank* 874 — —Patrick J. Condon* 6,291 — —Leo P. Denault*** 179,581 691,300 —Kirkland H. Donald* 6,851 — 2,231Philip L. Frederickson* 4,664 — 805Alexis M. Herman* 13,352 — —Stuart L. Levenick* 19,878 — —Blanche L. Lincoln* 13,093 — —Andrew S. Marsh** 70,899 204,766 —Karen A. Puckett* 6,291 — —Roderick K. West** 51,949 60,566 —All directors and executive officersas a group (17 persons) 511,522 1,266,295 3,036 Entergy Arkansas A. Christopher Bakken, III** 19,880 38,566 —Marcus V. Brown** 32,692 145,033 —Leo P. Denault** 179,581 691,300 —Andrew S. Marsh*** 70,899 204,766 —Laura R. Landreaux*** 4,132 — —Richard C. Riley**** 11,599 16,333 —Roderick K. West*** 51,949 60,566 —All directors and executive officersas a group (10 persons) 446,759 1,264,729 — Entergy Louisiana A. Christopher Bakken, III** 19,880 38,566 —Marcus V. Brown** 32,692 145,033 —Leo P. Denault** 179,581 691,300 —Andrew S. Marsh*** 70,899 204,766 —Phillip R. May, Jr.*** 21,546 22,900 12Roderick K. West*** 51,949 60,566 —All directors and executive officersas a group (9 persons) 452,574 1,271,296 12501Table of ContentsName Shares (1)(2) Options Exercisable Within 60Days Stock Units (3)Entergy Mississippi Marcus V. Brown** 32,692 145,033 —Leo P. Denault** 179,581 691,300 —Haley R. Fisackerly*** 7,843 13,700 —Andrew S. Marsh*** 70,899 204,766 —Roderick K. West*** 51,949 60,566 —All directors and executive officers asa group (8 persons) 418,991 1,223,530 — Entergy New Orleans Marcus V. Brown** 32,692 145,033 —Leo P. Denault** 179,581 691,300 —David D. Ellis*** 500 — —Andrew S. Marsh*** 70,899 204,766 —Charles L. Rice, Jr.**** 7,631 8,167 —Roderick K. West*** 51,949 60,566 —All directors and executive officers asa group (9 persons) 419,279 1,217,997 — Entergy Texas Marcus V. Brown** 32,692 145,033 —Leo P. Denault** 179,581 691,300 —Andrew S. Marsh*** 70,899 204,766 —Sallie T. Rainer*** 8,370 15,667 —Roderick K. West*** 51,949 60,566 —All directors and executive officers asa group (8 persons) 419,518 1,225,497 —*Director of the respective Company**Named Executive Officer of the respective Company***Director and Named Executive Officer of the respective Company****Former Director of the respective Company(1)The number of shares of Entergy Corporation common stock owned by each individual and by all non-employee directors andexecutive officers as a group does not exceed one percent of the outstanding shares of Entergy Corporation common stock.(2)For the non-employee directors, the balances include phantom units that are issued under the Service Recognition Program. Allnon-employee directors are credited with phantom units for each year of service on the Entergy Corporation Board. Thesephantom units do not have voting rights, accrue dividends, and will be settled in shares of Entergy Corporation common stockfollowing the non-employee director’s separation from the Board.(3)Represents the balances of phantom units each executive holds under the defined contribution restoration plan and the deferralprovisions of the Equity Ownership Plan. These units will be paid out in either Entergy Corporation Common Stock or cashequivalent to the value of one share of Entergy Corporation common stock per unit on the date of payout, including accrueddividends. The deferral period is determined by the individual and is at least two years from the award of the bonus. Messrs.Donald and Frederickson have deferred receipt of some of their quarterly stock grants. The deferred shares will be settled in cashin an amount equal to the market value of Entergy Corporation common stock at the end of the deferral period.502Table of ContentsEquity Compensation Plan InformationThe following table summarizes the equity compensation plan information as of December 31, 2018. Information is includedfor equity compensation plans approved by the shareholders. There are no shares authorized for issuance under equity compensationplans not approved by the shareholders.Plan Number of Securities to beIssued Upon Exercise ofOutstanding Options,Warrants and Rights (a) WeightedAverageExercise Price(b)(2) Number of SecuritiesRemaining Available forFuture Issuance (excludingsecurities reflected in column(a))(c)Equity compensation plans approved bysecurity holders (1) 2,993,333 $75.14 2,006,268Equity compensation plans not approvedby security holders — — —Total 2,993,333 $75.14 2,006,268(1)Includes the 2007 Equity Ownership Plan, the 2011 Equity Ownership Plan, and the 2015 Equity Plan. The 2007 EquityOwnership Plan was approved by Entergy Corporation shareholders on May 12, 2006, and only applied to awards grantedbetween January 1, 2007 and May 5, 2011. The 2011 Equity Ownership Plan was approved by Entergy Corporation shareholderson May 6, 2011, and only applied to awards granted between May 6, 2011 and May 7, 2015. The 2015 Equity Plan wasapproved by Entergy Corporation shareholders on May 8, 2015, and 6,900,000 shares of Entergy Corporation common stock canbe issued from the 2015 Equity Plan, with no more than 1,500,000 shares available for incentive stock option grants. The 2015Equity Plan applies to awards granted on or after May 8, 2015. The 2007 Equity Ownership Plan, the 2011 Equity OwnershipPlan, and the 2015 Equity Plan (collectively, the “Plans”) are administered by the Personnel Committee of the Board of Directors(other than with respect to awards granted to non-employee directors, which awards are administered by the entire Board ofDirectors). Eligibility under the Plans is limited to the non-employee directors and to the officers and employees of an Entergyemployer and any corporation 80% or more of whose stock (based on voting power) or value is owned, directly or indirectly, byEntergy Corporation. The Plans provide for the issuance of stock options, restricted stock, equity awards (units whose value isrelated to the value of shares of the common stock but do not represent actual shares of common stock), performance awards(performance shares or units valued by reference to shares of common stock or performance units valued by reference to financialmeasures or property other than common stock), restricted stock unit awards, and other stock-based awards.(2)The weighted average exercise price reported in the column does not include outstanding performance awards.503Table of ContentsItem 13. Certain Relationships and Related Party Transactions and Director IndependenceFor information regarding certain relationship, related transactions and director independence of Entergy Corporation, see theProxy Statement under the headings “Corporate Governance at Entergy - Director Independence” and “Corporate Governance atEntergy - Governance Policies - Our Transactions with Related Party Persons Policy.”Entergy Corporation’s Board of Directors has adopted written policies and procedures for the review, approval or ratification ofany transaction involving an amount in excess of $120,000 in which any director or executive officer of Entergy Corporation, anynominee for director, or any immediate family member of the foregoing has or will have a material interest as contemplated byItem 404(a) of Regulation S-K (“Related Person Transactions”). Under these policies and procedures, Entergy Corporation’s CorporateGovernance Committee or a subcommittee of its Board of Directors consisting entirely of independent directors reviews the transactionand either approves or rejects the transaction after taking into account the following factors:•Whether the proposed transaction is on terms that are at least as favorable to Entergy Corporation as those achievablewith an unaffiliated third party;•Size of the transaction and amount of consideration;•Nature of the interest;•Whether the transaction involves a conflict of interest;•Whether the transaction involves services available from unaffiliated third parties; and•Any other factors that the Corporate Governance Committee or subcommittee deems relevant.The policy does not apply to (a) compensation and related person transactions involving a director or an executive officer solelyresulting from that person’s service as a director or employment with Entergy Corporation so long as the compens tion is approved bythe Board of Directors (or an appropriate committee), (b) transactions involving public utility services at rates or charges fixed inconformity with law or governmental authority, or (c) any other categories of transactions currently or in the future excluded from thereporting requirements of Item 404(a) of Regulation S-K.Related Party Transactions Since January 1, 2018, neither Entergy Corporation nor any of its affiliates has participated in any Related Person Transaction.504Table of ContentsItem 14. Principal Accountant Fees and Services (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy)Aggregate fees billed to Entergy Corporation (consolidated), Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, EntergyNew Orleans, Entergy Texas, and System Energy for the years ended December 31, 2018 and 2017 by Deloitte & Touche LLP were asfollows: 2018 2017Entergy Corporation (consolidated) Audit Fees$8,801,895 $8,401,895Audit-Related Fees (a)1,067,119 875,000Total audit and audit-related fees9,869,014 9,276,895Tax Fees— —All Other Fees— —Total Fees (b)$9,869,014 $9,276,895Entergy Arkansas Audit Fees$1,030,758 $1,018,860Audit-Related Fees (a)— —Total audit and audit-related fees1,030,758 1,018,860Tax Fees— —All Other Fees— —Total Fees (b)$1,030,758 $1,018,860Entergy Louisiana Audit Fees$1,916,517 $1,887,719Audit-Related Fees (a)500,000 500,000Total audit and audit-related fees2,416,517 2,387,719Tax Fees— —All Other Fees— —Total Fees (b)$2,416,517 $2,387,719Entergy Mississippi Audit Fees$910,758 $933,860Audit-Related Fees (a)— —Total audit and audit-related fees910,758 933,860Tax Fees— —All Other Fees— —Total Fees (b)$910,758 $933,860505Table of Contents 2018 2017Entergy New Orleans Audit Fees$965,758 $953,860Audit-Related Fees (a)— —Total audit and audit-related fees965,758 953,860Tax Fees— —All Other Fees— —Total Fees (b)$965,758 $953,860Entergy Texas Audit Fees$1,200,758 $1,093,860Audit-Related Fees (a)— —Total audit and audit-related fees1,200,758 1,093,860Tax Fees— —All Other Fees— —Total Fees (b)$1,200,758 $1,093,860System Energy Audit Fees$850,758 $868,860Audit-Related Fees (a)— —Total audit and audit-related fees850,758 868,860Tax Fees— —All Other Fees— —Total Fees (b)$850,758 $868,860(a)Includes fees for employee benefit plan audits, consultation on financial accounting and reporting, and other attestationservices.(b)100% of fees paid in 2018 and 2017 were pre-approved by the Entergy Corporation Audit Committee.506Table of ContentsEntergy Audit Committee Guidelines for Pre-approval of Independent Auditor ServicesThe Audit Committee has adopted the following guidelines regarding the engagement of Entergy’s independent auditor toperform services for Entergy:1.The independent auditor will provide the Audit Committee, for approval, an annual engagement letter outlining the scope ofservices proposed to be performed during the fiscal year, including audit services and other permissible non-audit services(e.g. audit-related services, tax services, and all other services).2.For other permissible services not included in the engagement letter, Entergy management will submit a description of theproposed service, including a budget estimate, to the Audit Committee for pre-approval. Management and the independentauditor must agree that the requested service is consistent with the SEC’s rules on auditor independence prior to submissionto the Audit Committee. The Audit Committee, at its discretion, will pre-approve permissible services and has establishedthe following additional guidelines for permissible non-audit services provided by the independent auditor:•Aggregate non-audit service fees are targeted at fifty percent or less of the approved audit service fee.•All other services should only be provided by the independent auditor if it is a highly qualified provider of thatservice or if the Audit Committee pre-approves the independent audit firm to provide the service.3.The Audit Committee will be informed quarterly as to the status of pre-approved services actually provided by theindependent auditor.4.To ensure prompt handling of unexpected matters, the Audit Committee delegates to the Audit Committee Chair or itsdesignee the authority to approve permissible services and fees. The Audit Committee Chair or designee will report actiontaken to the Audit Committee at the next scheduled Audit Committee meeting.5.The Vice President and General Auditor will be responsible for tracking all independent auditor fees and will reportquarterly to the Audit Committee.507Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(a)1.Financial Statements and Independent Auditors’ Reports for Entergy, Entergy Arkansas, Entergy Louisiana, EntergyMississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Table of Contents. (a)2.Financial Statement Schedules Report of Independent Registered Public Accounting Firm (see page 530) Financial Statement Schedules are listed in the Index to Financial Statement Schedules (see page S-1) (a)3.Exhibits Exhibits for Entergy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, andSystem Energy are listed in the Exhibit Index (see page 509 and are incorporated by reference herein). Each managementcontract or compensatory plan or arrangement required to be filed as an exhibit hereto is identified as such by footnote in theExhibit Index.Item 16. Form 10-K Summary (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, Entergy Texas, and System Energy) None.508Table of ContentsEXHIBIT INDEXThe following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibitshave heretofore been filed with the SEC as the exhibits and in the file numbers indicated and are incorporated herein by reference. Theexhibits marked with a (+) are management contracts or compensatory plans or arrangements required to be filed herewith and requiredto be identified as such by Item 15 of Form 10-K.Some of the agreements included or incorporated by reference as exhibits to this Form 10-K contain representations andwarranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit ofthe other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a wayof allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement bydisclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contractstandards of “materiality” that are different from the standard of “materiality” under the applicable securities laws; and (iv) were madeonly as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.Entergy acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible forconsidering whether additional specific disclosures of material information regarding material contractual provisions are required tomake the statements in this Form 10-K not misleading.(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or SuccessionEntergy Arkansas(a) 1 --Plan of Merger of Entergy Arkansas, Inc. and Entergy Arkansas Power, LLC (2.1 to Form 8-K12B filed December 3,2018 in 1-10764).Entergy Louisiana(b) 1 --Plan of Merger of Entergy Gulf States Power, LLC and Entergy Gulf States Louisiana, LLC (2.1 to Form 8-K12B filedOctober 1, 2015 in 1-32718). (b) 2 --Plan of Merger of Entergy Louisiana, LLC and Entergy Louisiana Power, LLC (2.2 to Form 8-K12B filed October 1,2015 in 1-32718). (b) 3 --Plan of Merger of Entergy Gulf States Power, LLC and Entergy Louisiana Power, LLC (2.3 to Form 8-K12B filedOctober 1, 2015 in 1-32718).Entergy Mississippi(c) 1 --Plan of Merger of Entergy Mississippi, Inc. and Entergy Mississippi Power and Light, LLC (2.1 to Form 8-K12B filedDecember 3, 2018 in 1-31508).Entergy New Orleans(d) 1 --Plan of Merger of Entergy New Orleans, Inc. and Entergy New Orleans Power, LLC (2.1 to Form 8-K12B filedDecember 1, 2017 in 1-35747).(3) Articles of Incorporation and By-lawsEntergy Corporation(a) 1 --Restated Certificate of Incorporation of Entergy Corporation dated October 10, 2006 (3(a) to Form 10-Q for the quarterended September 30, 2006 in 1-11299). (a) 2 --Bylaws of Entergy Corporation as amended January 27, 2017, and as presently in effect (3.1 to Form 8-K filed January30, 2017 in 1-11299).509Table of ContentsSystem Energy(b) 1 --Amended and Restated Articles of Incorporation of System Energy effective April 28, 1989 (3(b)1 to Form 10-K for theyear ended December 31, 2017 in 1-9067). (b) 2 --By-Laws of System Energy effective July 6, 1998, and as presently in effect (3(f) to Form 10-Q for the quarter endedJune 30, 1998 in 1-9067).Entergy Arkansas(c) 1 --Amended and Restated Certificate of Formation of Entergy Arkansas, LLC effective December 1, 2018 (3.3 to Form 8-K12B filed December 3, 2018 in 1-10764). (c) 2 --Amended and Restated Company Agreement of Entergy Arkansas, LLC effective December 1, 2018 (3.4 to Form 8-K12B filed December 3, 2018 in 1-10764).Entergy Louisiana(d) 1 --Certificate of Formation of Entergy Louisiana Power, LLC (including Certificate of Amendment to Certificate ofFormation to change the company name to Entergy Louisiana, LLC) effective July 7, 2015 (3.3 to Form 8-K12B filedOctober 1, 2015 in 1-32718). (d) 2 --Company Agreement of Entergy Louisiana Power, LLC (including First Amendment to Company Agreement to changethe company name to Entergy Louisiana, LLC) effective July 7, 2015 (3.4 to Form 8-K12B filed October 1, 2015 in1-32718).Entergy Mississippi*(e) 1 --Amended and Restated Certificate of Formation of Entergy Mississippi, LLC effective December 1, 2018. (e) 2 --Amended and Restated Company Agreement of Entergy Mississippi, LLC effective December 1, 2018 (3.4 to Form 8-K12B filed December 3, 2018 in 1-31508).Entergy New Orleans(f) 1 --Composite Certificate of Formation of Entergy New Orleans, LLC effective December 1, 2017 (3.3 to Form 8-K12Bfiled December 1, 2017 in 1-35747). (f) 2 --Composite Company Agreement of Entergy New Orleans, LLC effective December 1, 2017 (3.4 to Form 8-K12B filedDecember 1, 2017 in 1-35747).Entergy Texas(g) 1 --Certificate of Formation of Entergy Texas effective December 31, 2007 (3(i) to Form 10 filed March 14, 2008 in 000-53134). (g) 2 --Bylaws of Entergy Texas effective December 31, 2007 (3(ii) to Form 10 filed March 14, 2008 in 000-53134).(4)Instruments Defining Rights of Security Holders, Including IndenturesEntergy Corporation(a) 1 --See (4)(b) through (4)(g) below for instruments defining the rights of security holders of System Energy, EntergyArkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. 510Table of Contents(a) 2 --Indenture (For Unsecured Debt Securities), dated as of September 1, 2010, between Entergy Corporation and WellsFargo Bank, National Association (4.01 to Form 8-K filed September 16, 2010 in 1-11299). (a) 3 --Officer’s Certificate for Entergy Corporation relating to 5.125% Senior Notes due September 15, 2020 (4.02(b) to Form8-K filed September 16, 2010 in 1-11299). (a) 4 --Officer’s Certificate for Entergy Corporation relating to 4.0% Senior Notes due July 15, 2022 (4.02 to Form 8-K filedJuly 1, 2015 in 1-11299). (a) 5 --Officer’s Certificate for Entergy Corporation relating to 2.95% Senior Notes due September 1, 2026 (4.02 to Form 8-Kfiled August 19, 2016 in 1-11299). (a) 6 --Second Amended and Restated Credit Agreement dated as of September 14, 2018, among Entergy Corporation, asBorrower, the banks and other financial institutions listed on the signatures pages thereof, as Lenders, Citibank, N.A.,as Administrative Agent and LC Issuing Bank, MUFG Bank, Ltd., as LC Issuing Bank, and the other LC IssuingBanks from time to time parties thereto (4(g) to Form 10-Q for the quarter ended September 30, 2018 in 1-11299).System Energy(b) 1 --Mortgage and Deed of Trust, dated as of June 15, 1977, as amended and restated by the following SupplementalIndenture: (4.42 to Form 8-K filed September 25, 2012 in 1-9067 (Twenty-fourth)). (b) 2 --Loan Agreement, dated as of October 15, 1998, between System Energy and Mississippi Business Finance Corporation(B-6(b) to Rule 24 Certificate filed November 12, 1998 in 70-8511). (b) 3 --Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (4(B)3to Form 10-K for the year ended December 31, 2017 in 1-9067).Entergy Arkansas(c) 1 --Mortgage and Deed of Trust, dated as of October 1, 1944, as amended by the following Supplemental Indentures: (7(d)in 2-5463 (Mortgage); 7(b) in 2-7121 (First); 4(a)-7 in 2-10261 (Seventh); 2(b)-10 in 2-15767 (Tenth); 2(c) in 2-28869 (Sixteenth); 2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646 (Nineteenth); 2(c) in 2-39253 (Twentieth); 4(c)1 toForm 10-K for the year ended December 31, 2017 in 1-10764 (Thirtieth); 4(c)1 to Form 10-K for the year endedDecember 31, 2017 in 1-10764 (Thirty-first); 4(c)1 to Form 10-K for the year ended December 31, 2017 in 1-10764(Thirty-ninth); 4(c)1 to Form 10-K for the year ended December 31, 2017 in 1-10764 (Forty-first); 4(d)(2) in 33-54298 (Forty-sixth); C-2 to Form U5S for the year ended December 31,1995 (Fifty-third); 4.06 to Form 8-K filedOctober 8, 2010 in 1-10764 (Sixty-ninth); 4.06 to Form 8-K filed November 12, 2010 in 1-10764 (Seventieth); 4.06to Form 8-K filed December 13, 2012 in 1-10764 (Seventy-first); 4(e) to Form 8-K filed January 9, 2013 in 1-10764(Seventy-second); 4.06 to Form 8-K filed May 30, 2013 in 1-10764 (Seventy-third); 4.06 to Form 8-K filed June 4,2013 in 1-10764 (Seventy-fourth); 4.05 to Form 8-K filed March 14, 2014 in 1-10764 (Seventy-sixth); 4.05 to Form8-K filed December 9, 2014 in 1-10764 (Seventy-seventh); 4.05 to Form 8-K filed January 8, 2016 in 1-10764(Seventy-eighth); 4.05 to Form 8-K filed August 16, 2016 in 1-10764 (Seventy-ninth); 4(a) to Form 10-Q for thequarter ended September 30, 2018 (Eightieth); and 4.1 to Form 8-K12B filed December 3, 2018 in 1-10764 (Eighty-first)). (c) 2 --Second Amended and Restated Credit Agreement dated as of September 14, 2018, among Entergy Arkansas, asBorrower, the banks and other financial institutions listed on the signature pages thereof, as Lenders, Citibank, N.A.,as Administrative Agent, JPMorgan Chase Bank, N.A., as LC Issuing Bank, and the other LC Issuing Banks fromtime to time parties thereto (4(h) to Form 10-Q for the quarter ended September 30, 2018 in 1-10764). 511Table of Contents(c) 3 --Borrower Assumption Agreement dated as of November 30, 2018 of Entergy Arkansas Power, LLC under the SecondAmended and Restated Credit Agreement dated as of September 14, 2018, among Entergy Arkansas, as Borrower,the banks and other financial institutions listed on the signature pages thereof, as Lenders, Citibank, N.A., asAdministrative Agent, JPMorgan Chase Bank, N.A., as LC Issuing Bank, and the other LC Issuing Banks from time totime parties thereto (4.2 to Form 8-K12B filed December 3, 2018 in 1-10764). (c) 4 --Fuel Lease, dated as of December 22, 1988, between River Fuel Trust #1 and Entergy Arkansas (4(c)9 to Form 10-Kfor the year ended December 31, 2017 in 1-10764). (c) 5 --Loan Agreement, dated as of January 1, 2013, between Independence County, Arkansas and Entergy Arkansas relatingto Revenue Refunding Bonds (Entergy Arkansas, Inc. Project) Series 2013 (4(d) to Form 8-K filed January 9, 2013 in1-10764).Entergy Louisiana(d) 1 --Mortgage and Deed of Trust, dated as of April 1, 1944, as amended by the following Supplemental Indentures: (7(d) in2-5317 (Mortgage); 7(b) in 2-7408 (First); 4(d)1 to Form 10-K for the year ended December 31, 2017 in 1-32718(Sixth); 2(c) in 2-34659 (Twelfth); 4(d)1 to Form 10-K for the year ended December 31, 2017 in 1-32718(Thirteenth); 2(b)-2 in 2-38378 (Fourteenth); 4(d)1 to Form 10-K for the year ended December 31, 2017 in 1-32718(Twenty-first); 4(d)1 to Form 10-K for the year ended December 31, 2017 in 1-32718 (Twenty-fifth); 4(d)1 to Form10-K for the year ended December 31, 2017 in 1-32718 (Twenty-ninth); 4(d)1 to Form 10-K for the year endedDecember 31, 2017 in 1-32718 (Forty-second); A-2(a) to Rule 24 Certificate filed April 4, 1996 in 70-8487 (Fifty-first); B-4(i) to Rule 24 Certificate filed January 10, 2006 in 70-10324 (Sixty-third); B-4(ii) to Rule 24 Certificate filedJanuary 10, 2006 in 70-10324 (Sixty-fourth); 4(a) to Form 10-Q for the quarter ended September 30, 2008 in 1-32718 (Sixty-fifth); 4(e)1 to Form 10-K for the year ended December 31, 2009 in 1-132718 (Sixty-sixth); 4.08 toForm 8-K filed September 24, 2010 in 1-32718 (Sixty-eighth); 4.08 to Form 8-K filed March 24, 2011 in 1-32718(Seventy-first); 4(a) to Form 10-Q for the quarter ended June 30, 2011 in 1-32718 (Seventy-second); 4.08 to Form 8-K filed July 3, 2012 in 1-32718 (Seventy-fifth); 4.08 to Form 8-K filed December 4, 2012 in 1-32718 (Seventy-sixth);4.08 to Form 8-K filed May 21, 2013 in 1-32718 (Seventy-seventh); 4.08 to Form 8-K filed August 23, 2013 in 1-32718 (Seventy-eighth); 4.08 to Form 8-K filed June 24, 2014 in 1-32718 (Seventy-ninth); 4.08 to Form 8-K filedJuly 1, 2014 in 1-32718 (Eightieth); 4.08 to Form 8-K filed November 21, 2014 (Eighty-first); 4.1 to Form 8-K12Bfiled October 1, 2015 (Eighty-second); 4(g) to Form 8-K filed March 18, 2016 in 1-32718 (Eighty-third); 4.33 toForm 8-K filed March 24, 2016 in 1-32718 (Eighty-fourth); 4.33 to Form 8-K filed August 17, 2016 in 1-32718(Eighty-sixth); 4.43 to Form 8-K filed October 4, 2016 in 1-32718 (Eighty-seventh); 4.43 to Form 8-K filed May 23,2017 in 1-32718 (Eighty-eighth); 4.43 to Form 8‑K filed March 23, 2018 in 1-32718 (Eighty-ninth); and 4.43 to Form8-K filed August 14, 2018 in 1-32718 (Ninetieth)). (d) 2 --Second Amended and Restated Credit Agreement dated as of September 14, 2018, among Entergy Louisiana, asBorrower, the banks and other financial institutions listed on the signature pages thereof, as Lenders, Citibank, N.A.,as Administrative Agent, Wells Fargo Bank, National Association and BNP Paribas, as LC Issuing Banks, and theother LC Issuing Banks from time to time parties thereto (4(i) to Form 10-Q for the quarter ended September 30, 2018in 1-32718). (d) 3 --Fuel Lease, dated as of January 31, 1989, between River Fuel Company #2, Inc., and Entergy Louisiana (4(d)10 toForm 10-K for the year ended December 31, 2017 in 1-32718). (d) 4 --Nuclear Fuel Lease Agreement between Entergy Gulf States, Inc. and River Bend Fuel Services, Inc. to lease the fuelfor River Bend Unit 1, dated February 7, 1989 (4(d)11 to Form 10-K for the year ended December 31, 2017 in 1-32718). (d) 5 --Exhibit A to Trust Indenture dated as of February 7, 1989 between River Bend Fuel Services, Inc. and U.S. BankNational Association (as successor Trustee) (4(d)12 to Form 10-K for the year ended December 31, 2017 in 1-32718). 512Table of Contents(d) 6 --Loan Agreement, dated as of March 1, 2016, between the Louisiana Public Facilities Authority and Entergy Louisianarelating to Refunding Revenue Bonds (Entergy Louisiana, LLC Project) Series 2016A (4(b) to Form 8-K filed March18, 2016 in 1-32718). (d) 7 --Loan Agreement, dated as of March 1, 2016, between Louisiana Public Facilities Authority and Entergy Louisianarelating to Refunding Revenue Bonds (Entergy Louisiana, LLC Project) Series 2016B (4(d) to Form 8-K filed March18, 2016 in 1-32718). (d) 8 --Indenture of Mortgage, dated September 1, 1926, as amended by the following Supplemental Indentures: (7-A-9 inRegistration No. 2-6893 (Seventh); 4(d)15 to Form 10-K for the year ended December 31, 2017 in 1-32718(Eighteenth); 2-A-8 in Registration No. 2-66612 (Thirty-eighth); 4(b) to Form 10-Q for the quarter ended March31,1999 in 1-27031 (Fifty-eighth); 4(a) to Form 10-Q for the quarter ended September 30, 2009 in 0-20371 (Seventy-seventh); 4.07 to Form 8-K filed October 1, 2010 in 0-20371 (Seventy-eighth); 4.07 to Form 8-K filed July 1, 2014 in0-20371 (Eighty-first); 4.2 to Form 8-K12B filed October 1, 2015 in 1-32718 (Eighty-second); 4.3 to Form 8-K12Bfiled October 1, 2015 in 1-32718 (Eighty-third); 4.42 to Form 8-K filed March 24, 2016 in 1-32718 (Eighty-fourth);4.42 to Form 8-K filed May 19, 2016 in 1-32718 (Eighty-fifth); 4.42 to Form 8-K filed August 17, 2016 in 1-32718(Eighty-sixth); 4.42 to Form 8-K filed October 4, 2016 in 1-32718 (Eighty-seventh); 4.42 to Form 8-K filed May 23,2017 in 1-32718 (Eighty-eighth); 4.42 to Form 8-K filed March 23, 2018 in 1-32718 (Eighty-ninth); and 4.42 to Form8-K filed August 14, 2018 in 1-32718 (Ninetieth)). (d) 9 --Agreement of Resignation, Appointment and Acceptance, dated as of October 3, 2007, among Entergy Gulf States,Inc., JPMorgan Chase Bank, National Association, as resigning trustee, and The Bank of New York, as successortrustee (4(a) to Form 10-Q for the quarter ended September 30, 2007 in 1-27031). (d) 10 --Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015, as amended by the followingSupplemental Indentures: (4.38 in Registration No. 333-190911-07 (Mortgage); 4(f) to Form 8-K filed March 18,2016 in 1-32718 (First); 4.40 to Form 8-K filed March 24, 2016 in 1-32718 (Second); 4(h) to Form 10-Q for thequarter ended March 31, 2016 in 1-32718 (Fourth); 4.40 to Form 8-K filed May 19, 2016 in 1-32718 (Fifth); 4.40 toForm 8-K filed August 17, 2016 in 1-32718 (Sixth); 4.41 to Form 8-K filed October 4, 2016 in 1-32718 (Seventh);4.41 to Form 8-K filed May 23, 2017 in 1-32718 (Eighth); 4.41 to Form 8-K filed March 23, 2018 in 1-32718(Ninth); and 4.41 to Form 8-K filed August 14, 2018 in 1-32718 (Tenth)). (d) 11 --Officer’s Certificate No. 1-B-1, dated March 18, 2016, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4(e) to Form 8-K filed March 18, 2016 in 1-32718). (d) 12 --Officer’s Certificate No. 2-B-2, dated March 17, 2016, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.39 to Form 8-K filed March 24, 2016 in 1-32718). (d) 13 --Officer’s Certificate No. 4-B-4, dated May 16, 2016, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.39 to Form 8-K filed May 19, 2016 in 1-32718). (d) 14 --Officer’s Certificate No. 6-B-5, dated August 10, 2016, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.39 to Form 8-K filed August 17, 2016 in 1-32718). (d) 15 --Officer’s Certificate No. 7-B-6, dated September 28, 2016, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.40 to Form 8-K filed October 4, 2016 in 1-32718). (d) 16 --Officer’s Certificate No. 8-B-7, dated May 17, 2017, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.40 to Form 8-K filed May 23, 2017 in 1-32718). (d) 17 --Officer’s Certificate No. 10-B-8, dated March 20, 2018, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.40 to Form 8-K filed March 23, 2018 in 1-32718). (d) 18 --Officer’s Certificate No. 12-B-9, dated August 8, 2018, supplemental to Mortgage and Deed of Trust of EntergyLouisiana, dated as of November 1, 2015 (4.40 to Form 8-K filed August 14, 2018 in 1-32718).513Table of ContentsEntergy Mississippi(e) 1 --Mortgage and Deed of Trust, dated as of February 1, 1988, as amended by the following Supplemental Indentures:4(e)1 to Form 10-K for the year ended December 31, 2017 in 1-31508 (Mortgage); 4(e)1 to Form 10-K for the yearended December 31, 2017 in 1-31508 (Sixth); A-2(c) to Rule 24 Certificate filed May 14, 1999 in 70-8719(Thirteenth); 4(b) to Form 10-Q for the quarter ended June 30, 2009 in 1-31508 (Twenty-sixth); 4.38 to Form 8-Kfiled December 11, 2012 in 1-31508 (Thirtieth); 4.05 to Form 8-K filed March 21, 2014 in 1-31508 (Thirty-first);4.05 to Form 8-K filed May 13, 2016 in 1-31508 (Thirty-second); 4.16 to Form 8-K filed September 15, 2016 in 1-31508 (Thirty-third); 4.16 to Form 8-K filed November 14, 2017 in 1-31508 (Thirty-fourth); 4.1 to Form 8-K filedNovember 21, 2018 in 1-31508 (Thirty-fifth); 4.1 to Form 8-K12B filed December 3, 2018 in 1-31508 (Thirty-sixth);and 4(a) to Form 8-K filed December 12, 2018 in 1-31508 (Thirty-seventh)).Entergy New Orleans(f) 1 --Mortgage and Deed of Trust, dated as of May 1, 1987, as amended by the following Supplemental Indentures: 4(f)1 toForm 10-K for the year ended December 31, 2017 in 1-35747 (Mortgage); 4(f)1 to Form 10-K for the year endedDecember 31, 2017 in 1-35747 (Third); 4(b) to Form 10-Q for the quarter ended June 30, 1998 in 0-5807 (Seventh);4.02 to Form 8-K filed November 23, 2010 in 0-5807 (Fifteenth); 4.02 to Form 8-K filed November 29, 2012 in 1-35747 (Sixteenth); 4.02 to Form 8-K filed June 21, 2013 in 1-35747 (Seventeenth); 4(m) to Form 10-Q for the quarterended March 31, 2016 in 1-35747 (Eighteenth); 4.02 to Form 8-K filed March 22, 2016 in 1-35747 (Nineteenth);4.02 to Form 8-K filed May 24, 2016 in 1-35747 (Twentieth); 4.1 to Form 8-K12B filed December 1, 2017 in 1-35747 (Twenty-first); and 4(a) to Form 8-K filed September 27, 2018 in 1-35747 (Twenty-second)). *(f) 2 --Second Amended and Restated Credit Agreement dated as of November 16, 2018, among Entergy New Orleans, asBorrower, the banks and other financial institutions listed on the signature pages thereof, as Lenders, Bank ofAmerica, N.A., as Administrative Agent and LC Issuing Bank, and the other LC Issuing Banks from time to timeparties thereto.Entergy Texas(g) 1 --Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas and The Bank ofNew York Mellon, as trustee (4(h)2 to Form 10-K for the year ended December 31, 2008 in 0-53134). (g) 2 --Officer’s Certificate No. 5-B-4 dated September 7, 2011, supplemental to Indenture, Deed of Trust and SecurityAgreement dated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee (4.40to Form 8-K filed September 13, 2011 in 1-34360). (g) 3 --Officer’s Certificate No. 7-B-5 dated May 13, 2014, supplemental to Indenture, Deed of Trust and Security Agreementdated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee (4(g)4 to Form10-K for the year ended December 31, 2017 in 1-34360). (g) 4 --Officer’s Certificate No. 8-B-6 dated May 18, 2015, supplemental to Indenture, Deed of Trust and Security Agreementdated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee (4.40 to Form 8-Kfiled May 21, 2015 in 1-34360). (g) 5 --Officer’s Certificate No. 9-B-7 dated March 8, 2016, supplemental to Indenture, Deed of Trust and Security Agreementdated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee (4.40 to Form 8-Kfiled March 11, 2016 in 1-34360). (g) 6 --Officer’s Certificate No. 10-B-8 dated November 14, 2017, supplemental to Indenture, Deed of Trust and SecurityAgreement dated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee (4.48to Form 8-K filed November 17, 2017 in 1-34360). (g) 7 --Officer’s Certificate No. 12-B-9 dated January 3, 2019, supplemental to Indenture, Deed of Trust and SecurityAgreement dated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee(4.47(a) to Form 8-K filed January 8, 2019 in 1-34360).514Table of Contents(g) 8 --Officer’s Certificate No. 12-B-10 dated January 3, 2019, supplemental to Indenture, Deed of Trust and SecurityAgreement dated as of October 1, 2008, between Entergy Texas and The Bank of New York Mellon, as trustee(4.47(b) to Form 8-K filed January 8, 2019 in 1-34360). (g) 9 --Second Amended and Restated Credit Agreement dated as of September 14, 2018, among Entergy Texas, as Borrower,the banks and other financial institutions listed on the signature pages thereof, as Lenders, Citibank, N.A., asAdministrative Agent, JPMorgan Chase Bank, N.A., BNP Paribas, Mizuho Bank, Ltd., and The Bank of Nova Scotia,as LC Issuing Banks, and the other LC Issuing Banks from time to time parties thereto (4(j) to Form 10-Q for thequarter ended September 30, 2018 in 1-34360).(10) Material ContractsEntergy Corporation+(a) 1 --2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Effective forGrants and Elections On or After January 1, 2007) (Appendix B to Entergy Corporation’s Definitive Proxy Statementfiled on March 24, 2006 in 1-11299). +(a) 2 --First Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation andSubsidiaries effective October 26, 2006 (10(a)50 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 3 --Second Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation andSubsidiaries effective January 1, 2009 (10(a)51 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 4 --Third Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation andSubsidiaries effective December 30, 2010 (10(a)52 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 5 --2011 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Annex A toEntergy Corporation’s Definitive Proxy Statement filed on March 24, 2011 in 1-11299). +(a) 6 --2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (Appendix C to 2015 Entergy Corporation’sDefinitive Proxy Statement filed on March 20, 2015 in 1-11299). +(a) 7 --First Amendment to The 2015 Entergy Corporation Non-Employee Director Stock Program Established under the 2015Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a) to Form 10-Q for the quarter ended June 30,2017 in 1-11299). +(a) 8 --Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1,2009 (10(a)57 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 9 --First Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective December 30,2010 (10(a)58 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 10 --Second Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective January27, 2011 (10(a)57 to Form 10-K for the year ended December 31, 2011 in 1-11299). +(a) 11 --Third Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective July 25,2013 (10(b) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). +(a) 12 --Fourth Amendment of the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, effective July 1,2014 (10(c) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). +(a) 13 --Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, as amended and restated effectiveJanuary 1, 2009 (10(a)59 to Form 10-K for the year ended December 31, 2010 in 1-11299).515Table of Contents +(a) 14 --First Amendment of the Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, effectiveDecember 30, 2010 (10(a)60 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 15 --Second Amendment of the Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, effectiveJanuary 27, 2011 (10(a)60 to Form 10-K for the year ended December 31, 2011 in 1-11299). +(a) 16 --Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a)74 to Form 10-K for the year ended December31, 2001 in 1-11299). +(a) 17 --Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, as amended and restated effectiveJanuary 1, 2009 (10(a)62 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 18 --First Amendment of the Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, effectiveDecember 30, 2010 (10(a)63 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 19 --Second Amendment of the Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, effectiveJanuary 27, 2011 (10(a)64 to Form 10-K for the year ended December 31, 2011 in 1-11299). +(a) 20 --System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective January 1, 2009 (10(a)77 to Form10-K for the year ended December 31, 2009 in 1-11299). +(a) 21 --First Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective January 1,2010 (10(a)78 to Form 10-K for the year ended December 31, 2009 in 1-11299). +(a) 22 --Second Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effectiveDecember 30, 2010 (10(a)69 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 23 --Third Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective January27, 2011 (10(a)71 to Form 10-K for the year ended December 31, 2011 in 1-11299). +(a) 24 --Post-Retirement Plan of Entergy Corporation and Subsidiaries, as amended effective January 1, 2000 (10(a)80 to Form10-K for the year ended December 31, 2001 in 1-11299). +(a) 25 --First Amendment of the Post-Retirement Plan of Entergy Corporation and Subsidiaries effective December 28, 2001(10(a)81 to Form 10-K for the year ended December 31, 2001 in 1-11299). +(a) 26 --Pension Equalization Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2009(10(a)74 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 27 --First Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective December 30,2010 (10(a)75 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 28 --Second Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective January 27,2011 (10(a)76 to Form 10-K for the year ended December 31, 2011 in 1-11299). +(a) 29 --Third Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective June 19, 2013(10(b) to Form 10-Q for the quarter ended June 30, 2013 in 1-11299). +(a) 30 --Fourth Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective July 25, 2013(10(c) to Form 10-Q for the quarter ended June 30, 2013 in 1-11299). +(a) 31 --Fifth Amendment of the Pension Equalization Plan of Entergy Corporation and Subsidiaries, effective July 1, 2014(10(a) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). 516Table of Contents+(a) 32 --Executive Income Security Plan of Gulf States Utilities Company, as amended effective March 1, 1991 (10(a)86 to Form10-K for the year ended December 31, 2001 in 1-11299). +(a) 33 --System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective January 1, 2009 (10(a)78 to Form10-K for the year ended December 31, 2010 in 1-11299). +(a) 34 --First Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective December30, 2010 (10(a)79 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 35 --Second Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effectiveJanuary 27, 2011 (10(a)81 to Form 10-K for the year ended December 31, 2011 in 1-11299). +(a) 36 --Third Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective January1, 2009 (10(a)81 to Form 10-K for the year ended December 31, 2013 in 1-11299). +(a) 37 --Fourth Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective July 25,2013 (10(d) to Form 10-Q for the quarter ended June 30, 2013 in 1-11299). +(a) 38 --Fifth Amendment of the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective July 1,2014 (10(d) to Form 10-Q for the quarter ended September 30, 2014 in 1-11299). +(a) 39 --Retention Agreement effective August 3, 2006 between Leo P. Denault and Entergy Corporation (10(b) to Form 10-Qfor the quarter ended June 30, 2006 in 1-11299). +(a) 40 --Amendment to Retention Agreement effective January 1, 2009 between Leo P. Denault and Entergy Corporation(10(a)93 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 41 --Amendment to Retention Agreement effective January 1, 2010 between Leo P. Denault and Entergy Corporation(10(a)101 to Form 10-K for the year ended December 31, 2009 in 1-11299). +(a) 42 --Amendment to Retention Agreement effective December 30, 2010 between Leo P. Denault and Entergy Corporation(10(a)95 to Form 10-K for the year ended December 31, 2010 in 1-11299). +(a) 43 --Shareholder Approval of Future Severance Agreements Policy, effective March 8, 2004 (10(f) to Form 10-Q for thequarter ended March 31, 2004 in 1-11299). +(a) 44 --First Amendment to The 2015 Entergy Corporation Non-Employee Director Stock Program Established under the 2015Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a) to Form 10-Q for the quarter ended June 30,2017 in 1-11299). +(a) 45 --Second Amendment to The 2015 Entergy Corporation Non-Employee Director Stock Program Established under the2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(g) to Form 10-Q for the quarter ended June30, 2018 in 1-11299). +(a) 46 --Entergy Nuclear Retention Plan, as amended and restated effective January 1, 2007 (10(a)107 to Form 10-K for the yearended December 31, 2007 in 1-11299). +(a) 47 --Form of Stock Option Grant Agreement (10(a)46 to Form 10-K for the year ended December 31, 2017 in 1-11299). +(a) 48 --Form of Long Term Incentive Program Performance Unit Agreement (10(a)47 to Form 10-K for the year endedDecember 31, 2017 in 1-11299). +(a) 49 --Form of Restricted Stock Grant Agreement (10(a)48 to Form 10-K for the year ended December 31, 2017 in 1-11299). 517Table of Contents+(a) 50 --Form of Restricted Stock Units Grant Agreement (10(a)49 to Form 10-K for the year ended December 31, 2017 in 1-11299).. +(a) 51 --Restricted Units Agreement between Roderick K. West and Entergy Corporation effective May 1, 2013 (10(a) to Form10-Q for the quarter ended June 30, 2013 in 1-11299). +(a) 52 --Restricted Stock Unit Agreement between Andrew Marsh and Entergy Corporation effective August 3, 2015 (10(a)102to Form 10-K for the year ended December 31, 2015 in 1-11299). +(a) 53 --Executive Annual Incentive Plan of Entergy Corporation and Subsidiaries as amended and restated effective January 1,2016 (Appendix B to 2015 Entergy Corporation’s Definitive Proxy Statement filed on March 20, 2015 in 1-11299). +(a) 54 --Entergy Corporation Service Recognition Program for Non-Employee Directors, as amended and restated effective June1, 2015 (10(d) to Form 10-Q for the quarter ended June 30, 2015 in 1-11299). +(a) 55 --Restricted Stock Units Agreement by and between A. Christopher Bakken, III and Entergy Corporation effective April6, 2016 (10(a)54 to Form 10-K for the year ended December 31, 2016 in 1-11299). +(a) 56 --Offer Letter, dated January 28, 2016, by and between A. Christopher Bakken, III and Entergy Services (10(a)55 toForm 10-K for the year ended December 31, 2016 in 1-11299) (a) 57 --Confirmation of Forward Sale Transaction, dated June 6, 2018, between Entergy Corporation and Morgan Stanley &Co. LLC in its capacity as a Forward Purchaser (10.1 to Form 8-K filed June 11, 2018 in 1-11299). (a) 58 --Confirmation of Forward Sale Transaction, dated June 6, 2018, between Entergy Corporation and Goldman Sachs &Co. LLC in its capacity as a Forward Purchaser (10.2 to Form 8-K filed June 11, 2018 in 1-11299). (a) 59 --Confirmation of Forward Sale Transaction, dated June 6, 2018, between Entergy Corporation and JPMorgan ChaseBank, National Association in its capacity as a Forward Purchaser (10.3 to Form 8-K filed June 11, 2018 in 1-11299). (a) 60 --Confirmation of Additional Forward Sale Transaction, dated June 7, 2018, between Entergy Corporation and MorganStanley & Co. LLC in its capacity as a Forward Purchaser (10.4 to Form 8-K filed June 11, 2018 in 1-11299). (a) 61 --Confirmation of Additional Forward Sale Transaction, dated June 7, 2018, between Entergy Corporation and GoldmanSachs & Co. LLC in its capacity as a Forward Purchaser (10.5 to Form 8-K filed June 11, 2018 in 1-11299). (a) 62 --Confirmation of Additional Forward Sale Transaction, dated June 7, 2018, between Entergy Corporation and JPMorganChase Bank, National Association in its capacity as a Forward Purchaser (10.6 to Form 8-K filed June 11, 2018 in 1-11299).System Energy(b) 1 --Availability Agreement, dated June 21, 1974, among System Energy and certain other System companies (10(b)1 toForm 10-K for the year ended December 31, 2017 in 1-9067). (b) 2 --First Amendment to Availability Agreement, dated as of June 30, 1977 (10(b)2 to Form 10-K for the year endedDecember 31, 2017 in 1-9067). (b) 3 --Second Amendment to Availability Agreement, dated as of June 15, 1981 (10(b)3 to Form 10-K for the year endedDecember 31, 2017 in 1-9067). 518Table of Contents(b) 4 --Third Amendment to Availability Agreement, dated as of June 28, 1984 (10(b)4 to Form 10-K for the year endedDecember 31, 2017 in 1-9067). (b) 5 --Fourth Amendment to Availability Agreement, dated as of June 1, 1989 (10(b)5 to Form 10-K for the year endedDecember 31, 2017 in 1-9067). (b) 6 --Thirty-seventh Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 2012, amongSystem Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and The Bank ofNew York Mellon, as successor trustee (10(a)15 to Form 10-K for the year ended December 31, 2012 in 1-11299). (b) 7 --Amendment to the Thirty-seventh Assignment of Availability Agreement, Consent and Agreement, dated as ofSeptember 18, 2015, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy NewOrleans, and The Bank of New York Mellon, as successor trustee (4.25 to Form S-3 filed October 2, 2015). (b) 8 --Capital Funds Agreement, dated June 21, 1974, between Entergy Corporation and System Energy (10(b)8 to Form 10-Kfor the year ended December 31, 2017 in 1-9067). (b) 9 --First Amendment to Capital Funds Agreement, dated as of June 1, 1989 (10(b)9 to Form 10-K for the year endedDecember 31, 2017 in 1-9067). (b) 10 --Thirty-seventh Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 2012, amongEntergy Corporation, System Energy, and The Bank of New York Mellon, as successor trustee (10(a)19 to Form 10-Kfor the year ended December 31, 2012 in 1-11299). (b) 11 --Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (StephenJ. Kaba, successor), as Owner Trustees, and System Energy (10(b)11 to Form 10-K for the year ended December 31,2017 in 1-9067). (b) 12 --Lease Supplement No. 4, dated as of January 15, 2014, to Facility Lease No. 1 (10(b)12 to Form 10-K for the yearended December 31, 2016 in 1-11299). (b) 13 --Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M. Carta (Stephen J.Kaba, successor), as Owner Trustees, and System Energy (10(b)13 to Form 10-K for the year ended December 31,2017 in 1-9067). (b) 14 --Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2 (10(b)14 to Form 10-K for the year endedDecember 31, 2016 in 1-11299). (b) 15 --Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies(10(b)15 to Form 10-K for the year ended December 31, 2017 in 1-9067). *(b) 16 --Unit Power Sales Agreement among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, andEntergy New Orleans dated as of June 10, 1982, as amended and revised.Entergy Louisiana(c) 1 --Amendment, effective as of May 26, 2017, to the Fourth Amended and Restated Limited Liability Company Agreementof Entergy Holdings Company LLC effective as of September 19, 2015 (10(c)1 to Form 10-K for the year endedDecember 31, 2017 in 1-32718).(14) Code of EthicsEntergy Corporation(a)Entergy Corporation Code of Business Conduct and Ethics (14 to Form 10-Q for the quarter ended September 30, 2018 in 1-11299).519Table of Contents*(21) Subsidiaries of the Registrants(23) Consents of Experts and Counsel*(a)The consent of Deloitte & Touche LLP is contained herein at page 529.*(24) Powers of Attorney(31) Rule 13a-14(a)/15d-14(a) Certifications*(a)Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. *(b)Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. *(c)Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. *(d)Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. *(e)Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. *(f)Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. *(g)Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. *(h)Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. *(i)Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. *(j)Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. *(k)Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. *(l)Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. *(m)Rule 13a-14(a)/15d-14(a) Certification for System Energy. *(n)Rule 13a-14(a)/15d-14(a) Certification for System Energy.(32) Section 1350 Certifications*(a)Section 1350 Certification for Entergy Corporation. *(b)Section 1350 Certification for Entergy Corporation. *(c)Section 1350 Certification for Entergy Arkansas. *(d)Section 1350 Certification for Entergy Arkansas. *(e)Section 1350 Certification for Entergy Louisiana. *(f)Section 1350 Certification for Entergy Louisiana. *(g)Section 1350 Certification for Entergy Mississippi.520Table of Contents*(h)Section 1350 Certification for Entergy Mississippi. *(i)Section 1350 Certification for Entergy New Orleans. *(j)Section 1350 Certification for Entergy New Orleans. *(k)Section 1350 Certification for Entergy Texas. *(l)Section 1350 Certification for Entergy Texas. *(m)Section 1350 Certification for System Energy. *(n)Section 1350 Certification for System Energy.(101) XBRL DocumentsEntergy Corporation*INS -XBRL Instance Document. *SCH -XBRL Taxonomy Extension Schema Document. *CAL -XBRL Taxonomy Extension Calculation Linkbase Document. *DEF -XBRL Taxonomy Extension Definition Linkbase Document. *LAB -XBRL Taxonomy Extension Label Linkbase Document. *PRE -XBRL Taxonomy Extension Presentation Linkbase Document._________________ *Filed herewith. + Management contracts or compensatory plans or arrangements.521Table of ContentsENTERGY CORPORATIONSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. ENTERGY CORPORATION By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019Leo P. Denault (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Andrew S. Marsh(Executive Vice President and Chief Financial Officer; Principal Financial Officer); John R. Burbank, Patrick J. Condon, Kirkland H.Donald, Philip L. Frederickson, Alexis M. Herman, Stuart L. Levenick, Blanche L. Lincoln, and Karen A. Puckett (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 522Table of ContentsENTERGY ARKANSAS, LLCSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. ENTERGY ARKANSAS, LLC By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019Laura R. Landreaux (Chair of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); AndrewS. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp andRoderick K. West (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 523Table of ContentsENTERGY LOUISIANA, LLCSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. ENTERGY LOUISIANA, LLC By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019Phillip R. May, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer);Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkampand Roderick K. West (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 524Table of ContentsENTERGY MISSISSIPPI, LLCSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. ENTERGY MISSISSIPPI, LLC By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019Haley R. Fisackerly (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer);Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkampand Roderick K. West (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 525Table of ContentsENTERGY NEW ORLEANS, LLCSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. ENTERGY NEW ORLEANS, LLC By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019David D. Ellis (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); AndrewS. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp andRoderick K. West (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 526Table of ContentsENTERGY TEXAS, INC.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. ENTERGY TEXAS, INC. By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019Sallie T. Rainer (Chair of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S.Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp and RoderickK. West (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 527Table of ContentsSYSTEM ENERGY RESOURCES, INC.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall bedeemed to relate only to matters having reference to such company and any subsidiaries thereof. SYSTEM ENERGY RESOURCES, INC. By /s/ Alyson M. Mount Alyson M. Mount Senior Vice President and Chief Accounting Officer Date: February 26, 2019Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall bedeemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.SignatureTitleDate /s/ Alyson M. Mount Alyson M. MountSenior Vice President andChief Accounting Officer(Principal Accounting Officer)February 26, 2019Roderick K. West (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer);Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); A. Christopher Bakken,III and Steven C. McNeal (Directors).By: /s/ Alyson M. MountFebruary 26, 2019(Alyson M. Mount, Attorney-in-fact) 528Table of ContentsEXHIBIT 23(a)CONSENTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in Registration Statement No. 333-213335 on Form S-3 and in Registration StatementsNos. 333-140183, 333-174148, 333-204546, 333-206556, and 333-227150 on Form S-8 of our reports dated February 26, 2019,relating to the consolidated financial statements and financial statement schedule of Entergy Corporation and Subsidiaries, and theeffectiveness of Entergy Corporation and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report onForm 10-K of Entergy Corporation for the year ended December 31, 2018.We consent to the incorporation by reference in Registration Statement No. 333-213335-06 on Form S-3 of our reports dated February26, 2019, relating to the consolidated financial statements and financial statement schedule of Entergy Arkansas, LLC and Subsidiariesappearing in this Annual Report on Form 10-K of Entergy Arkansas, LLC for the year ended December 31, 2018.We consent to the incorporation by reference in Registration Statement No. 333-213335-03 on Form S-3 of our reports dated February26, 2019, relating to the consolidated financial statements and financial statement schedule of Entergy Louisiana, LLC and Subsidiariesappearing in this Annual Report on Form 10‑K of Entergy Louisiana, LLC for the year ended December 31, 2018.We consent to the incorporation by reference in Registration Statement No. 333-213335-02 on Form S-3 of our reports dated February26, 2019, relating to the financial statements and financial statement schedule of Entergy Mississippi, LLC appearing in this AnnualReport on Form 10‑K of Entergy Mississippi, LLC for the year ended December 31, 2018.We consent to the incorporation by reference in Registration Statement No. 333-213335-05 on Form S-3 of our reports dated February26, 2019, relating to the consolidated financial statements and financial statement schedule of Entergy Texas, Inc. and Subsidiariesappearing in this Annual Report on Form 10-K of Entergy Texas, Inc. for the year ended December 31, 2018.We consent to the incorporation by reference in Registration Statement No. 333-213335-04 on Form S-3 of our report dated February26, 2019, relating to the financial statements of System Energy Resources, Inc. appearing in this Annual Report on Form 10-K ofSystem Energy Resources, Inc. for the year ended December 31, 2018./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019529Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholders and Board of Directors ofEntergy Corporation and SubsidiariesOpinion on the Financial Statement ScheduleWe have audited the consolidated financial statements of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31,2018 and 2017, and for each of the three years in the period ended December 31, 2018, and the Corporation’s internal control overfinancial reporting as of December 31, 2018, and have issued our reports thereon dated February 26, 2019. Our audits also included theconsolidated financial statement schedule of the Corporation listed in Item 15. This consolidated financial statement schedule is theresponsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s consolidated financialstatement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation tothe consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019530Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the shareholder and Board of Directors ofEntergy Texas, Inc. and SubsidiariesTo the members and Board of Directors ofEntergy Arkansas, LLC and SubsidiariesEntergy Louisiana, LLC and SubsidiariesEntergy Mississippi, LLCEntergy New Orleans, LLC and SubsidiariesOpinion on the Financial Statement SchedulesWe have audited the consolidated financial statements of Entergy Arkansas, LLC and Subsidiaries, Entergy Louisiana, LLC andSubsidiaries, Entergy New Orleans, LLC and Subsidiaries, and Entergy Texas, Inc. and Subsidiaries, and we have also audited thefinancial statements of Entergy Mississippi, LLC (collectively the “Companies”) as of December 31, 2018 and 2017, and for each of thethree years in the period ended December 31, 2018, and have issued our reports thereon dated February 26, 2019. Our audits alsoincluded the financial statement schedules of the respective Companies listed in Item 15. These financial statement schedules are theresponsibility of the respective Companies’ management. Our responsibility is to express an opinion on the Companies’ financialstatement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the financialstatements taken as a whole, present fairly, in all material respects, the information set forth therein./s/ DELOITTE & TOUCHE LLPNew Orleans, LouisianaFebruary 26, 2019531Table of ContentsINDEX TO FINANCIAL STATEMENT SCHEDULESSchedule Page IIValuation and Qualifying Accounts 2018, 2017, and 2016: Entergy Corporation and SubsidiariesS-2 Entergy Arkansas, LLC and SubsidiariesS-3 Entergy Louisiana, LLC and SubsidiariesS-4 Entergy Mississippi, LLCS-5 Entergy New Orleans, LLC and SubsidiariesS-6 Entergy Texas, Inc. and SubsidiariesS-7Schedules other than those listed above are omitted because they are not required, not applicable, or the required information isshown in the financial statements or notes thereto.Columns have been omitted from schedules filed because the information is not applicable.S-1Table of ContentsENTERGY CORPORATION AND SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2018, 2017, and 2016(In Thousands)Column A Column B Column C Column D Column E Other Balance at Additions Changes BalanceDescription Beginning ofPeriod Charged toIncome Deductions (1) at End ofPeriodAllowance for doubtful accounts 2018 $13,587 $3,936 $10,201 $7,3222017 $11,924 $4,211 $2,548 $13,5872016 $39,895 $7,505 $35,476 $11,924Notes: (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.S-2Table of ContentsENTERGY ARKANSAS, LLC AND SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2018, 2017, and 2016(In Thousands)Column A Column B Column C Column D Column E Other Balance at Additions Changes BalanceDescription Beginning ofPeriod Charged toIncome Deductions (1) at End ofPeriodAllowance for doubtful accounts 2018 $1,063 $810 $609 $1,2642017 $1,211 $503 $651 $1,0632016 $34,226 $902 $33,917 $1,211Notes: (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.S-3Table of ContentsENTERGY LOUISIANA, LLC AND SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2018, 2017, and 2016(In Thousands)Column A Column B Column C Column D Column E Other Balance at Additions Changes BalanceDescription Beginning ofPeriod Charged toIncome Deductions (1) at End ofPeriodAllowance for doubtful accounts 2018 $8,430 $2,395 $9,012 $1,8132017 $6,277 $3,108 $955 $8,4302016 $4,209 $2,942 $874 $6,277Notes: (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.S-4Table of ContentsENTERGY MISSISSIPPI, LLCSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2018, 2017, and 2016(In Thousands)Column A Column B Column C Column D Column E Other Balance at Additions Changes BalanceDescription Beginningof Period Charged toIncome Deductions (1) at End ofPeriodAllowance for doubtful accounts 2018 $574 $265 $276 $5632017 $549 $255 $230 $5742016 $718 $259 $428 $549Notes: (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.S-5Table of ContentsENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2018, 2017, and 2016(In Thousands)Column A Column B Column C Column D Column E Other Balance at Additions Changes BalanceDescription Beginningof Period Charged toIncome Deductions (1) at End ofPeriodAllowance for doubtful accounts 2018 $3,057 $187 $22 $3,2222017 $3,059 $152 $154 $3,0572016 $268 $2,872 $81 $3,059Notes: (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.S-6Table of ContentsENTERGY TEXAS, INC. AND SUBSIDIARIESSCHEDULE II - VALUATION AND QUALIFYING ACCOUNTSFor the Years Ended December 31, 2018, 2017, and 2016(In Thousands)Column A Column B Column C Column D Column E Other Balance at Additions Changes BalanceDescription Beginningof Period Charged toIncome Deductions (1) at End ofPeriodAllowance for doubtful accounts 2018 $463 $279 $281 $4612017 $828 $192 $557 $4632016 $474 $531 $177 $828Notes: (1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.S-7Exhibit 3(e)1AMENDED AND RESTATED CERTIFICATE OF FORMATION OFENTERGY MISSISSIPPI, LLC This certificate of formation is submitted for filing pursuant to the applicable provisions of the Texas BusinessOrganizations Code.ARTICLE I - ENTITY NAME AND TYPEThe name and type of filing entity being formed are: Entergy Mississippi, LLC, a Texas limited liability company (hereinafter"Company").ARTICLE II - REGISTERED OFFICE AND REGISTERED AGENTThe initial registered agent is an individual resident of the state whose name is Thomas G. Wagner. The business address of theinitial registered agent and the initial registered office is: 2001 Timberloch Place, 2nd Floor, The Woodlands, Texas 77380.ARTICLE III - GOVERNING AUTHORITYThe Company shall be managed by its Managers. The name and address of each initial manager is set forth below:NameAddressHaley R. Fisackerly308 East Pearl StreetJackson, MS 39201Paul D. Hinnenkamp639 Loyola Avenue, 28th FloorNew Orleans, LA 70113Andrew S. Marsh639 Loyola Avenue, 28th FloorNew Orleans, LA 70113Roderick K. West639 Loyola Avenue, 28th FloorNew Orleans, LA 70113ARTICLE IV - PURPOSEThe purpose for which the Company is organized is for the transaction of any and all lawful purposes for which a limitedliability company may be organized under the Texas Business Organizations Code.ARTICLE V - ORGANIZERThe name and address of the organizer is:NameAddressDaniel T. Falstad639 Loyola Avenue, 26th FloorNew Orleans, Louisiana 70113EFFECTIVENESS OF FILINGThis document becomes effective at a later date, which is not more than ninety (90) days from thedate of signing. The delayed effective date is December 1, 2018 at 12:02 A.M. Central Standard Time.EXECUTIONThe undersigned affirms that the person designated as registered agent has consented to the appointment. The undersignedsigns this document subject to the penalties imposed by law for the submission of a materially false or fraudulent instrument andcertifies under penalty of perjury that the undersigned is authorized to execute the filing instrument.Date: November 26, 2018/s/ Haley R. Fisackerly Haley R. Fisackerly President and Chief Executive OfficerEXECUTION VERSIONExhibit 4(f)2U.S. $25,000,000SECOND AMENDED AND RESTATED CREDIT AGREEMENTDated as of November 16, 2018AmongENTERGY NEW ORLEANS, LLCas BorrowerTHE BANKS NAMED HEREINas BanksBANK OF AMERICA, N.A.as Administrative Agent and LC Issuing Bankandthe other LC Issuing Banksfrom time to time parties hereto TABLE OF CONTENTSPageArticle I DEFINITIONS AND ACCOUNTING TERMS1Section 1.01. Certain Defined Terms.1Section 1.02. Computation of Time Periods.20Section 1.03. Accounting Terms and Principles.20Article II AMOUNTS AND TERMS OF THE EXTENSIONS OF CREDIT20Section 2.01. The Commitments.20Section 2.02. Making the Advances.21Section 2.03. Letters of Credit.22Section 2.04. Fees.26Section 2.05. Reduction of the Commitments.27Section 2.06. Repayment of Advances.28Section 2.07. Interest on Advances.28Section 2.08. Additional Interest on Eurodollar Rate Advances.28Section 2.09. Interest Rate Determination.29Section 2.10. Conversion of Advances.31Section 2.11. Prepayments.32Section 2.12. Increased Costs.32Section 2.13. Illegality.33Section 2.14. Payments and Computations.34Section 2.15. Taxes.35Section 2.16. Sharing of Payments, Etc.39Section 2.17. Noteless Agreement; Evidence of Indebtedness.39Section 2.18. Defaulting Lenders.40Article III CONDITIONS OF EXTENSIONS OF CREDIT43Section 3.01. Conditions Precedent to Effectiveness.43Section 3.02. Conditions Precedent to Each Extension of Credit.44Article IV REPRESENTATIONS AND WARRANTIES45Section 4.01. Representations and Warranties of the Borrower.45Article V COVENANTS OF THE BORROWER47Section 5.01. Affirmative Covenants.47Section 5.02. Negative Covenants.50Article VI EVENTS OF DEFAULT AND REMEDIES52Section 6.01. Events of Default.52Section 6.02. Remedies.54Section 6.03. Cash Collateral Account.54Article VII THE AGENT55Section 7.01. Authorization and Action.55Section 7.02. Administrative Agent’s Reliance, Etc.55Section 7.03. Bank of America and Affiliates.56Section 7.04. Lender Credit Decision.56Section 7.05. Indemnification.56Section 7.06. Successor Administrative Agent.57Section 7.07. Resignation of LC Issuing Banks.58Section 7.08. Trust Indenture Act.59Article VIII MISCELLANEOUS59Section 8.01. Amendments, Etc.59Section 8.02. Notices, Etc.60Section 8.03. No Waiver; Remedies.60Section 8.04. Costs and Expenses; Indemnification.61Section 8.05. Right of Set-off.62Section 8.06. Binding Effect.63Section 8.07. Assignments and Participations.63Section 8.08. Governing Law.69Section 8.09. Consent to Jurisdiction; Waiver of Jury Trial.69Section 8.10. Execution in Counterparts.69Section 8.11. Electronic Communications.70Section 8.12. Severability.71Section 8.13. Headings.71Section 8.14. USA PATRIOT Act Notice.72Section 8.15. Confidentiality.72Section 8.16. Entire Agreement.73Section 8.17. Texas Revolving Credit Statute.73Section 8.18. Interest Rate Limitation.73Section 8.19. No Fiduciary Duty.73Section 8.20. Amendment and Restatement of Existing Credit Agreement.74Section 8.21. Acknowledgment and Consent to Bail-In of EEA Financial Institutions.74Section 8.22. Certain ERISA Matters.75SCHEDULESSchedule I - List of Applicable Lending OfficesSchedule II - Commitment ScheduleSchedule III - Fronting Commitment ScheduleSchedule IV - Existing Letters of CreditEXHIBITSExhibit A-1 - Form of Notice of BorrowingExhibit A-2 - Form of Notice of ConversionExhibit A-3 - Form of Request for IssuanceExhibit B - Form of Assignment and AssumptionExhibit C-1 - [Reserved]Exhibit C-2 - [Reserved]Exhibit C-3- [Reserved]Exhibit D - [Reserved] Exhibit E-1 - Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. FederalIncome Tax Purposes)Exhibit E-2 - Form of U.S. Tax Compliance Certificate (For Foreign ParticipantsThat Are Not Partnerships For U.S. Federal Income Tax Purposes)Exhibit E-3- Form of U.S. Tax Compliance Certificate (For Foreign ParticipantsThat Are Partnerships For U.S. Federal Income Tax Purposes)Exhibit E-4- Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes) SECOND AMENDED AND RESTATED CREDIT AGREEMENTSECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November 16, 2018, amongENTERGY NEW ORLEANS, LLC, a Texas limited liability company (the “Borrower”), the banks and other financial institutions(the “Banks”) listed on the signature pages hereof, Bank of America, N.A. (“Bank of America”), as administrative agent (the“Administrative Agent”) for the Lenders (as defined below) hereunder and as LC Issuing Bank (as defined below) and the other LCIssuing Banks parties hereto from time to time.PRELIMINARY STATEMENTS(1) The Borrower has requested that the Lenders agree, on the terms and conditions set forth herein, to amend and restate in itsentirety the Amended and Restated Credit Agreement, dated as of November 20, 2015, as amended by the Amendment to Amendedand Restated Credit Agreement, dated as of June 30, 2016, and as further amended prior to the date hereof (the “Existing CreditAgreement”), among the Borrower, the lenders party thereto and Bank of America, as administrative agent.(2) Subject to the terms and conditions of this Agreement, the Lenders severally, to the extent of their respective Commitments(as defined herein), are willing to amend and restate the Existing Credit Agreement to establish the requested revolving credit facility infavor of the Borrower.NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows:ARTICLE IDEFINITIONS AND ACCOUNTING TERMSSECTION 1.01. Certain Defined Terms.As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable toboth the singular and plural forms of the terms defined):“Administrative Agent” has the meaning specified in the preamble hereto.“Advance” means an advance by a Lender to the Borrower as part of a Borrowing and refers to a Base Rate Advanceor a Eurodollar Rate Advance, each of which shall be a “Type” of Advance.“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is undercommon control with such Person or is a director or officer of such Person.“Agent Parties” has the meaning specified in Section 8.11(c).“Agreement” means the Existing Credit Agreement, as amended and restated by this Second Amended and RestatedCredit Agreement, as further amended, supplemented or modified from time to time.“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or itsSubsidiaries from time to time concerning or relating to bribery, money laundering or corruption.“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the caseof a Base Rate Advance and such Lender’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance“Applicable Margin” means, (i) for any Base Rate Advance, the Base Rate Margin interest rate per annum set forthbelow in the column identified by the applicable Senior Debt Rating Level, and (ii) for any Eurodollar Rate Advance, theEurodollar Margin interest rate per annum set forth below in the column identified by the applicable Senior Debt Rating Level.Senior Debt Rating LevelLevel 1Level 2Level 3Level 4Level 5Level 6Interest Rate Per Annum Eurodollar Margin1.000%1.075%1.275%1.475%1.625%2.050%Base Rate Margin0.000%0.075%0.275%0.475%0.625%1.050%Any change in the Applicable Margin will be effective as of the date on which S&P or Moody’s, as the case may be,announces the applicable change in any rating that results in a change in the Senior Debt Rating Level.“Approved Fund” means any Fund that is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender or (iii)an entity or an Affiliate of an entity that administers or manages a Lender. “Assignment and Assumption” means anassignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, insubstantially the form of Exhibit B hereto.“Bank of America” has the meaning specified in the preamble hereto.“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA ResolutionAuthority in respect of any liability of an EEA Financial Institution.“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEAMember Country from time to time which is described in the EU Bail-In Legislation Schedule.“Banks” has the meaning specified in the preamble hereto.“Base Rate” means for any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “primerate,” and (c) the rate of interest per annum equal to the Eurodollar Rate as determined on such day (or if such day is not aBusiness Day, on the next preceding Business Day) that would be applicable to a Eurodollar Rate Advance having an InterestPeriod of one month, plus 1%. The “prime rate” is a rate set by Bank of America based upon various factors including Bank ofAmerica’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricingsome loans, which may be priced at, above, orbelow such announced rate. Any change in such prime rate announced by Bank of America shall take effect at the opening ofbusiness on the day specified in the public announcement of such change.“Base Rate Advance” means an Advance that bears interest as provided in Section 2.07(a).“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by theBeneficial Ownership Regulation.“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA,(b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes ofERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such“employee benefit plan” or “plan”.“Borrower” has the meaning specified in the preamble hereto.“Borrowing” means a borrowing consisting of simultaneous Advances of the same Type made by each of the Lenderspursuant to Section 2.01 or Converted pursuant to Section 2.09 or 2.10.“Business Day” means a day of the year on which banks are not required or authorized to close in New York City and,if the applicable Business Day relates to any Eurodollar Rate Advances, on which dealings are carried on in the Londoninterbank market.“Capitalization” means, as of any date of determination, with respect to the Borrower and its Subsidiaries determinedon a consolidated basis, an amount equal to the sum of (i) the total principal amount of all Debt of the Borrower and itsSubsidiaries outstanding on such date, (ii) Consolidated Net Worth as of such date and (iii) to the extent not otherwise includedin Capitalization, all preferred stock and other preferred securities of the Borrower and its Subsidiaries, including preferred orpreference securities issued by any subsidiary trust, outstanding on such date.“Cash Collateral Account” has the meaning specified in Section 6.03.“Cash Collateralize” means, in respect of an obligation, provide and pledge (as a first priority perfected securityinterest) cash collateral in United States dollars at a location and pursuant to documentation in form and substance satisfactoryto the Administrative Agent and the LC Issuing Banks (and “Cash Collateralization” has a corresponding meaning).“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption ortaking effect of any law, rule, regulation or treaty, (ii) any change (other than any change by way of imposition or increase ofreserve requirements included in the Eurodollar Rate Reserve Percentage) in any law, rule, regulation or treaty or in theadministration, interpretation, implementation or application thereof by any Governmental Body or (iii) the making or issuanceof any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Body; provided thatnotwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and allrequests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines ordirectives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or anysuccessor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant toBasel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.“City Council” means the Council of the City of New Orleans.“City Council Authorization” means the authorization of the City Council in Resolution number R-18-226 granted tothe Borrower effective as of July 12, 2018, which authorization provides that it is effective through October 31, 2019, asamended, extended, supplemented, replaced or renewed from time to time to authorize the Borrower’s incurrence of long-termindebtedness.“Charges” has the meaning specified in Section 8.18.“Code” means the Internal Revenue Code of 1986, as the same may be amended from time to time, and the regulationspromulgated and rulings issued thereunder, each as amended or modified from time to time.“Commitment” has the meaning specified in Section 2.01.“Common Equity” means the stock, shares or other ownership interests in the issuer thereof howsoever evidenced(including, without limitation, limited liability company membership interests) that have ordinary voting power for the electionof directors, managers or trustees (or other persons performing similar functions) of the issuer, as applicable, provided thatPreferred Equity, even if it has such ordinary voting power, shall not be Common Equity.“Communication” has the meaning specified in Section 8.11(a).“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (howeverdenominated) or that are franchise Taxes or branch profits Taxes.“Consolidated Net Worth” means the sum of the capital stock (excluding treasury stock and capital stock subscribed forand unissued) and surplus (including earned surplus, capital surplus and the balance of the current profit and loss account nottransferred to surplus) accounts of the Borrower and its Subsidiaries appearing on a consolidated balance sheet of the Borrowerand its Subsidiaries prepared as of the date of determination in accordance with GAAP, after eliminating all intercompanytransactions and all amounts properly attributable to minority interests, if any, in such capital stock and surplus of Subsidiaries.“Convert”, “Conversion” and “Converted” each refers to a conversion of Advances of one Type into Advances ofanother Type or the selection of a new, or the renewal of the same, Interest Period for Eurodollar Rate Advances pursuant toSection 2.09 or 2.10.“Credit Parties” means the Administrative Agent, the LC Issuing Banks and the Lenders.“Debt” of any Person means (without duplication) all liabilities, obligations and indebtedness (whether contingent orotherwise) of such Person (i) for borrowed money or evidenced by bonds, debentures, notes, or other similar instruments, (ii) topay the deferred purchase price of property or services (other than such obligations incurred in the ordinary course of businesson customary trade terms, provided that such obligations are not more than 30 days past due), (iii) as lessee under leases whichshall have been or should be, in accordance with GAAP, recorded as capital leases, (iv) under reimbursement agreements orsimilar agreements with respect to the issuance of letters of credit (otherthan obligations in respect of letters of credit opened to provide for the payment of goods or services purchased in the ordinarycourse of business) and (v) under any Guaranty Obligations.“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation,conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency,reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect.“Defaulting Lender” means at any time, subject to Section 2.18(f), (i) any Lender that has failed, for two or moreBusiness Days from the date required to be funded or paid, to (A) fund any portion of its Advances, (B) fund any portion of itsparticipations in Letters of Credit or (C) pay over to any Credit Party any other amount required to be paid by it hereunder(each, a “funding obligation”), unless, in the case of clause (A) above, such Lender notifies the Administrative Agent and theBorrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent tofunding has not been satisfied (which conditions precedent, together with the applicable default, if any, will be specificallyidentified in such writing), (ii) any Lender that has notified the Administrative Agent, the Borrower or any LC Issuing Bank inwriting, or has stated publicly, that it does not intend or expect to comply with any of its funding obligations under thisAgreement unless such writing or statement states that such position is based on such Lender’s determination that one or moreconditions precedent to funding cannot be satisfied (which conditions precedent, together with the applicable default, if any,will be specifically identified in such writing or public statement), (iii) any Lender that has defaulted generally on its fundingobligations under other loan agreements, credit agreements and other similar agreements, (iv) any Lender that has, for three ormore Business Days after written request by the Administrative Agent, the Borrower or any LC Issuing Bank, failed to confirmin writing to the Administrative Agent, the Borrower and such LC Issuing Bank that it will comply with its prospective fundingobligations hereunder (provided that such Lender will cease to be a Defaulting Lender pursuant to this clause (iv) upon theAdministrative Agent’s, the Borrower’s and such LC Issuing Bank’s receipt of such written confirmation), (v) any Lender withrespect to which a Lender Insolvency Event has occurred and is continuing with respect to such Lender or its Lender Parent(provided, in each case of the foregoing clauses, that neither the reallocation of funding obligations provided for in Section2.18(b) hereof as a result of a Lender’s being a Defaulting Lender nor the performance by Non-Defaulting Lenders of suchreallocated funding obligations will by themselves cause the relevant Defaulting Lender to become a Non-Defaulting Lender)or (vi) any Lender that becomes the subject of any Bail-In Action. Any determination by the Administrative Agent that aLender is a Defaulting Lender under any of clauses (i) through (vi) above will be conclusive and binding absent manifest error,and such Lender will be deemed to be a Defaulting Lender (subject to Section 2.18(f) hereof) upon notification of suchdetermination by the Administrative Agent to the Borrower, the LC Issuing Banks and the Lenders.“Deferred Tax Note Obligations” means Debt of the Borrower in a maximum aggregate principal amount equal to$25,500,000 evidenced by that certain Intercompany Note, dated as of September 15, 2015, made by the Borrower in favor ofEntergy Louisiana, LLC for deferred tax recoveries related to the Borrower’s purchase of assets that currently support theprovision of service to customers in Algiers in Orleans Parish in the State of Louisiana.“Disclosure Documents” means the Borrower’s Annual Report on Form 10-K for the fiscal year ended December 31,2017, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018, June 30, 2018 and September 30, 2018 andCurrent Reports on Form 8-K filed in 2018 prior to the Restatement Effective Date.“Domestic Lending Office” means, with respect to any Lender, the office of such Lender specified as its “DomesticLending Office” opposite its name on Schedule I hereto or in the Assignment and Assumption pursuant to which it became aLender, or such other office of such Lender as such Lender may from time to time specify in writing to the Borrower and theAdministrative Agent.“EDGAR” means the “Electronic Data Gathering, Analysis and Retrieval” system (or any successor system thereof)maintained by the SEC.“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA MemberCountry which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA MemberCountry which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established inan EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subjectto consolidated supervision with its parent.“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.“EEA Resolution Authority” means any public administrative authority or any person entrusted with publicadministrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of anyEEA Financial Institution.“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 8.07(b)(iii), (v) and(vi) (subject to such consents, if any, as may be required under Section 8.07(b)(iii)).“Eligible Securitization Bonds” means securities, however denominated, that are issued by any direct or indirectSubsidiary of the Borrower or any other Person under which recourse is limited to assets that are primarily rights to collectcharges that are authorized by law (including, without limitation, pursuant to any order of any governmental authorityauthorized by law to regulate public utilities) to be invoiced to customers of the Borrower.“Environmental Laws” means any federal, state or local laws, ordinances or codes, rules, orders, or regulations relatingto pollution or protection of the environment, including, without limitation, laws relating to hazardous substances, laws relatingto reclamation of land and waterways and laws relating to emissions, discharges, releases or threatened releases of pollutants,contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment (including, withoutlimitation, ambient air, surface water, ground water, land surface or subsurface strata) or otherwise relating to the manufacture,processing, distribution, use, treatment, storage, disposal, transport or handling of pollution, contaminants, chemicals, orindustrial, toxic or hazardous substances or wastes.“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and theregulations promulgated and rulings issued thereunder, each as amended and modified from time to time.“ERISA Affiliate” of a Person or entity means any Person, trade or business (whether or not incorporated) that is amember of a group of which such Person or entity is a member and that isunder common control with such Person or entity within the meaning of, or that would otherwise be aggregated with suchPerson or entity under, Section 414 of the Code.“ERISA Plan” means an employee benefit plan maintained for employees of any Person or any ERISA Affiliate ofsuch Person subject to Title IV of ERISA (other than a Multiemployer Plan).“ERISA Termination Event” means (i) a Reportable Event described in Section 4043 of ERISA and the regulationsissued thereunder (other than a Reportable Event not subject to the provision for 30-day notice to PBGC), or (ii) the withdrawalof the Borrower or any of its ERISA Affiliates from an ERISA Plan during a plan year in which the Borrower or any of itsERISA Affiliates was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice ofintent to terminate an ERISA Plan or the treatment of an ERISA Plan amendment as a termination under Section 4041 ofERISA, or (iv) the institution of proceedings to terminate an ERISA Plan by the PBGC or to appoint a trustee to administer anyERISA Plan, or (v) any other event or condition that would constitute grounds under Section 4042 of ERISA for thetermination of, or the appointment of a trustee to administer, any ERISA Plan.“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan MarketAssociation (or any successor person), as in effect from time to time.“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Board of Governors of theFederal Reserve System, as in effect from time to time.“Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender specified as its “EurodollarLending Office” opposite its name on Schedule I hereto or in the Assignment and Assumption pursuant to which it became aLender (or, if no such office is specified, its Domestic Lending Office), or such other office of such Lender as such Lender mayfrom time to time specify in writing to the Borrower and the Administrative Agent.“Eurodollar Rate” means, for any Interest Period for each Eurodollar Rate Advance made as part of the sameBorrowing, the London interbank offered rate (“LIBOR”) as administered by ICE Benchmark Administration Limited (or anyother Person that takes over the administration of such rate) for deposits in immediately available funds in United States dollarsfor a period equal in length to such Interest Period as displayed on page LIBOR01 of the Reuters screen that displays such rate(or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute Reuters page or screenthat displays such rate, or on the appropriate page or screen of such other comparable information service that publishes suchrate from time to time as selected by the Administrative Agent in its discretion) (in each case, the “Screen Rate”) atapproximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period, provided, that if theScreen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement, and provided,further, if the Screen Rate shall not be available at such time for such Interest Period (an “Impacted Interest Period”), theEurodollar Rate for such Borrowing shall be the Interpolated Rate, provided, that if any Interpolated Rate shall be less thanzero, such rate shall be deemed to be zero for purposes of this Agreement.“Eurodollar Rate Advance” means an Advance that bears interest as provided in Section 2.07(b).“Eurodollar Rate Reserve Percentage” of any Lender for the Interest Period for any Eurodollar Rate Advance meansthe reserve percentage applicable during such Interest Period (or ifmore than one such percentage shall be so applicable, the daily average of such percentages for those days in such InterestPeriod during which any such percentage shall be so applicable) under regulations issued from time to time by the Board ofGovernors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including,without limitation, any emergency, supplemental or other marginal reserve requirement) for such Lender with respect toliabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period.“Eurodollar Successor Rate” has the meaning specified in Section 2.09(d).“Eurodollar Successor Rate Conforming Changes” means, with respect to any proposed Eurodollar Successor Rate,any conforming changes to the definition of Base Rate, Interest Period, timing and frequency of determining rates and makingpayments of interest and other administrative matters as may be appropriate, in the discretion of the Administrative Agent inconsultation with the Borrower, to reflect the adoption of such Eurodollar Successor Rate and to permit the administrationthereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agentdetermines that adoption of any portion of such market practice is not administratively feasible or that no market practice for theadministration of such Eurodollar Successor Rate exists, in such other manner of administration as the Administrative Agentdetermines is reasonably necessary in connection with the administration of this Agreement).“Events of Default” has the meaning specified in Section 6.01.“Excluded Taxes” means any of the following Taxes imposed on or with respect to any Recipient or required to bewithheld or deducted from a payment to any Recipient, (i) Taxes imposed on or measured by net income (howeverdenominated), franchise Taxes, and branch profits Taxes, in each case, (A) imposed as a result of such Recipient beingorganized under the laws of, or having its principal office or, in the case of any Lender, its Applicable Lending Office locatedin, the jurisdiction imposing such Tax (or any political subdivision thereof) or (B) that are Other Connection Taxes, (ii) in thecase of a Lender (which for purposes of this clause (ii) shall include any LC Issuing Bank), U.S. federal withholding Taxesimposed on amounts payable to or for the account of such Lender with respect to an applicable interest in an Advance orCommitment pursuant to a law in effect on the date on which (A) such Lender acquires such interest in the Advance orCommitment (other than pursuant to an assignment requested by the Borrower under Section 8.07(e)) or (B) such Lenderchanges its Applicable Lending Office, except in each case to the extent that, pursuant to Section 2.15, amounts with respect tosuch Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to suchLender immediately before it changed its Applicable Lending Office, (iii) Taxes attributable to such Recipient’s failure tocomply with Section 2.15(g) and (iv) any U.S. federal withholding Taxes imposed under FATCA.“Existing Credit Agreement” has the meaning specified in the preliminary statements hereto.“Existing Letter of Credit” means a letter of credit listed on Schedule IV hereto outstanding under the Existing CreditAgreement immediately prior to the satisfaction of all the conditions precedent set forth in Sections 3.01 and 3.02.“Extension of Credit” means (i) the disbursement of the proceeds of any Borrowing and (ii) the issuance of a Letter ofCredit or the amendment of any Letter of Credit having the effect of extending the stated termination date thereof or increasingthe maximum amount available to be drawn thereunder.“Facility Fee” has the meaning specified in Section 2.04(a).“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended orsuccessor version that is substantively comparable and not materially more onerous to comply with) and any current or futureregulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Code, and anyintergovernmental agreement entered into in connection with such sections of the Code and any legislation, law, regulation orpractice enacted or promulgated pursuant to such intergovernmental agreement.“Federal Funds Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal fundstransactions by depositary institutions, as determined in such manner as the NYFRB shall set forth on its public website fromtime to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate, providedthat if the Federal Funds Rate as so determined would be less than zero, such rate shall be deemed to zero for the purposes ofthis Agreement.“Fee Letters” means (i) the letter agreement, dated as of November 16, 2018, between the Borrower and Bank ofAmerica and (ii) each LC Issuing Bank Fee Letter, if any, entered into by the Borrower and an LC Issuing Bank from time totime, in the case of each of the preceding clauses, amended, modified and supplemented from time to time.“FERC Authorization” means, the authorization of the Federal Energy Regulatory Commission granted to theBorrower in Docket Number ES17-28-000 issued October 26, 2017 and effective as of November 1, 2017.“Foreign Lender” means a Lender that is not a U.S. Person.“Fronting Commitment” means, with respect to any LC Issuing Bank, the aggregate stated amount of all Letters ofCredit that such LC Issuing Bank agrees to issue, as modified from time to time pursuant to an agreement signed by such LCIssuing Bank. With respect to each Lender that is an LC Issuing Bank on the Restatement Effective Date, such LC IssuingBank’s Fronting Commitment shall be such LC Issuing Bank’s “Fronting Commitment” listed on Schedule III, and withrespect to any Lender that becomes an LC Issuing Bank after the Restatement Effective Date, such Lender’s FrontingCommitment shall equal the amount agreed between the Borrower and such Lender at the time that such Lender becomes anLC Issuing Bank, in each case, as such Fronting Commitment may be modified in accordance with the terms of thisAgreement.“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding orotherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course of its activities.“GAAP” means generally accepted accounting principles in the United States consistent with those applied in thepreparation of the financial statements referred to in Section 4.01(e) hereof.“Governmental Body” means the government of the United States of America or any other nation, or of any politicalsubdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank orother entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining togovernment (including any supra-national bodies such as the European Union or the European Central Bank).“Granting Lender” has the meaning specified in Section 8.07(g).“Guaranty Obligations” means direct or indirect guaranties in respect of, and obligations to purchase or otherwiseacquire, or otherwise to assure a creditor against loss in respect of, Debt of any Person, including, without limitation, SupportObligations.“Hybrid Securities” means (i) debt or preferred or preference equity securities (however designated or denominated) ofthe Borrower or any of its Subsidiaries that are mandatorily convertible into Common Equity or Preferred Equity of theBorrower or any of its Subsidiaries, provided that such securities do not constitute Mandatorily Redeemable Stock, (ii)securities of the Borrower or any of its Subsidiaries that (A) are afforded equity treatment (whether full or partial) by S&P orMoody’s at the time of issuance, and (B) require no repayments or prepayments and no mandatory redemptions or repurchases,in each case, prior to 91 days after the Termination Date, (iii) any other securities (however designated or denominated), thatare (A) issued by the Borrower or any of its Subsidiaries, (B) not subject to mandatory redemption or mandatory prepayment,and (C) together with any guaranty thereof, subordinate in right of payment to the unsecured and unsubordinated indebtedness(other than trade liabilities incurred in the ordinary course of business and payable in accordance with customary terms) of theissuer of such securities or guaranty and (iv) QUIPS.“ICC” has the meaning specified in Section 2.03(j).“ICC Rule” has the meaning specified in Section 2.03(j).“Impacted Interest Period” has the meaning specified for such term in the definition herein of “Eurodollar Rate”.“Indemnified Person” has the meaning specified in Section 8.04(c).“Indemnified Taxes” means (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made byor on account of any obligation of the Borrower under any Loan Document and (ii) to the extent not otherwise described in (i),Other Taxes.“Interest Period” means, for each Advance made as part of the same Borrowing, the period commencing on the date ofsuch Advance or the date of the Conversion of any Advance into such an Advance and ending on the last day of the periodselected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last dayof the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to theprovisions below. The duration of each such Interest Period shall be one-week (if available to all Lenders) or 1, 2, 3 or 6months (or any other period acceptable to all the Lenders) in the case of a Eurodollar Rate Advance, as the Borrower may,upon notice received by the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Business Dayprior to the first day of such Interest Period, select; provided, however, that:(i)the Borrower may not select any Interest Period that ends after the Termination Date;(ii)Interest Periods commencing on the same date for Advances made as part of the same Borrowingshall be of the same duration; and(iii)whenever the last day of any Interest Period would otherwise occur on a day other than a BusinessDay, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, inthe case of any Interest Period for a Eurodollar Rate Advance, that if such extension would cause the last day of suchInterest Period to occurin the next following calendar month, the last day of such Interest Period shall occur on the next preceding BusinessDay.“Interpolated Rate” means, at any time, for any Interest Period, the rate per annum determined by the AdministrativeAgent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results frominterpolating on a linear basis between (a) the Screen Rate for the longest period for which the Screen Rate is available for theEurodollar Rate Advance that is shorter than the Impacted Interest Period, and (b) the Screen Rate for the shortest period forwhich the Screen Rate is available for the Eurodollar Rate Advance that exceeds the Impacted Interest Period, in each case, atsuch time.“ISP” has the meaning specified in Section 2.03(j).“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines,regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation oradministration thereof by any Governmental Body charged with the enforcement, interpretation or administration thereof, andall applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, anyGovernmental Body, in each case whether or not having the force of law.“LC Commitment Amount” means $10,000,000 as the same may be reduced permanently from time to time pursuantto Section 2.05.“LC Fee” has the meaning specified in Section 2.04(b).“LC Issuing Bank” means Bank of America, N.A. and each other consenting Lender or Affiliate thereof that may beappointed from time to time by the Borrower to issue Letters of Credit under this Agreement and that is reasonably acceptableto the Administrative Agent.“LC Issuing Bank Fee Letters” means the letter agreements between the Borrower and each LC Issuing Bank, in formand substance satisfactory to such LC Issuing Bank, concerning fees payable by the Borrower to such LC Issuing Bank for itsown account, in each case, as amended, modified and supplemented from time to time.“LC Outstandings” means, on any date of determination, the sum of the undrawn stated amounts of all Letters ofCredit that are outstanding on such date plus the aggregate principal amount of all unpaid reimbursement obligations of theBorrower on such date with respect to payments made by the LC Issuing Banks under Letters of Credit. The LC Outstandingswith respect to any Lender shall equal such Lender’s Percentage of the sum in the immediately preceding sentence.“LC Payment Notice” has the meaning specified in Section 2.03(d).“Lender Insolvency Event” means that (i) a Lender or its Lender Parent is insolvent, or is generally unable to pay itsdebts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignmentfor the benefit of its creditors, or (ii) a Lender or its Lender Parent is the subject of a bankruptcy, insolvency, reorganization,liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed forsuch Lender or its Lender Parent, or such Lender or its Lender Parent has taken any action in furtherance of or indicating itsconsent to or acquiescence in any such proceeding or appointment; provided that, a Lender Insolvency Event shall not bedeemed to have occurred solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct orindirect parentcompany thereof by a Governmental Body so long as such ownership interest does not result in or provide such Lender withimmunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachmenton its assets or permit such Lender (or such Governmental Body) to reject, repudiate, disavow or disaffirm any contracts oragreements made with such Lender.“Lender Parent” means, with respect to a Lender, the bank holding company (as defined in Federal Reserve BoardRegulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority ofthe shares of such Lender.“Lenders” means the Banks listed on the signature pages hereof and each Person that shall become a party heretopursuant to Section 8.07.“Letter of Credit” means (i) an Existing Letter of Credit or (ii) a standby letter of credit (which may include commercialletters of credit, if agreed to by the applicable LC Issuing Bank) issued by an LC Issuing Bank pursuant to Section 2.03, ineach case, as such letter of credit may from time to time be amended, modified or extended in accordance with the terms of thisAgreement.“LIBOR” has the meaning specified in the definition of “Eurodollar Rate.”“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of anykind in respect of such asset. For the purposes of this Agreement, a Person or any of its Subsidiaries shall be deemed to own,subject to a Lien, any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional saleagreement, capital lease or other title retention agreement relating to such asset.“Loan Documents” means this Agreement, each promissory note delivered under Section 2.17 and the Fee Letters, ineach case, as any of the foregoing may be amended, supplemented or modified from time to time.“Majority Lenders” means, subject to the last paragraph of Section 8.01, at any time Lenders to which are owed morethan 50% of the then aggregate unpaid principal amount of the Advances and participation obligations with respect to the LCOutstandings, or, if there are no Outstanding Credits, Lenders having more than 50% of the Commitments (without givingeffect to any termination in whole of the Commitments pursuant to Section 6.02), provided, that for purposes hereof, neither theBorrower, nor any of its Affiliates, if a Lender, shall be included in (i) the Lenders holding such amount of the Advances orparticipation obligations with respect to the LC Outstandings or having such amount of the Commitments or (ii) determiningthe aggregate unpaid principal amount of the Advances or participation obligations with respect to the LC Outstandings or thetotal Commitments.“Mandatorily Redeemable Stock” means, with respect to any Person, such Person’s Common Equity or PreferredEquity to the extent that it is (i) redeemable, payable or required to be purchased or otherwise retired or extinguished, orconvertible into any Debt or other liability of such Person, (A) at a fixed or determinable date, whether by operation of asinking fund or otherwise, (B) at the option of any Person other than such Person, or (C) upon the occurrence of a conditionnot solely within the control of such Person, such as a redemption required to be made out of future earnings, or (ii) presentlyconvertible into Mandatorily Redeemable Stock.“Margin Stock” has the meaning assigned to that term in Regulation U issued by the Board of Governors of theFederal Reserve System, and as amended and in effect from time to time.“Material Adverse Effect” means (i) any material adverse effect on the business, condition (financial or otherwise),operations, properties or prospects of the Borrower and its Subsidiaries considered on a consolidated basis, or (ii) any materialadverse effect on the legality, validity or enforceability against the Borrower of any Loan Document.“Maximum Rate” has the meaning specified in Section 8.18.“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.“Mortgage Indenture” means the Mortgage and Deed of Trust, dated as of May 1, 1987, between the Borrower andThe Bank of New York Mellon, as successor trustee, as amended, restated, supplemented or otherwise modified from time totime (except as expressly provided otherwise herein), together with any supplemental indentures issued pursuant thereto.“Multiemployer Plan” means a “multiemployer plan” as defined in Section 4001(a)(3) of ERISA to which theBorrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the precedingthree plan years made or accrued an obligation to make contributions.“Non-Consenting Lender” means any Lender hereunder that does not approve any consent, waiver or amendment that(a) requires the approval of all affected Lenders in accordance with the terms of Section 8.01 and (b) has been approved by theMajority Lenders.“Non-Defaulting Lender” means, at any time, a Lender that is not a Defaulting Lender or a Potential DefaultingLender.“Non-Performing Lender” has the meaning specified in Section 2.03(e).“Non-Recourse Debt” means any Debt of any Subsidiary of the Borrower that does not constitute Debt of theBorrower or any Significant Subsidiary.“Notice of Borrowing” has the meaning specified in Section 2.02(a).“Notice of Conversion” has the meaning specified in Section 2.10(a).“NYFRB” means the Federal Reserve Bank of New York.“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or formerconnection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipienthaving executed, delivered, become a party to, performed its obligations under, received payments under, received or perfecteda security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned aninterest in any Advance or Loan Document).“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxesthat arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from thereceipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes thatare Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section8.07(e)).“Outstanding Credits” means, on any date of determination, an amount equal to the sum of (i) the aggregate principalamount of all Borrowings outstanding on such date plus (ii) the LC Outstandings on such date, in each case, after giving effectto all repayments and prepayments of Advances and Reimbursement Amounts and all reductions in the LC Outstandings onsuch date.“Parent” means Entergy Corporation, a Delaware corporation, or its successors and permitted assigns.“Participant” has the meaning specified in Section 8.07(d).“Participant Register” has the meaning specified in Section 8.07(d).“Patriot Act” means USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as in effect fromtime to time.“PBGC” means the U.S. Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functionsunder ERISA.“Percentage” means, for any Lender on any date of determination, the percentage obtained by dividing such Lender’sCommitment on such day by the total of the Commitments on such date, and multiplying the quotient so obtained by 100%.“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust,unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.“Platform” has the meaning specified in Section 8.11(b).“Potential Defaulting Lender” means, at any time, (i) any Lender with respect to which an event of the kind referred toin the definition of “Lender Insolvency Event” has occurred and is continuing in respect of any Subsidiary of such Lender, or(ii) any Lender that has notified, or whose Lender Parent or a Subsidiary thereof has notified, the Administrative Agent, theBorrower or any LC Issuing Bank in writing, or has stated publicly, that it does not intend to comply with its fundingobligations generally under other loan agreements, credit agreements and other similar agreements, unless such writing orstatement states that such position is based on such Lender’s determination that one or more conditions precedent to fundingcannot be satisfied (which conditions precedent, together with the applicable default, if any, will be specifically identified insuch writing or public statement). Any determination by the Administrative Agent that a Lender is a Potential DefaultingLender under any of clauses (i) and (ii) above will be conclusive and binding absent manifest error, and such Lender will bedeemed a Potential Defaulting Lender (subject to Section 2.18(f) hereof) upon notification of such determination by theAdministrative Agent to the Borrower, the LC Issuing Banks and the Lenders.“Preferred Equity” means any stock, shares or other ownership interests in the issuer thereof howsoever evidenced(including, without limitation, limited liability company membership interests), whether with or without voting rights, that isentitled to dividends or distributions prior to the payment of dividends or distributions with respect to Common Equity.“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemptionmay be amended from time to time.“QUIPS” means, on any date of determination, all outstanding preferred stock and other preferred securities of theBorrower and its Subsidiaries, including preferred securities issued by any subsidiary trust.“Recipient” means the Administrative Agent, any LC Issuing Bank, any Lender or any other recipient of any paymentto be made by or on account of any obligation of the Borrower or its Subsidiaries hereunder.“Register” has the meaning specified in Section 8.07(c).“Reimbursement Amount” has the meaning specified in Section 2.03(c).“Related Parties” means with respect to any specified Person, such Person’s Affiliates and the partners, directors,officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of suchPerson’s Affiliates and any Person that possesses, directly or indirectly, the power to direct or cause the direction of themanagement or policies of such Person, whether through the ability to exercise voting power, by contract or otherwise.“Removal Effective Date” has the meaning specified in Section 7.06(b).“Reportable Event” has the meaning assigned to that term in Title IV of ERISA.“Request for Issuance” means a request made pursuant to Section 2.03(a) in the form of Exhibit A-3.“Resignation Effective Date” has the meaning specified in Section 7.06(a).“Restatement Effective Date” means November 16, 2018.“S&P” means S&P Global Ratings, acting through Standard & Poor’s Financial Services LLC business, or anysuccessor thereto.“Sanctioned Country” means, at any time of determination, a country, region or territory which is the subject or targetof any Sanctions.“Sanctioned Person” means, at any time of determination, (a) any Person listed in any Sanctions-related list ofdesignated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S.Department of State, the United Nations Security Council, the European Union, any EU member state or Her Majesty’sTreasury of the United Kingdom, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Personowned or controlled by or acting on behalf of any such Person described in the preceding clause (a) or (b), or (d) any Person, tothe Borrower’s knowledge, with which any Lender is prohibited under Sanctions relevant to it from dealing or engaging intransactions. For purposes of the foregoing, control of a Person shall be deemed to include where a Sanctioned Person (i) ownsor has power to vote 25% or more of the issued and outstanding equity interests having ordinary voting power for the electionof directors of the Person or other individuals performing similar functions for the Person, or (ii) has the power to direct orcause the direction of the management and policies of the Person, whether by ownership of equity interests, contracts orotherwise.“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time totime by (a) the U.S. government, including those administered by the Officeof Foreign Assets Control of the U.S. Department of the Treasury or by the U.S. Department of State, or (b) the UnitedNations Security Council, the European Union, any EU member state, or Her Majesty’s Treasury of the United Kingdom.“Scheduled Unavailability Date” has the meaning specified for such term in Section 2.09(d).“Screen Rate” has the meaning specified for such term in the definition herein of “Eurodollar Rate”.“SEC” means the United States Securities and Exchange Commission.“Senior Debt Rating Level” at any time shall be determined as follows in accordance with the ratings assigned by S&Pand Moody’s to the Borrower’s senior unsecured long-term debt (or, in the event that S&P or Moody’s has not issued a ratingfor the Borrower’s senior unsecured long-term debt, the issuer or corporate rating (as such rating is designated by S&P orMoody’s) assigned by such rating agency to the Borrower):S&P Rating/Moody’s RatingSenior Debt Rating LevelA- or higher or A3 or higher1Below Level 1 but at least BBB+ or Baa12Below Level 2 but at least BBB or Baa23Below Level 3 but at least BBB- or Baa34Below Level 4 but at least BB+ or Ba15Below BB+ and Ba1 or unrated6Notwithstanding the foregoing, (i) if the ratings described above differ by one level or “notch”, the Senior Debt RatingLevel will be deemed to be the Senior Debt Rating Level that corresponds to the rating level that is the higher of the two ratingsdescribed above, and (ii) if the ratings described above differ by more than one level or “notch”, the Senior Debt Rating Levelwill be deemed to be the Senior Debt Rating Level that corresponds to the rating level that is one level or “notch” below thehigher of the two ratings described above.“Significant Subsidiary” means any Subsidiary of the Borrower: (i) the total assets (after intercompany eliminations) ofwhich exceed 10% of the total assets of the Borrower and its Subsidiaries or (ii) the net worth of which exceeds 10% of theConsolidated Net Worth of the Borrower and its Subsidiaries, in each case as shown on the most recent audited consolidatedbalance sheet of the Borrower and its Subsidiaries.“SPC” has the meaning specified in Section 8.07(g).“Subsidiary” means, with respect to any Person, any corporation or other entity of which securities or other ownershipinterests having ordinary voting power to elect a majority of the Board of Directors or other persons performing similarfunctions are at the time directly or indirectly owned by such a Person, or one or more Subsidiaries, or by such Person and oneor more of its Subsidiaries.“Support Obligations” means any financial obligation, contingent or otherwise, of any Person guaranteeing orotherwise supporting any Debt of any other Person in any manner, whether directly or indirectly, and including, withoutlimitation, any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchaseor payment of) such Debt or to purchase (or to advance or supply funds for the purchase of) any security for the payment ofsuch Debt, (ii) topurchase property, securities or services for the purpose of assuring the owner of such Debt of the payment of such Debt,(iii) to maintain working capital, equity capital, available cash or other financial statement condition of the primary obligor so asto enable the primary obligor to pay such Debt, (iv) to provide equity capital under or in respect of equity subscriptionarrangements so as to assure any Person with respect to the payment of such Debt, or (v) to provide financial support for theperformance of, or to arrange for the performance of, any non-funded debt payment obligations of the primary obligor of suchDebt.“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backupwithholding), assessments, fees or other charges imposed by any Governmental Body, including any interest, additions to taxor penalties applicable thereto.“Termination Date” means the earlier to occur of (i) November 16, 2021, and (ii) the date of termination in whole ofthe Commitments and each LC Issuing Bank’s obligation to issue Letters of Credit pursuant to Section 2.05 or Section 6.02hereof; provided that, if such earlier date is not a Business Day, the Termination Date means the Business Day next precedingsuch earlier date.“Trust Indenture Act” has the meaning specified in Section 7.08.“U.S. Person” means any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.“U.S. Tax Compliance Certificate” shall have the meaning specified in Section 2.15(g)(ii)(B)(3).“UCP” has the meaning specified in Section 2.03(j).“Withholding Agent” means the Borrower and the Administrative Agent.“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down andconversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEAMember Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.SECTION 1.02. Computation of Time Periods.In this Agreement and any other Loan Document, in the computation of periods of time from a specified date to a laterspecified date, the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”.SECTION 1.03. Accounting Terms and Principles.All accounting terms not specifically defined herein shall be construed in accordance with GAAP. It is agreed that for purposesof determining compliance with the financial covenant contained in Section 5.02(b) hereof, leases and power purchase agreementsshall be treated on the basis of GAAP and the application thereof as in effect on the Restatement Effective Date. If changes in GAAPor the application thereof used in the preparation of any financial statement of the Borrower affect compliance with the financialcovenant contained in Section 5.02(b) hereof, the Borrower, the Administrative Agent and the Lenders agree to negotiate in good faithsuch modifications as are necessary as a result of such changes in GAAP which changes shall, in the case of a change in leaseaccounting, produce a result which shall be consistent with the immediately preceding sentence and to amend this Agreement to effectsuch modifications. Until suchprovisions of this Agreement are modified, determinations of compliance with the financial covenant contained in Section 5.02(b)hereof shall be made on the basis of GAAP and the application thereof as in effect and applied immediately before such changebecame effective, and all financial statements shall be provided together with a reconciliation between the calculations and amounts setforth therein before and after giving effect to such changes in GAAP.ARTICLE IIAMOUNTS AND TERMS OF THE EXTENSIONS OF CREDITSECTION 2.01. The Commitments.Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower and toparticipate in the reimbursement obligations of the Borrower in respect of Letters of Credit from time to time on any Business Dayduring the period from the Restatement Effective Date until the Termination Date applicable to the Commitment of such Lender in anaggregate amount not to exceed at any time outstanding the amount set forth opposite such Lender’s name on Schedule II hereto or, ifsuch Lender has entered into any Assignment and Assumption, set forth for such Lender in the Register maintained by theAdministrative Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to Section 2.05 (such Lender’s“Commitment”). Each Borrowing shall be in an amount not less than $1,000,000 or an integral multiple of $100,000 in excess thereofand shall consist of Advances of the same Type and, in the case of Eurodollar Rate Advances, having the same Interest Period made orConverted on the same day by the Lenders ratably according to their respective Commitments. Within the limits of each Lender’sCommitment, the Borrower may from time to time borrow, prepay pursuant to Section 2.11 and reborrow under this Section 2.01;provided, however, that at no time may the Outstanding Credits exceed the aggregate amount of the Commitments.SECTION 2.02. Making the Advances.(a)Each Borrowing shall be made on notice, given (i) in the case of a Borrowing comprising Eurodollar Rate Advances,not later than 11:00 A.M. (New York City time) on the third Business Day prior to the date of the proposed Borrowing, and (ii) in thecase of a Borrowing comprising Base Rate Advances, not later than 1:00 P.M. (New York City time) on the date of the proposedBorrowing, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice thereof. Each such notice ofa Borrowing (a “Notice of Borrowing”) shall be transmitted by facsimile or email in substantially the form of Exhibit A-1 hereto,specifying therein the requested (A) date of such Borrowing, (B) Type of Advances to be made in connection with such Borrowing,(C) aggregate amount of such Borrowing, (D) wire instructions of the Borrower, and (E) in the case of a Borrowing comprisingEurodollar Rate Advances, initial Interest Period for such Advances. Each Lender shall, before (x) 12:00 noon (New York City time)on the date of any Borrowing comprising Eurodollar Rate Advances, and (y) 3:00 P.M. (New York City time) on the date of anyBorrowing comprising Base Rate Advances, make available for the account of its Applicable Lending Office to the AdministrativeAgent at its address referred to in Section 8.02, in same day funds, such Lender’s ratable portion of such Borrowing. After theAdministrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, theAdministrative Agent will make such funds available to the Borrower at the Administrative Agent’s aforesaid address.(b)Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Notice of Borrowingrequesting Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by suchLender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing theapplicable conditions set forth in Article III,including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other fundsacquired by such Lender to fund the Advance to be made by such Lender as part of such Borrowing when such Advance, as a resultof such failure, is not made on such date.(c)Unless the Administrative Agent shall have received notice from a Lender prior to the time of any Borrowing thatsuch Lender will not make available to the Administrative Agent such Lender’s ratable portion of such Borrowing, the AdministrativeAgent may assume that such Lender has made such portion available to the Administrative Agent on the date of such Borrowing inaccordance with subsection (a) of this Section 2.02 and the Administrative Agent may, in reliance upon such assumption, makeavailable to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made suchratable portion available to the Administrative Agent, such Lender and the Borrower (following the Administrative Agent’s demand onsuch Lender for the corresponding amount) severally agree to repay to the Administrative Agent forthwith on demand suchcorresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower untilthe date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable at the time toAdvances made in connection with such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If such Lender shallrepay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Advance as partof such Borrowing for purposes of this Agreement.(d)The failure of any Lender to make the Advance to be made by it as part of any Borrowing shall not relieve any otherLender of its obligation, if any, hereunder to make its Advance on the date of such Borrowing, but no Lender shall be responsible forthe failure of any other Lender to make the Advance to be made by such other Lender on the date of any Borrowing.SECTION 2.03. Letters of Credit.(a)Subject to the satisfaction of the conditions precedent set forth in Sections 3.01 and 3.02 on the Restatement EffectiveDate, each Existing Letter of Credit shall be deemed to be a Letter of Credit issued hereunder. Subject to the terms and conditionshereof, each LC Issuing Bank agrees to issue Letters of Credit from time to time for the account of the Borrower (or to extend thestated maturity thereof or to amend or otherwise modify the terms thereof), in an aggregate stated amount not exceeding such LCIssuing Bank’s Fronting Commitment, up to a maximum aggregate stated amount for all Letters of Credit at any one time outstandingequal to the LC Commitment Amount, on not less than two Business Days’ prior notice thereof by delivery of a Request for Issuanceto the Administrative Agent (which shall promptly distribute copies thereof to the Lenders) and the applicable LC Issuing Bank. EachRequest for Issuance shall specify (i) the date (which shall be a Business Day) of issuance of such Letter of Credit (or the date ofeffectiveness of such extension, amendment or other modification) and the stated expiry date thereof (which shall be no later than fiveBusiness Days prior to the then-scheduled Termination Date), (ii) the proposed stated amount of such Letter of Credit (which shall notbe less than $100,000), (iii) the name and address of the beneficiary of such Letter of Credit and (iv) a statement of drawing conditionsapplicable to such Letter of Credit, and if such Request for Issuance relates to an amendment or other modification (other than anextension of the stated maturity thereof) of a Letter of Credit, it shall be accompanied by the consent of the beneficiary of the Letter ofCredit thereto. Each Request for Issuance shall be irrevocable unless modified or rescinded by the Borrower not less than one day priorto the proposed date of issuance (or effectiveness) specified therein. Not later than 12:00 noon (New York City time) on the proposeddate of issuance (or effectiveness) specified in such Request for Issuance, and upon fulfillment of the applicable conditions precedentand the other requirements set forth herein, the applicable LC Issuing Bank shall issue (or extend, amend or otherwise modify) suchLetter of Credit and provide notice and a copy thereof to the Administrative Agent, which shall promptly furnish copies thereof to theLenders. Upon each issuance of a Letter of Credit by any LC Issuing Bank,each Lender shall be deemed, and hereby irrevocably and unconditionally agrees, to purchase from such LC Issuing Bank withoutrecourse a participation in such Letter of Credit equal to such Lender’s Percentage of the aggregate amount available to be drawnunder such Letter of Credit. Each Letter of Credit shall utilize the Commitment of each Lender by an amount equal to the amount ofsuch participation.(b)No Letter of Credit shall be requested or issued hereunder if, after the issuance thereof, (i) the Outstanding Creditswould exceed the total Commitments then scheduled to be in effect until the Termination Date, (ii) that portion of the LC Outstandingsarising from Letters of Credit issued by an LC Issuing Bank would exceed the amount of such LC Issuing Bank’s FrontingCommitment or (iii) the LC Outstandings would exceed the LC Commitment Amount. No LC Issuing Bank shall extend, amend orotherwise modify any Letter of Credit if such LC Issuing Bank would not be permitted at such time to issue the Letter of Credit in itsmodified form under the terms hereof. No LC Issuing Bank shall at any time be obligated to issue any Letter of Credit if such issuancewould conflict with any applicable law.(c)The Borrower hereby agrees to pay to the Administrative Agent for the account of the applicable LC Issuing Bankand each Lender that has funded its participation in the reimbursement obligations of the Borrower pursuant to subsection (d) below,on demand, without presentment, protest or other formalities of any kind, made by the applicable LC Issuing Bank to the Borrower, onand after each date on which the applicable LC Issuing Bank shall pay any amount under any Letter of Credit issued by such LCIssuing Bank, a sum equal to the amount so paid (the “Reimbursement Amount”) plus interest on the Reimbursement Amount fromthe date so paid by such LC Issuing Bank until repayment to such LC Issuing Bank in full at a fluctuating interest rate per annumequal to the interest rate applicable to Base Rate Advances plus, if any amount paid by such LC Issuing Bank under a Letter of Creditis not reimbursed by the Borrower within three Business Days, 2%. The Borrower may satisfy its obligation hereunder to repay theReimbursement Amount by requesting a Borrowing under Section 2.02 in the amount of such Reimbursement Amount, and theproceeds of such Borrowing may be applied to satisfy the Borrower’s obligations to the applicable LC Issuing Bank or the Lenders, asthe case may be.(d)If any LC Issuing Bank shall not have been reimbursed in full for any payment made by such LC Issuing Bank undera Letter of Credit issued by such LC Issuing Bank on the date of such payment, such LC Issuing Bank shall give the AdministrativeAgent and each Lender prompt notice thereof (an “LC Payment Notice”) no later than 12:00 noon (New York City time) on theBusiness Day immediately succeeding the date of such payment by such LC Issuing Bank. Each Lender shall be obligated to fund theparticipation that such Lender purchased pursuant to Section 2.03(a) by paying to the Administrative Agent for the account of theapplicable LC Issuing Bank an amount equal to such Lender’s Percentage of such unreimbursed amount paid by such LC IssuingBank, plus interest on such amount at a rate per annum equal to the Federal Funds Rate from the date of the payment by the applicableLC Issuing Bank to the date of payment to such LC Issuing Bank by such Lender. Each such payment by a Lender shall be made notlater than 3:00 P.M. (New York City time) on the later to occur of (i) the Business Day immediately following the date of suchpayment by the applicable LC Issuing Bank and (ii) the Business Day on which such Lender shall have received an LC PaymentNotice from the applicable LC Issuing Bank. Each Lender’s obligation to make each such payment to the Administrative Agent for theaccount of any LC Issuing Bank shall be several and shall not be affected by the occurrence or continuance of an Event of Default orthe failure of any other Lender to make any payment under this Section 2.03(d). Each Lender further agrees that each such paymentshall be made without any offset, abatement, withholding or reduction whatsoever.(e)The failure of any Lender to make any payment to the Administrative Agent for the account of any LC Issuing Bankin accordance with subsection (d) above shall not relieve any other Lender of its obligation to make payment, but no Lender shall beresponsible for the failure of any other Lender. If anyLender (a “Non‑Performing Lender”) shall fail to make any payment to the Administrative Agent for the account of any LC IssuingBank in accordance with subsection (d) above within five Business Days after the LC Payment Notice relating thereto, then, suchNon-Performing Lender agrees to pay to the Administrative Agent for the account of the applicable LC Issuing Bank forthwith ondemand such amount, together with interest thereon for each day from the date such Lender would have funded its participation had itcomplied with the requirements of subsection (d) above until the date such amount is paid to the Administrative Agent at the FederalFunds Rate.(f)The payment obligations of each Lender under Sections 2.03(d) and 2.03(e) and of the Borrower under thisAgreement in respect of any payment under any Letter of Credit by any LC Issuing Bank shall be absolute, unconditional andirrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, withoutlimitation, the following circumstances:i.any lack of validity or enforceability of this Agreement or any other agreement or instrument relating thereto orto such Letter of Credit;ii.any amendment or waiver of, or any consent to departure from, the terms of this Agreement or such Letter ofCredit;iii.the existence of any claim, set‑off, defense or other right which the Borrower may have at any time againstany beneficiary, or any transferee, of such Letter of Credit (or any Persons for whom any such beneficiary or any suchtransferee may be acting), the applicable LC Issuing Bank, or any other Person, whether in connection with this Agreement,the transactions contemplated hereby, thereby or by such Letter of Credit, or any unrelated transaction;iv.any statement or any other document presented under such Letter of Credit reasonably proving to be forged,fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;v.payment in good faith by the applicable LC Issuing Bank under the Letter of Credit issued by such LC IssuingBank against presentation of a draft or certificate that does not comply with the terms of such Letter of Credit; orvi.any other act or omission to act or delay of any kind by any Lender (including the LC Issuing Banks), theAdministrative Agent or any other Person or any other circumstance or happening whatsoever, whether or not similar to any ofthe foregoing, that might, but for the provisions of this subsection (vi), constitute a legal or equitable discharge of or defense tothe Borrower’s or the Lenders’ obligations hereunder.(g)The Borrower assumes all risks of the acts and omissions of any beneficiary or transferee of any Letter of Credit.Neither the LC Issuing Banks, the Lenders nor any of their respective officers, directors, employees, agents or Affiliates shall be liableor responsible for (i) the use that may be made of such Letter of Credit or any acts or omissions of any beneficiary or transferee thereofin connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if suchdocuments should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by any LC Issuing Bankagainst presentation of documents that do not comply with the terms of such Letter of Credit, including failure of any documents tobear any reference or adequate reference to such Letter of Credit; or (iv) any other circumstances whatsoever in making or failing tomake payment under such Letter of Credit. Notwithstanding any provision to the contrary contained in this Agreement, the Borrowerand each Lendershall have the right to bring suit against any LC Issuing Bank, and such LC Issuing Bank shall be liable to the Borrower and anyLender, to the extent of any direct, as opposed to consequential, damages suffered by the Borrower or such Lender which theBorrower or such Lender proves were caused by such LC Issuing Bank’s willful misconduct or gross negligence (as determined by acourt of competent jurisdiction in a final, non-appealable judgment), including, in the case of the Borrower, such LC Issuing Bank’swillful failure to make timely payment under such Letter of Credit following the presentation to it by the beneficiary thereof of a draftand accompanying certificate(s) that strictly comply with the terms and conditions of such Letter of Credit. In furtherance and not inlimitation of the foregoing, each LC Issuing Bank may accept sight drafts and accompanying certificates presented under the Letter ofCredit issued by such LC Issuing Bank that appear on their face to be in order, without responsibility for further investigation,regardless of any notice or information to the contrary, and payment against such documents shall not constitute willful misconduct orgross negligence by such LC Issuing Bank. Notwithstanding the foregoing, no Lender shall be obligated to indemnify the Borrowerfor damages caused by any LC Issuing Bank’s willful misconduct or gross negligence (as determined by a court of competentjurisdiction in a final, non-appealable judgment).(h)The Borrower acknowledges that the rights and obligations of the LC Issuing Banks under each Letter of Credit areindependent of the existence, performance or nonperformance of any contract or arrangement underlying such Letter of Credit,including contracts or arrangements between the LC Issuing Banks and the Borrower and between the Borrower and the beneficiary ofsuch Letter of Credit. The LC Issuing Banks shall have no duty to notify the Borrower of its receipt of a demand or a draft, certificateor other document presented under a Letter of Credit or of its decision to honor such demand. The LC Issuing Banks may, withoutincurring any liability to the Borrower or impairing its entitlement to reimbursement under this Agreement, honor a demand under aLetter of Credit despite notice from the Borrower of, and without any duty to inquire into, any defense to payment or any adverseclaims or other rights against the beneficiary of such Letter of Credit or any other person. The LC Issuing Banks shall have no duty torequest or require the presentation of any document, including any default certificate, not required to be presented under the terms andconditions of a Letter of Credit. The LC Issuing Banks shall have no duty to seek any waiver of discrepancies from the Borrower, norany duty to grant any waiver of discrepancies that the Borrower approves or requests. The LC Issuing Banks shall have no duty toextend the expiration date or term of a Letter of Credit or to issue a replacement letter of Letter of Credit on or before the expirationdate of a Letter of Credit or the end of such term.(i)Any LC Issuing Bank may resign at any time in accordance with the provisions of Section 7.07 hereof.(j)The Borrower agrees that the LC Issuing Banks may issue Letters of Credit subject to the Uniform Customs andPractice for Documentary Credits, International Chamber of Commerce (“ICC”) Publication No. 600 (2007 Revision) or, at an LCIssuing Bank’s option, such later revision thereof in effect at the time of issuance of such Letter of Credit (as so chosen for the Credit,the “UCP”) or the International Standby Practices 1998, ICC Publication No. 590 or, at an LC Issuing Bank’s option, such laterrevision thereof in effect at the time of issuance of the Credit (as so chosen for such Letter of Credit, the “ISP”, and each of the UCPand the ISP, an “ICC Rule”). The LC Issuing Banks’ privileges, rights and remedies under such ICC Rules shall be in addition to, andnot in limitation of, its privileges, rights and remedies expressly provided for herein. The UCP and the ISP (or such later revision ofeither) shall serve, in the absence of proof to the contrary, as evidence of general banking usage with respect to the subject matterthereof. The Borrower agrees that for matters not addressed by the chosen ICC Rule, such Letter of Credit shall be subject to andgoverned by the laws of the State of New York and applicable United States Federal laws. If, at the Borrower’s request, a Letter ofCredit expressly chooses a state or country law other than New York State law and United States Federal law or is silent with respectto the choice of an ICC Rule or a governing law,the LC Issuing Banks shall not be liable for any payment, cost, expense or loss resulting from any action or inaction taken by an LCIssuing Bank if such action or inaction is or would be justified under an ICC Rule, New York law, applicable United States Federallaw or the law governing such Letter of Credit.SECTION 2.04. Fees.(a)The Borrower agrees to pay to the Administrative Agent for the account of each Lender a facility fee (the “FacilityFee”) on the amount of such Lender’s Commitment (regardless of usage) from the date hereof in the case of each Bank, and from theeffective date specified in the Assignment and Assumption pursuant to which it became a Lender, in the case of each other Lender,until the Termination Date, payable on the last day of each March, June, September and December during such period, and on theTermination Date at the rate per annum set forth below in the column identified by the Senior Debt Rating Level:Senior Debt Rating LevelLevel 1Level 2Level 3Level 4Level 5Level 6Rate Per Annum Facility Fee0.125%0.175%0.225%0.275%0.375%0.450%Any change in the Facility Fee will be effective as of the date on which S&P or Moody’s, as the case may be, announces theapplicable change in any rating that results in a change in the Senior Debt Rating Level.(b)The Borrower shall pay to the Administrative Agent for the account of each Lender a fee (the “LC Fee”) onthe average daily amount of the sum of the undrawn stated amounts of all Letters of Credit outstanding on each such day, fromthe Restatement Effective Date in the case of each Bank, and from the effective date specified in the Assignment andAssumption pursuant to which it became a Lender, in the case of each other Lender, until the later to occur of the TerminationDate and the date on which no Letters of Credit are outstanding, payable on the last day of each March, June, September andDecember during such period and such later date, at a rate equal at all times to the Applicable Margin in effect from time totime for Eurodollar Rate Advances. In addition, the Borrower shall pay to the LC Issuing Banks such fees for the issuance andmaintenance of Letters of Credit and for drawings thereunder as may be separately agreed between the Borrower and the LCIssuing Banks.(c)The Borrower agrees to pay, (i) to Bank of America, as an LC Issuing Bank, for its own account, (A) a fronting feeequal to 0.20% per annum on the undrawn stated amount of each Letter of Credit issued by Bank of America in its capacity as an LCIssuing Bank, payable by the Borrower quarterly in arrears on the last day of each March, June, September and December and on theTermination Date or such later date on which no Letter of Credit issued by such LC Issuing Bank shall be outstanding, and otherwisein accordance with the payment provisions set forth in the Loan Documents, and (B) customary issuance and administration fees inrespect of such Letters of Credit and (ii) to any other LC Issuing Bank that issues any Letter of Credit, a fronting fee in the amountseparately agreed by the Borrower and such LC Issuing Bank and such other charges with respect to such Letter of Credit as areagreed upon with such LC Issuing Bank and as are customary.(d)The Borrower agrees to pay the other fees payable by it in such amounts and on such terms as set forth in the FeeLetters.SECTION 2.05. Reduction of the Commitments.(a)The Borrower shall have the right, without premium or penalty, upon at least three Business Days’ notice to theAdministrative Agent, to terminate in whole or permanently reduce ratably in part the unused portions of the respective Commitmentsof the Lenders; provided that each partial reduction shall be in the aggregate amount of $1,000,000 or an integral multiple thereof;provided, further, that the Commitments may not be reduced to an amount that is less than the aggregate stated amount of outstandingLetters of Credit. Subject to the foregoing, (i) any reduction of the Commitments to an amount that is less than $15,000,000 shall alsoresult in a reduction of the LC Commitment Amount to the extent of such deficit, and (ii) if after giving effect to any reduction of theLC Commitment Amount pursuant to the preceding clause (i), any Fronting Commitment exceeds the LC Commitment Amount, suchFronting Commitment shall be automatically reduced by the amount of such excess. Once terminated, a Commitment may not bereinstated.(b)The Borrower may terminate in whole the unused amount of the Commitment of a Defaulting Lender upon not lessthan three Business Days’ prior notice to the Administrative Agent (which will promptly notify the Lenders thereof), and in such eventthe provisions of Section 2.18(b)(iii) will apply to all amounts thereafter paid by the Borrower for the account of such DefaultingLender under this Agreement (whether on account of principal, interest, fees, indemnity or other amounts), provided that suchtermination will not be deemed to be a waiver or release of any claim the Borrower, the Administrative Agent, any LC Issuing Bank orany Lender may have against such Defaulting Lender.SECTION 2.06. Repayment of Advances.(a)The Borrower shall repay the principal amount of each Advance made by each Lender no later than the TerminationDate.(b)If at any time the aggregate principal amount of Outstanding Credits exceeds the Commitments, the Borrower shallpay or prepay so much of the Borrowings as shall be necessary in order that the Outstanding Credits will not exceed the CommitmentsSECTION 2.07. Interest on Advances.The Borrower shall pay interest on the unpaid principal amount of each Advance made by each Lender from the date of suchAdvance until such principal amount shall be paid in full, at the following rates per annum:(a)Base Rate Advances. If such Advance is a Base Rate Advance, a rate per annum equal at all times to theBase Rate in effect from time to time plus the Applicable Margin for such Base Rate Advance in effect from time to time,payable quarterly on the last day of each March, June, September and December and on the date such Base Rate Advance shallbe Converted or paid in full.(b)Eurodollar Rate Advances. Subject to Section 2.08, if such Advance is a Eurodollar Rate Advance, a rate perannum equal at all times during the Interest Period for such Advance to the sum of the Eurodollar Rate for such Interest Period plus theApplicable Margin for such Eurodollar Rate Advance in effect from time to time, payable on the last day of each Interest Period forsuch Eurodollar Rate Advance, on the date such Eurodollar Rate Advance shall be Converted or paid in full and, if such InterestPeriod has a duration of more than three months, on each day that occurs during such Interest Period every three months from the firstday of such Interest Period.SECTION 2.08. Additional Interest on Eurodollar Rate Advances.The Borrower shall pay to each Lender, so long as such Lender shall be required under regulations of the Board of Governorsof the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including EurocurrencyLiabilities, additional interest on the unpaid principal amount of each Eurodollar Rate Advance of such Lender, from the date of suchAdvance until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained bysubtracting (i) the Eurodollar Rate for the Interest Period for such Advance from (ii) the rate obtained by dividing such Eurodollar Rateby a percentage equal to 100% minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest Period, payable on eachdate on which interest is payable on such Advance. Such additional interest shall be determined by such Lender and notified to theBorrower through the Administrative Agent, and such determination shall be conclusive and binding for all purposes, absent manifesterror.SECTION 2.09. Interest Rate Determination.(a)The Administrative Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest ratedetermined by the Administrative Agent for purposes of Section 2.07(a) or 2.07(b).(b)If in connection with any request for a Eurodollar Rate Advance or a conversion to or continuation thereof, (i) theAdministrative Agent determines that (A) Dollar deposits are not being offered to banks in the London interbank market for theapplicable amount and Interest Period of such Eurodollar Rate Advance, or (B) (x) adequate and reasonable means do not exist fordetermining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance or in connectionwith an existing or proposed Base Rate Loan and (y) the circumstances described in Section 2.09(d)(i) do not apply (in each case withrespect to this clause (i), “Impacted Loans”), or (ii) the Administrative Agent or the Majority Lenders determine that for any reason theEurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance does not adequately and fairlyreflect the cost to such Lenders of funding such Eurodollar Rate Advance, the Administrative Agent will promptly so notify theBorrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Advances shall besuspended (to the extent of the affected Eurodollar Rate Advances or Interest Periods), and (y) in the event of a determinationdescribed in the preceding sentence with respect to the Eurodollar Rate component of the Base Rate, the utilization of the EurodollarRate component in determining the Base Rate shall be suspended, in each case until the Administrative Agent (or, in the case of adetermination by the Majority Lenders described in clause (ii) of this Section 2.09(b), until the Administrative Agent upon instructionof the Majority Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for aBorrowing of, conversion to or continuation of Eurodollar Rate Advances (to the extent of the affected Eurodollar Rate Advances orInterest Periods) or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans inthe amount specified therein.(c)Notwithstanding the foregoing, if the Administrative Agent has made the determination described in clause (i) ofSection 2.09(b), the Administrative Agent, in consultation with the Borrower, may establish an alternative interest rate for the ImpactedLoans, in which case, such alternative rate of interest shall apply with respect to the Impacted Loans until (i) the Administrative Agentrevokes the notice delivered with respect to the Impacted Loans under clause (i) of the first sentence of Section 2.09(b), (ii) theAdministrative Agent or the Majority Lenders notify the Administrative Agent and the Borrower that such alternative interest rate doesnot adequately and fairly reflect the cost to such Lenders of funding the Impacted Loans, or (iii) any Lender determines that any Lawhas made it unlawful, or that any Governmental Body has asserted that it is unlawful, for such Lender or its applicable lending office tomake, maintain or fundLoans whose interest is determined by reference to such alternative rate of interest or to determine or charge interest rates based uponsuch rate or any Governmental Authority has imposed material restrictions on the authority of such Lender to do any of the foregoingand provides the Administrative Agent and the Borrower written notice thereof.(d)Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if the AdministrativeAgent determines (which determination shall be conclusive absent manifest error), or the Borrower or Majority Lenders notify theAdministrative Agent (with, in the case of the Majority Lenders, a copy to Borrower) that the Borrower or Majority Lenders (asapplicable) have determined, that:i.adequate and reasonable means do not exist for ascertaining LIBOR for any requested Interest Period,including, without limitation, because the Screen Rate is not available or published on a current basis and such circumstancesare unlikely to be temporary; orii.the administrator of the Screen Rate or a Governmental Authority having jurisdiction over the AdministrativeAgent has made a public statement identifying a specific date after which the Eurodollar Rate or the Screen Rate shall nolonger be made available, or used for determining the interest rate of loans (such specific date, the “Scheduled UnavailabilityDate”), oriii.syndicated loans currently being executed, or that include language similar to that contained in this Section2.09, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace theEurodollar Rate,then, reasonably promptly after such determination by the Administrative Agent or receipt by the Administrative Agent of such notice,as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace the Eurodollar Rate with an alternatebenchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein), giving dueconsideration to any evolving or then existing convention for similar U.S. dollar denominated syndicated credit facilities for suchalternative benchmarks (any such proposed rate, a “Eurodollar Successor Rate”), together with any proposed Eurodollar SuccessorRate Conforming Changes and any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after theAdministrative Agent shall have posted such proposed amendment to all Lenders and the Borrower unless, prior to such time, Lenderscomprising the Majority Lenders have delivered to the Administrative Agent written notice that such Majority Lenders do not acceptsuch amendment. Such Eurodollar Successor Rate shall be applied in a manner consistent with market practice; provided that to theextent such market practice is not administratively feasible for the Administrative Agent, such Eurodollar Successor Rate shall beapplied in a manner as otherwise reasonably determined by the Administrative Agent.If no Eurodollar Successor Rate has been determined and the circumstances under clause (i) above exist or the ScheduledUnavailability Date has occurred (as applicable), the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, (x) the obligation of the Lenders to make or maintain Eurodollar Rate Advances shall be suspended, (to the extent of theaffected Eurodollar Rate Advances or Interest Periods), and (y) the Eurodollar Rate component shall no longer be utilized indetermining the Base Rate. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of,conversion to or continuation of Eurodollar Rate Advances (to the extent of the affected Eurodollar Rate Advances or Interest Periods)or, failing that, will be deemed to have converted such request into a request for a Committed Borrowing of Base Rate Loans (subjectto the foregoing clause (y)) in the amount specified therein.Notwithstanding anything else herein, any definition of Eurodollar Successor Rate shall provide that in no event shall such EurodollarSuccessor Rate be less than zero for purposes of this Agreement.SECTION 2.10. Conversion of Advances.(a)Voluntary. The Borrower may, upon notice given to the Administrative Agent not later than 11:00 A.M. (New YorkCity time) on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Sections 2.09 and2.13, on any Business Day, Convert all Advances of one Type made in connection with the same Borrowing into Advances of anotherType; provided, however, that any Conversion of, or with respect to, any Eurodollar Rate Advances into Advances of another Typeshall be made on, and only on, the last day of an Interest Period for such Eurodollar Rate Advances, unless the Borrower shall alsoreimburse the Lenders in respect thereof pursuant to Section 8.04(b) on the date of such Conversion. Each such notice of a Conversion(a “Notice of Conversion”) shall be transmitted by facsimile, in substantially the form of Exhibit A-2 hereto, specifying therein (i) thedate of such Conversion, (ii) the Advances to be Converted, and (iii) if such Conversion is into, or with respect to, Eurodollar RateAdvances, the duration of the Interest Period for each such Advance.(b)Mandatory. If the Borrower shall fail to select the Type of any Advance or the duration of any Interest Period for anyBorrowing comprising Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” inSection 1.01 and Section 2.10(a), or if any proposed Conversion of a Borrowing that is to comprise Eurodollar Rate Advances uponConversion shall not occur as a result of the circumstances described in subsection (c) below, or if an Event of Default has occurredand is continuing and Eurodollar Rate Advances are outstanding, the Administrative Agent will forthwith so notify the Borrower andthe Lenders, and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base RateAdvances.(c)Failure to Convert. Each notice of Conversion given pursuant to subsection (a) above shall be irrevocable andbinding on the Borrower. In the case of any Borrowing that is to comprise Eurodollar Rate Advances upon Conversion, the Borroweragrees to indemnify each Lender against any loss, cost or expense incurred by such Lender if, as a result of the failure of the Borrowerto satisfy any condition to such Conversion (including, without limitation, the occurrence of any Event of Default, or any event thatwould constitute an Event of Default with notice or lapse of time or both), such Conversion does not occur. The Borrower’sobligations under this subsection (c) shall survive the repayment of all other amounts owing to the Lenders and the AdministrativeAgent under this Agreement and the termination of the Commitments.(d)No Event of Default. Notwithstanding any other provision of this Agreement to the contrary, the Borrower may notborrow Advances at the Eurodollar Rate or Convert Advances resulting in Eurodollar Rate Advances at any time an Event of Defaulthas occurred and is continuing.SECTION 2.11. Prepayments.The Borrower may, upon notice received by the Administrative Agent prior to 11:00 A.M. (New York City time) on anyBusiness Day, with respect to Base Rate Advances, and upon at least two Business Days’ notice to the Administrative Agent, withrespect to Eurodollar Rate Advances, stating the proposed date and aggregate principal amount of the prepayment, and if such notice isgiven the Borrower shall, prepay the outstanding principal amounts of the Advances made as part of the same Borrowing in whole orratably in part, together with accrued interest to the date of such prepayment on the principal amount prepaid; provided, however, that(i) each partial prepayment shall be in an aggregate principal amount not less than $1,000,000 or any integral multiple of $100,000 inexcess thereof and (ii) in the case of any such prepayment of anEurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(b) onthe date of such prepayment.SECTION 2.12. Increased Costs.(a)Increased Costs Generally. If any Change in Law shall:i.impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similarrequirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (exceptany reserve requirement reflected in the Eurodollar Rate Reserve Percentage, in the case of Eurodollar Rate Advances) or anyLC Issuing Bank;ii.subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (ii)through (iv) of the definition of “Excluded Taxes” and (C) Connection Income Taxes) on its loans, loan principal, letters ofcredit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; oriii.impose on any Lender or any LC Issuing Bank or the London interbank market any other condition, cost orexpense (other than Taxes) affecting this Agreement or Advances made by such Lender or any Letter of Credit or participationtherein;and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, converting to,continuing or maintaining any Advance or of maintaining its obligation to make any such Advance, or to increase the cost to suchLender, such LC Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or ofmaintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivableby such Lender, LC Issuing Bank or other Recipient hereunder (whether of principal, interest or any other amount) then, upon requestof such Lender, LC Issuing Bank or other Recipient, the Borrower will pay to such Lender, LC Issuing Bank or other Recipient, as thecase may be, such additional amount or amounts as will compensate such Lender, LC Issuing Bank or other Recipient, as the case maybe, for such additional costs incurred or reduction suffered.(b)Capital Requirements. If any Lender or LC Issuing Bank determines that any Change in Law affecting suchLender or LC Issuing Bank or any Applicable Lending Office of such Lender or such Lender’s or LC Issuing Bank’s holdingcompany, if any, regarding capital or liquidity requirements, has or would have the effect of reducing the rate of return on suchLender’s or LC Issuing Bank’s capital or on the capital of such Lender’s or LC Issuing Bank’s holding company, if any, as aconsequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters ofCredit held by, such Lender, or the Letters of Credit issued by any LC Issuing Bank, to a level below that which such Lenderor LC Issuing Bank or such Lender’s or LC Issuing Bank’s holding company could have achieved but for such Change inLaw (taking into consideration such Lender’s or LC Issuing Bank’s policies and the policies of such Lender’s or LC IssuingBank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or LCIssuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or LC Issuing Bank orsuch Lender’s or LC Issuing Bank’s holding company for any such reduction suffered.(c)Certificates for Increased Costs. A certificate of a Lender or LC Issuing Bank setting forth the amount or amountsnecessary to compensate such Lender or LC Issuing Bank or its holding company,as the case may be, as specified in subsection (a) or (b) of this Section 2.12 and delivered to the Borrower, shall be conclusive absentmanifest error. The Borrower shall pay such Lender or LC Issuing Bank, as the case may be, the amount shown as due on any suchcertificate within 10 days after receipt thereof.(d)Delay in Requests. Failure or delay on the part of any Lender or LC Issuing Bank to demand compensation pursuantto this Section shall not constitute a waiver of such Lender’s or LC Issuing Bank’s right to demand such compensation; provided thatthe Borrower shall not be required to compensate a Lender or LC Issuing Bank pursuant to this Section for any increased costsincurred or reductions suffered more than nine months prior to the date that such Lender or LC Issuing Bank, as the case may be,notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of such Lender’s or LC IssuingBank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions isretroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).SECTION 2.13. Illegality.Notwithstanding any other provision of this Agreement, if any Lender shall notify the Administrative Agent that any Change inLaw makes it unlawful, or any central bank or other Governmental Body asserts that it is unlawful, for any Lender or its EurodollarLending Office to perform its obligations hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar RateAdvances hereunder, (i) the obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall besuspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension nolonger exist and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate Advances of all Lenders then outstanding, togetherwith interest accrued thereon, unless the Borrower, within five Business Days of notice from the Administrative Agent, Converts allEurodollar Rate Advances of all Lenders then outstanding into Advances of another Type in accordance with Section 2.10.SECTION 2.14. Payments and Computations.(a)The Borrower shall make each payment hereunder not later than 12:00 noon (New York City time) on the day whendue in United States dollars to the Administrative Agent free and clear of and without condition or reduction for any defense, setoff,recoupment or counterclaim at its address referred to in Section 8.02 in same day funds. The Administrative Agent will promptlythereafter cause to be distributed like funds relating to the payment of principal or interest or Facility Fees ratably (other than amountspayable pursuant to Section 2.02(c), 2.04, 2.08, 2.12, 2.15 or 8.04(b)) to the Lenders for the account of their respective ApplicableLending Offices, and like funds relating to the payment of any other amount payable to any Lender or LC Issuing Bank to suchLender for the account of its Applicable Lending Office or to any LC Issuing Bank, in each case to be applied in accordance with theterms of this Agreement. Upon its acceptance of an Assignment and Assumption and recording of the information contained therein inthe Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Assumption, theAdministrative Agent shall make all payments hereunder in respect of the interest assigned thereby to the Lender assignee thereunder,and the parties to such Assignment and Assumption shall make all appropriate adjustments in such payments for periods prior to sucheffective date directly between themselves.(b)The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made whendue hereunder, to charge from time to time to the extent permitted by law against any or all of the Borrower’s accounts with suchLender any amount so due.(c)All computations of interest based on clause (i) of the definition of “Base Rate” shall be made by the AdministrativeAgent on the basis of a year of 365 or 366 days, as the case may be, and all computations of interest based on the Eurodollar Rate, theFederal Funds Rate or clause (ii) or (iii) of the definition of “Base Rate” and of the Facility Fee and the LC Fee shall be made by theAdministrative Agent, and all computations of interest pursuant to Section 2.08 shall be made by a Lender, on the basis of a year of360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period forwhich such interest, Facility Fee or LC Fee is payable. Each determination by the Administrative Agent (or, in the case ofSection 2.08, by a Lender) of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.(d)Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shallbe made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation ofpayment of interest, Facility Fee or LC Fee, as the case may be; provided, however, if such extension would cause payment of intereston or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the nextpreceding Business Day.(e)Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which anypayment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assumethat the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, inreliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due suchLender. If and to the extent that the Borrower shall not have so made such payment in full to the Administrative Agent, each Lendershall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, foreach day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the AdministrativeAgent, at the Federal Funds Rate.(f)Notwithstanding anything to the contrary contained herein, any Advance or other amount payable by the Borrowerhereunder that is not paid when due (whether at stated maturity, by acceleration or otherwise), and all Advances at any time an Eventof Default shall have occurred and be continuing, shall (to the fullest extent permitted by law) bear interest from the date when dueuntil paid in full at a rate per annum equal at all times, in the case of each Advance, to the applicable interest rate in effect from time totime for such Advance plus 2% per annum, and, in the case of other amounts, to the Base Rate plus the Applicable Margin for BaseRate Advances plus 2% per annum, payable in each case upon demand.SECTION 2.15. Taxes.(a)Defined Terms. For purposes of this Section 2.15, the term “Lender” includes each LC Issuing Bank and the term“applicable law” includes FATCA.(b)Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower under any LoanDocument shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law(as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax fromany such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction orwithholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Body in accordance withapplicable law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so thatafter such deduction or withholding has been made (includingsuch deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives anamount equal to the sum it would have received had no such deduction or withholding been made.(c)Payment of Other Taxes by the Borrower. The Borrower shall timely pay to the relevant Governmental Body inaccordance with applicable law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.(d)Indemnification by the Borrower. The Borrower shall indemnify each Recipient, within 30 days after demandtherefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amountspayable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipientand any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legallyimposed or asserted by the relevant Governmental Body. A certificate as to the amount of such payment or liability delivered to theBorrower by such Recipient (with a copy to the Administrative Agent, unless the Administrative Agent is such Recipient), or by theAdministrative Agent on its own behalf or on behalf of any other Recipient, shall be conclusive absent manifest error.(e)Indemnification by the Lenders. Each Lender shall severally indemnify the Administrative Agent, within 10 daysafter demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has notalready indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to doso), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 8.07(d) relating to the maintenance ofa Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by theAdministrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto,whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Body. A certificate as to theamount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lenderunder any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amountdue to the Administrative Agent under this subsection (e).(f)Evidence of Payments. As soon as practicable after any payment of Taxes by the Borrower to a Governmental Bodypursuant to this Section 2.15, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issuedby such Governmental Body evidencing such payment, a copy of the return reporting such payment or other evidence of such paymentreasonably satisfactory to the Administrative Agent.(g)Status of Lenders. (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respectto payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or timesreasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonablyrequested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reducedrate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver suchother documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enablethe Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or informationreporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution andsubmission of such documentation (other than such documentation set forth in paragraphs (ii)(A), (ii)(B) and (ii)(D) below) shallnot be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to anymaterial unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.i.Without limiting the generality of the foregoing,(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior tothe date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon thereasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that suchLender is exempt from U.S. federal backup withholding tax;(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and theAdministrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on whichsuch Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonablerequest of the Borrower or the Administrative Agent), whichever of the following is applicable:(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the UnitedStates is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRSForm W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Taxpursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments underany Loan Document, IRS Form W-8BEN or W-8BEN-E establishing an exemption from, or reduction of, U.S.federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;(2) executed copies of IRS Form W-8ECI;(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest underSection 881(c) of the Code, (x) a certificate substantially in the form of Exhibit E-1 to the effect that suchForeign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percentshareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreigncorporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y)executed copies of IRS Form W-8BEN or W-8BEN-E; or(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY,accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax ComplianceCertificate substantially in the form of Exhibit E-2 or Exhibit E-3, IRS Form W-9, and/or other certificationdocuments from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership andone or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption,such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-4 onbehalf of each such direct and indirect partner;(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and theAdministrative Agent (in such number of copies as shall be requestedby the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (andfrom time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copiesof any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federalwithholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicablelaw to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made;and(D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholdingTax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA(including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to theBorrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonablyrequested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including asprescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by theBorrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to complywith their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligationsunder FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of thisclause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in anyrespect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legalinability to do so.(h)Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that ithas received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.15 (including by the paymentof additional amounts pursuant to this Section 2.15), it shall pay to the indemnifying party an amount equal to such refund (butonly to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net ofall out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by therelevant Governmental Body with respect to such refund). Such indemnifying party, upon the request of such indemnifiedparty, shall repay to such indemnified party the amount paid over pursuant to this subsection (h) (plus any penalties, interest orother charges imposed by the relevant Governmental Body) in the event that such indemnified party is required to repay suchrefund to such Governmental Body. Notwithstanding anything to the contrary in this subsection (h), in no event will theindemnified party be required to pay any amount to an indemnifying party pursuant to this subsection (h) the payment of whichwould place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in ifthe Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed andthe indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection shall not beconstrued to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes thatit deems confidential) to the indemnifying party or any other Person.(i)FATCA. For purposes of determining withholding Taxes imposed under FATCA, from and after the RestatementEffective Date, the Borrower and the Administrative Agent shall treat (and the Lendershereby authorize the Administrative Agent to treat) this Agreement as not qualifying as a “grandfathered obligation” within themeaning of Treasury Regulation Sections 1.1471-2(b)(2)(i) and 1.1471-2T(b)(2)(i).(j)Survival. Each party’s obligations under this Section 2.15 shall survive the resignation or replacement of theAdministrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and therepayment, satisfaction or discharge of all obligations under any Loan Document.SECTION 2.16. Sharing of Payments, Etc.If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, orotherwise) on account of the Advances made by it (other than pursuant to the Fee Letters, Section 2.02(c), 2.08, 2.12, 2.15 or 8.04(b))or, on account of the Borrower’s reimbursement obligations in respect of LC Outstandings in excess of its ratable share of payments onaccount of the Advances or on account of such reimbursement obligations obtained by all the Lenders, such Lender shall forthwithpurchase from the other Lenders such participations in the Advances made by them and such reimbursement obligations as shall benecessary to cause such purchasing Lender to share the excess payment ratably with each of them, provided, however, that (i) if all orany portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall berescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with anamount equal to such Lender’s ratable share (according to the proportion of (A) the amount of such Lender’s required repayment to(B) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasingLender in respect of the total amount so recovered and (ii) the provisions of this Section 2.16 shall not be construed to apply to (A) anypayment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application offunds arising from the existence of a Defaulting Lender), or (B) any payment obtained by a Lender as consideration for the assignmentof or sale of a participation in any of its Advances or participations in LC Outstandings to any assignee or participant, other than to theBorrower or any Subsidiary thereof (as to which the provisions of this Section 2.16 shall apply). The Borrower agrees that any Lenderso purchasing a participation from another Lender pursuant to this Section 2.16 may, to the fullest extent permitted by law, exercise allits rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditorof the Borrower in the amount of such participation.SECTION 2.17. Noteless Agreement; Evidence of Indebtedness.(a)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtednessof the Borrower to such Lender resulting from each Advance made by such Lender from time to time, including the amounts ofprincipal and interest payable and paid to such Lender from time to time hereunder.(b)The Administrative Agent shall also maintain accounts in which it will record (i) the amount of each Advance madehereunder, the Type thereof and the Interest Period (if any) with respect thereto, (ii) the amount of any principal or interest due andpayable or to become due and payable from the Borrower to each Lender hereunder, and (iii) the amount of any sum received by theAdministrative Agent hereunder from the Borrower and each Lender’s share thereof.(c)The entries maintained in the accounts maintained pursuant to subsections (a) and (b) above shall be prima facieevidence of the existence and amounts of the obligations therein recorded; provided, however, that the failure of the AdministrativeAgent or any Lender to maintain such accounts or any errortherein shall not in any manner affect the obligation of the Borrower to repay such obligations in accordance with their terms.(d)Any Lender may request that its Advances be evidenced by one or more promissory notes. In such event, theBorrower shall prepare, execute and deliver to such Lender one or more promissory notes payable to such Lender and in a formacceptable to the Borrower and the Administrative Agent. Thereafter, the Advances evidenced by such note(s) and interest thereonshall at all times (including after any assignment pursuant to Section 8.07) be represented by notes from the Borrower, payable to thepayee named therein or any assignee pursuant to Section 8.07, except to the extent that any such Lender or assignee subsequentlyreturns any such notes for cancellation and requests that such Borrowings once again be evidenced as in subsections (a) and (b) above.SECTION 2.18. Defaulting Lenders.(a)Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, suchDefaulting Lender will not be entitled to any fees accruing during such period pursuant to Sections 2.04(a) and 2.04(b) (withoutprejudice to the rights of the Non-Defaulting Lenders in respect of such fees), provided that (i) to the extent that all or a portion of theLC Outstandings of such Defaulting Lender is reallocated to the Non-Defaulting Lenders pursuant to Section 2.18, such fees thatwould have accrued for the benefit of such Defaulting Lender will instead accrue for the benefit of and be payable to such Non-Defaulting Lenders, pro rata in accordance with their respective Percentages, and (ii) to the extent that all or any portion of such LCOutstandings cannot be so reallocated, such fees will instead accrue for the benefit of and be payable to the LC Issuing Banks, asapplicable (and the pro rata payment provisions of Section 2.16 will automatically be deemed adjusted to reflect the provisions of thisSection).(b)If a Lender becomes, and during the period it remains, a Defaulting Lender, the following provisions shall apply withrespect to any LC Outstandings held by such Defaulting Lender:i.The LC Outstandings held by such Defaulting Lender will, subject to the limitation in the first proviso below,automatically be reallocated (effective on the day such Lender becomes a Defaulting Lender) among the Non-DefaultingLenders pro rata in accordance with their respective Percentages; provided that (A)(x) the sum of each Non-DefaultingLender’s Outstanding Credits (after giving effect to such reallocation) may not in any event exceed the Commitment of suchNon-Defaulting Lender as in effect at the time of such reallocation and (y) the sum of all Non-Defaulting Lender’s OutstandingCredits (after giving effect to such reallocation) may not in any event exceed the total Commitments of all Non-DefaultingLenders as in effect at the time of such reallocation and (B) subject to Section 8.21, neither such reallocation nor any paymentby a Non-Defaulting Lender pursuant thereto will constitute a waiver or release of any claim the Borrower, the AdministrativeAgent, any LC Issuing Bank or any other Lender may have against such Defaulting Lender or cause such Defaulting Lender tobe a Non-Defaulting Lender;ii.to the extent that any portion (the “unreallocated portion”) of the Defaulting Lender’s LC Outstandingscannot be so reallocated, whether by reason of the first proviso in clause (i) above or otherwise, the Borrower will, not laterthan three Business Days after demand by the Administrative Agent (at the direction of an LC Issuing Bank), (A) CashCollateralize the obligations of the Borrower to the LC Issuing Banks in respect of such LC Outstandings in an amount at leastequal to the aggregate amount of the unreallocated portion of such LC Outstandings, or (B) make other arrangementssatisfactory to the Administrative Agent and to the LC Issuing Banks, in their sole discretion, to protect them against the risk ofnon-payment by such Defaulting Lender; andiii.any amount paid by the Borrower or otherwise received by the Administrative Agent for the account of aDefaulting Lender under this Agreement (whether on account of principal, interest, fees, indemnity payments or other amounts)will not be paid or distributed to such Defaulting Lender, but will instead be retained by the Administrative Agent in asegregated account until (subject to Section 2.18(f)) the termination of the Commitments and payment in full of all obligationsof the Borrower hereunder and will be applied by the Administrative Agent, to the fullest extent permitted by law, to themaking of payments from time to time in the following order of priority: first to the payment of any amounts owing by suchDefaulting Lender to the Administrative Agent under this Agreement, second to the payment of any amounts owing by suchDefaulting Lender to the LC Issuing Banks (pro rata as to the respective amounts owing to each of them) under thisAgreement, third to the payment of post-default interest and then current interest due and payable to the Lenders hereunderother than Defaulting Lenders, ratably among them in accordance with the amounts of such interest then due and payable tothem, fourth to the payment of fees then due and payable to the Non-Defaulting Lenders hereunder, ratably among them inaccordance with the amounts of such fees then due and payable to them, fifth to pay principal and unreimbursed amounts thendue and payable under Letters of Credit to the Non-Defaulting Lenders hereunder ratably in accordance with the amountsthereof then due and payable to them, sixth to the ratable payment of other amounts then due and payable to the Non-Defaulting Lenders, and seventh after the termination of the Commitments and payment in full of all obligations of theBorrower hereunder, to pay amounts owing under this Agreement to such Defaulting Lender or as a court of competentjurisdiction may otherwise direct.(c)In furtherance of the foregoing, if any Lender becomes, and during the period it remains, a Defaulting Lender or aPotential Defaulting Lender, each LC Issuing Bank is hereby authorized by the Borrower (which authorization is irrevocable andcoupled with an interest) to give, in its discretion, through the Administrative Agent, Notices of Borrowing pursuant to Section 2.02(a)in such amounts and in such times as may be required to (i) reimburse amounts due and payable under Letters of Credit and/or (ii)Cash Collateralize the obligations of the Borrower in respect of outstanding Letters of Credit in an amount at least equal to theaggregate amount of the obligations (contingent or otherwise) of such Defaulting Lender or Potential Defaulting Lender in respect ofsuch Letter of Credit.(d)In addition to the other conditions precedent herein set forth, if any Lender becomes, and during the period it remains,a Defaulting Lender or a Potential Defaulting Lender, no LC Issuing Bank will be required to issue any Letter of Credit or to amendany outstanding Letter of Credit in a manner that constitutes an Extension of Credit, unless such LC Issuing Bank is satisfied that anyexposure that would result therefrom is eliminated or fully covered by the Commitments of the Non-Defaulting Lenders or by CashCollateralization or a combination thereof satisfactory to such LC Issuing Bank.(e)If any Lender becomes, and during the period it remains, a Defaulting Lender or a Potential Defaulting Lender, if anyLetter of Credit is at the time outstanding, any LC Issuing Bank may (except, in the case of a Defaulting Lender, to the extent theCommitments have been fully reallocated pursuant to Section 2.18(b)), by notice to the Borrower and such Defaulting Lender orPotential Defaulting Lender through the Administrative Agent, require the Borrower to Cash Collateralize the obligations of theBorrower to such LC Issuing Bank in respect of such Letter of Credit in an amount at least equal to the aggregate amount of theunreallocated obligations (contingent or otherwise) of such Defaulting Lender or such Potential Defaulting Lender to be applied prorata in respect thereof, or to make other arrangements satisfactory to the Administrative Agent and to such LC Issuing Bank in theirsole discretion to protect them against the risk of non-payment by such Defaulting Lender or Potential Defaulting Lender.(f)If the Borrower, the Administrative Agent and the LC Issuing Banks agree in writing that a Lender is no longer aDefaulting Lender or a Potential Defaulting Lender, as the case may be, the Administrative Agent will so notify the parties hereto,whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may includearrangements with respect to any amounts then held in the segregated account referred to in Section 2.18(b)), such Lender will, to theextent applicable, purchase at par such portion of outstanding Advances of the other Lenders and/or make such other adjustments asthe Administrative Agent may determine to be necessary to cause the Outstanding Credits held by the Lenders to be on a pro rata basisin accordance with their respective Percentages, whereupon such Lender will cease to be a Defaulting Lender or Potential DefaultingLender and will be a Non-Defaulting Lender (and such Outstanding Credits held by each Lender will automatically be adjusted on aprospective basis to reflect the foregoing); provided that no adjustments will be made retroactively with respect to fees accrued orpayments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided, further, that except to theextent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender or Potential Defaulting Lenderto Non-Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s havingbeen a Defaulting Lender or Potential Defaulting Lender.ARTICLE IIICONDITIONS OF EXTENSIONS OF CREDITSECTION 3.01. Conditions Precedent to Effectiveness.The effectiveness of this Agreement and the obligation of each Lender and each LC Issuing Bank to make its initial Extensionof Credit hereunder on the Restatement Effective Date is subject to satisfaction of each the following conditions precedent on or beforesuch date:(a)The Administrative Agent shall have received the following on or before the Restatement Effective Date,each dated such date (except for the Disclosure Documents and the Fee Letters), in form and substance satisfactory to theAdministrative Agent and (except for the notes described in paragraph (i) and the Fee Letters) with one copy for each Lenderand each LC Issuing Bank:i.(A) This Agreement, duly executed by each of the parties hereto, and (B) a promissory note payable to theorder of each Lender that requests one pursuant to Section 2.17, duly completed and executed by the Borrower;ii.Certified copies of the resolutions of the governing body of the Borrower approving this Agreement, and of alldocuments evidencing other necessary limited liability company action with respect to this Agreement;iii.A certificate of the Secretary or an Assistant Secretary of the Borrower certifying (A) the names and truesignatures of the officers of the Borrower authorized to sign this Agreement and the other documents to be delivered hereunder;(B) that attached thereto are true and correct copies of the organizational documents of the Borrower, in each case as in effecton the Restatement Effective Date; and (C) that attached thereto are true and correct copies of all governmental and regulatoryauthorizations and approvals (if any) required for the due execution, delivery and performance by the Borrower of thisAgreement;iv.Copies of all the Disclosure Documents (it being agreed that such Disclosure Documents will be deemed tohave been delivered under this clause (iv) if such documents are publicly available on EDGAR or on the Borrower’s websiteno later than the third Business Day immediately preceding the Restatement Effective Date);v.One or more favorable opinions of counsel (including special New York and Texas counsel) for the Borrowerin form and substance satisfactory to the Administrative Agent;vi.The Fee Letters duly executed by each of the parties thereto;vii.All documentation and information required by regulatory authorities under applicable “know yourcustomer” and anti-money laundering rules and regulations, including without limitation the Patriot Act, to the extent suchdocumentation or information is requested by the Administrative Agent on behalf of the Lenders prior to the RestatementEffective Date; andviii.At least five (5) days prior to the Restatement Effective Date, if the Borrower qualifies as a “legal entitycustomer” under the Beneficial Ownership Regulation, the Borrower must deliver a Beneficial Ownership Certification inrelation to Borrower.(b)The Borrower shall have paid to the Lenders all accrued and unpaid fees pursuant to Section 2.04 of the ExistingCredit Agreement, and any other amounts then due and owing by the Borrower to the Lenders pursuant to the Existing CreditAgreement (other than the Advances and participation amounts that are continuing to remain outstanding under this Agreement).(c)The Administrative Agent shall have received the fees payable pursuant to the Fee Letters.SECTION 3.02. Conditions Precedent to Each Extension of Credit.The obligation of each Lender to make an Advance on the occasion of each Borrowing and of each LC Issuing Bank to issue,amend, extend or renew a Letter of Credit, in each case, as part of an Extension of Credit shall be subject to the further conditionsprecedent that on the date of such Extension of Credit:(a)The Administrative Agent and the relevant LC Issuing Bank, if applicable, shall have received from theBorrower a notice requesting such Extension of Credit as required by Section 2.02 or 2.03, as applicable.(b)The following statements shall be true (and each of the giving of the applicable Notice of Borrowing or Request forIssuance and the acceptance by the Borrower of any proceeds of a Borrowing or the issuance of such Letter of Credit shall constitute arepresentation and warranty by the Borrower that on the date of such Extension of Credit such statements are true):i.The representations and warranties contained in Section 4.01 (excluding those contained in the last sentence ofsubsection (e) and in subsections (f) and (n) thereof) are true and correct on and as of the date of such Extension of Credit,before and after giving effect to such Extension of Credit and to the application of the proceeds therefrom, as though made onand as of such date; provided that the representations and warranties contained in Section 4.01(e) shall be deemed to refer to themost recent financial statements delivered pursuant to Section 5.01(c)(i) and (ii), as applicable;ii.Such Extension of Credit is being made in accordance with the terms and conditions of the City CouncilAuthorization; andiii.No event has occurred and is continuing, or would result from such Extension of Credit or from theapplication of the proceeds therefrom or the issuance or amendment of any Letter of Credit in connection therewith, thatconstitutes an Event of Default or would constitute an Event of Default with notice or lapse of time or both.(c)The Administrative Agent shall have received such other certifications, opinions, financial or other information,approvals and documents as the Administrative Agent, any LC Issuing Bank or any Lender may reasonably request through theAdministrative Agent.(d)Each Letter of Credit shall be in form and substance acceptable to the LC Issuing Bank issuing such Letter of Credit.ARTICLE IVREPRESENTATIONS AND WARRANTIESSECTION 4.01. Representations and Warranties of the Borrower.The Borrower represents and warrants as follows:(a)The Borrower is (i) duly organized, validly existing and in good standing under the laws of the jurisdiction ofits organization and (ii) duly qualified to do business as a foreign organization in each jurisdiction in which the nature of thebusiness conducted or the property owned, operated or leased by it requires such qualification, except where failure to soqualify would not materially adversely affect its business, condition (financial or otherwise), operations, properties or prospects.(b)The execution, delivery and performance by the Borrower of each Loan Document to which it is, or is to become, aparty, are within the Borrower’s organizational powers, have been duly authorized by all necessary organizational action and do notcontravene (i) the Borrower’s organizational documents, (ii) law applicable to the Borrower or its properties, or (iii) any contractual orlegal restriction binding on or affecting the Borrower or its properties.(c)No authorization or approval or other action by, and no notice to or filing with, any governmental authority orregulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement (including obtainingany Extensions of Credit under this Agreement) or any other Loan Document to which it is, or is to become, a party, except for theCity Council Authorization and FERC Authorization, both of which have been duly obtained and are in full force and effect, andexcept that each such Extension of Credit must be made in accordance with the terms and conditions of the City CouncilAuthorization.(d)This Agreement and the other Loan Documents to which it is, or is to become, a party have been or will be (as thecase may be) duly executed and delivered by it, and this Agreement is, and upon execution and delivery thereof each other LoanDocument will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with itsterms, subject, however, to any applicable bankruptcy, reorganization, rearrangement, moratorium or similar laws affecting generallytheenforcement of creditors’ rights and remedies and to general principles of equity (regardless of whether enforceability is considered in aproceeding in equity or at law).(e)The consolidated financial statements of the Borrower and its Subsidiaries as of December 31, 2017 and for the yearended on such date, as set forth in the Borrower’s Annual Report on Form 10-K for the fiscal year ended on such date, as filed withthe SEC, accompanied by an opinion of Deloitte & Touche LLP, and the consolidated financial statements of the Borrower and itsSubsidiaries as of March 31, 2018, June 30, 2018 and September 30, 2018, and for the fiscal quarters ended on such dates, as set forthin the Borrower’s Quarterly Reports on Form 10-Q for the fiscal quarters ended on such dates, as filed with the SEC, copies of each ofwhich have been furnished to each Bank, fairly present the consolidated financial condition of the Borrower and its Subsidiaries as atsuch dates and the consolidated results of the operations of the Borrower and its Subsidiaries for the periods ended on such dates, inaccordance with GAAP, subject, in the case of such financial statements for the fiscal quarters ended March 31, 2018, June 30, 2018,and September 30, 2018, to year-end adjustments and the absence of detailed footnotes. Except as disclosed in the DisclosureDocuments, since December 31, 2017, there has been no material adverse change in the financial condition or operations of theBorrower.(f)Except as disclosed in the Disclosure Documents, there is no pending or threatened action or proceeding affecting theBorrower or any of its Subsidiaries before any court, governmental agency or arbitrator that could reasonably be expected to have aMaterial Adverse Effect. There has been no change in any matter disclosed in such filings that could reasonably be expected to resultin such a Material Adverse Effect.(g)No event has occurred and is continuing that constitutes an Event of Default or that would constitute an Event ofDefault but for the requirement that notice be given or time elapse or both.(h)The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying MarginStock, and no proceeds of any Extension of Credit will be used to purchase or carry any Margin Stock or to extend credit to others forthe purpose of purchasing or carrying any Margin Stock. After applying the proceeds of each Extension of Credit, not more than 25%of the value of the assets of the Borrower and its Subsidiaries subject to the restrictions of Section 5.02(a), (c) or (d) will consist of orbe represented by Margin Stock.(i)The Borrower is not an “investment company” or a company “controlled” by an “investment company” within themeaning of the Investment Company Act of 1940, as amended.(j)Except as could not reasonably be expected to result in a Material Adverse Effect, no ERISA Termination Event hasoccurred, or is reasonably expected to occur, with respect to any ERISA Plan.(k)Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) with respect to each ERISAPlan, copies of which have been filed with the Internal Revenue Service and furnished to the Banks, is complete and accurate andfairly presents the funding status of such ERISA Plan, and since the date of such Schedule B there has been no change in such fundingstatus that could reasonably be expected to result in a Material Adverse Effect.(l)Except as could not reasonably be expected to result in a Material Adverse Effect, the Borrower has not incurred, anddoes not reasonably expect to incur, any withdrawal liability under ERISA to any Multiemployer Plan.(m)The reports, financial statements and other written information furnished by or on behalf of the Borrower to theAdministrative Agent, any LC Issuing Bank or any Lender pursuant to or in connection with the Loan Documents and the transactionscontemplated thereby, when considered in their totality together with the information set forth in the Borrower’s periodic reports filedas of any date of determination with the SEC under the Securities Exchange Act of 1934, as amended, do not contain and will notcontain, when taken as a whole, any untrue statement of a material fact and do not omit and will not omit, when taken as a whole, tostate any fact necessary to make the statements therein, in the light of the circumstances under which they were or will be made, notmisleading in any material respect; provided that, with respect to projections and forward looking statements, the Borrower representsonly that such information was prepared in good faith based upon assumptions and estimates believed to be reasonable at the timemade and notes that whether or not such projections or forward looking statements are in fact achieved will depend upon future eventssome of which are not within the control of the Borrower and actual results may vary from the projections and such variations may bematerial and, accordingly, the Borrower gives no representation and warranty that such projections and forward looking statements willbe achieved.(n)As of the date delivered, the information included in the Beneficial Ownership Certification, if any, is true and correctin all respects. (o)The Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by theBorrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicableSanctions, and the Borrower, its Subsidiaries and their respective officers and employees and, to the knowledge of the Borrower, itsdirectors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) theBorrower, any Subsidiary thereof or any of their respective officers or employees, or (b) to the knowledge of the Borrower, anydirector or agent of the Borrower or any Subsidiary that will act in any capacity in connection with or benefit from the credit facilityestablished hereby, is a Sanctioned Person. No Borrowing or Letter of Credit or use of proceeds thereof or other transactioncontemplated by this Agreement will violate Anti-Corruption Laws or applicable Sanctions.ARTICLE VCOVENANTS OF THE BORROWERSECTION 5.01. Affirmative Covenants.So long as any amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment orany Letter of Credit shall remain outstanding hereunder, the Borrower will, unless the Majority Lenders shall otherwise consent inwriting:(a)Keep Books; Existence; Maintenance of Properties; Compliance with Laws; Insurance; Taxes; InspectionRights.i.keep proper books of record and account, all in accordance with GAAP;ii.except as otherwise permitted by Section 5.02(c), preserve and keep in full force and effect its existence andpreserve and keep in full force and effect its licenses, rights and franchises to the extent necessary to carry on its business;provided, however, that the Borrower may change its form of organization from a corporation to a limited liability company orfrom a limited liability company to a corporation if (A) such change shall not affect any obligations of the Borrower underthe Loan Documents and (B) the Borrower shall deliver to the Administrative Agent (x) prompt notice of such change, (y)certified true and correct copies of the organizational documents of the Borrower after giving effect to such change and (z) allinformation requested by the Administrative Agent or any Lender in order to comply with its obligations under the Patriot Actreferred to in Section 8.14;iii.maintain and keep, or cause to be maintained and kept, its properties in good repair, working order andcondition, and from time to time make or cause to be made all needful and proper repairs, renewals, replacements andimprovements, in each case to the extent such properties are not obsolete and not necessary to carry on its business;iv.comply with all applicable laws, rules, regulations and orders, except to the extent that the failure to complycould not reasonably be expected to result in a Material Adverse Effect, such compliance to include, without limitation, payingbefore the same become delinquent all taxes, assessments and governmental charges imposed upon it or its property, except tothe extent being contested in good faith by appropriate proceedings, and compliance with ERISA and Environmental Laws;v.maintain insurance with responsible and reputable insurance companies or associations or through its ownprogram of self-insurance in such amounts and covering such risks as is usually carried by companies engaged in similarbusinesses and owning similar properties in the same general areas in which it operates and furnish to the AdministrativeAgent, within a reasonable time after written request therefor, such information as to the insurance carried as any Lender,through the Administrative Agent, may reasonably request;vi.pay and discharge its obligations and liabilities in the ordinary course of business, except to the extent thatsuch obligations and liabilities are being contested in good faith by appropriate proceedings; andvii.from time to time upon reasonable notice, permit or arrange for the Administrative Agent, the LC IssuingBanks, the Lenders and their respective agents and representatives to inspect the records and books of account of the Borrowerand its Subsidiaries during regular business hours; provided, that such inspections shall not occur more frequently than once percalendar year unless a default or Event of Default shall have occurred and be continuing.(b)Use of Proceeds. Use the proceeds of the Borrowings and the Letters of Credit for general corporate purposesincluding (i) financing, in part, investments by and capital expenditures of the Borrower and its Subsidiaries, (ii) subject to the termsand conditions of this Agreement, repurchases of Common Equity of the Borrower and (iii) financing working capital requirements ofthe Borrower and its Subsidiaries.(c)Reporting Requirements. Furnish to the Lenders:i.as soon as available and in any event within 60 days after the end of each of the first three quarters of eachfiscal year of the Borrower, (A) consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such quarterand (B) consolidated statements of income and retained earnings of the Borrower and its Subsidiaries for the periodcommencing at the end of the previous fiscal year and ending with the end of such quarter, each certified by a duly authorizedofficer of the Borrower as having been prepared in accordance with GAAP;ii.as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a copyof the annual report for such year for the Borrower and its Subsidiaries, containing consolidated financial statements for suchyear certified without qualification by Deloitte & Touche LLP (or such other nationally recognized public accounting firmselected by the Borrower), and certified by a duly authorized officer of the Borrower as having been prepared in accordancewith GAAP;iii.concurrently with the delivery of the financial statements specified in clauses (i) and (ii) above, a certificate ofthe chief financial officer, treasurer, assistant treasurer or controller of the Borrower, (A) stating that no Event of Default hasoccurred and is continuing, or if an Event of Default has occurred and is continuing, a statement setting forth details of suchEvent of Default, as the case may be, and the action that the Borrower has taken and proposes to take with respect thereto and(B) setting forth in a true and correct manner, the calculation of the ratio contemplated by Section 5.02(b) hereof, as of the dateof the most recent financial statements accompanying such certificate, to show the Borrower’s compliance with or the status ofthe financial covenant contained in Section 5.02(b) hereof;iv.as soon as possible and in any event within five days after the Borrower has knowledge of the occurrence ofeach Event of Default and each event that, with the giving of notice or lapse of time or both, would constitute an Event ofDefault, continuing on the date of such statement, a statement of the duly authorized officer of the Borrower setting forth detailsof such Event of Default or event, as the case may be, and the actions that the Borrower has taken and proposes to take withrespect thereto;v.as soon as possible and in any event within ten days after the Borrower knows or has reason to know that anylitigation against, or any arbitration, administrative, governmental or regulatory proceeding involving, the Borrower or any ofits Subsidiaries could reasonably be expected to have a Material Adverse Effect, notice of such litigation describing inreasonable detail the facts and circumstances concerning such litigation and the Borrower’s or such Subsidiary’s proposedactions in connection therewith;vi.promptly after the sending or filing thereof, copies of all reports that the Borrower sends to any of its securitiesholders, and copies of all reports and registration statements which the Borrower files with the SEC or any national securitiesexchange pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended;vii.as soon as possible and in any event within 30 days after the Borrower knows or has reason to know that anyERISA Termination Event with respect to any ERISA Plan has occurred, a statement of a duly authorized officer of theBorrower describing such ERISA Termination Event and the action, if any, that the Borrower proposes to take with respectthereto;viii.promptly and in any event within ten Business Days after receipt thereof by the Borrower from the PBGC,copies of each notice received by the Borrower of the PBGC’s intention to terminate any ERISA Plan or to have a trusteeappointed to administer any ERISA Plan;ix.promptly and in any event within 30 days after the filing thereof with the Internal Revenue Service, copies ofeach Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each ERISA Plan;x.promptly and in any event within ten Business Days after receipt thereof by the Borrower from aMultiemployer Plan sponsor, a copy of each notice concerning the imposition of withdrawal liability pursuant to Section 4202of ERISA;xi.promptly and in any event within five Business Days after S&P or Moody’s has changed any rating assignedto the Borrower’s senior unsecured long-term debt (or the Borrower’s issuer or corporate rating, as applicable), notice of suchchange;xii.subject to Sections 5.02(c) and 5.02(d), promptly and in any event within 30 days of any disposition, mergeror consolidation that would result in a name change or significant change in the organizational structure of the Borrower, noticeof such change;xiii.promptly after the Borrower qualifies as a “legal entity customer” under the Beneficial OwnershipRegulation, a Beneficial Ownership Certification in relation to Borrower; andxiv.such other information respecting the condition or operations, financial or otherwise, of the Borrower or anyof its Subsidiaries as the Administrative Agent or any LC Issuing Bank or any Lender through the Administrative Agent mayfrom time to time reasonably request.The financial statements and reports described in paragraphs (i), (ii) and (vi) above will be deemed to have been deliveredhereunder if such documents are publicly available on EDGAR or on the Borrower’s website no later than the date specified fordelivery of the same under paragraph (i), (ii) or (vi), as applicable, above. If any financial statements or report described in (i) and (ii)above is due on a date that is not a Business Day, then such financial statements or report shall be delivered on the next succeedingBusiness Day.(d)Compliance with Anti-Corruption Laws and Sanctions. Maintain in effect and enforce policies andprocedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employeesand agents with Anti-Corruption Laws and applicable Sanctions.SECTION 5.02. Negative Covenants.So long as any amount payable by the Borrower hereunder shall remain unpaid or any Lender shall have any Commitment orany Letter of Credit shall remain outstanding hereunder, the Borrower will not, without the written consent of the Majority Lenders:(a)Liens, Etc. Create or suffer to exist any Lien upon or with respect to any of its properties (including, withoutlimitation, any shares of any class of equity security of any of its Significant Subsidiaries), in each case to secure or provide forthe payment of Debt, other than: (i) Liens in existence on the Restatement Effective Date; (ii) Liens for taxes, assessments orgovernmental charges or levies to the extent not past due, or which are being contested in good faith in appropriate proceedingsdiligently conducted and for which the Borrower has provided adequate reserves for the payment thereof in accordance withGAAP; (iii) pledges or deposits in the ordinary course of business to secure obligations under worker’s compensation laws orsimilar legislation; (iv) other pledges or deposits in the ordinary course of business (other than for borrowed monies) that, in theaggregate, are not material to the Borrower; (v) purchase money mortgages or other liens or purchase money security interestsupon or in any property acquired or held by the Borrower in the ordinary course of business to secure the purchase price ofsuch property or to secure indebtedness incurred solely forthe purpose of financing the acquisition of such property; (vi) Liens imposed by law such as materialmen’s, mechanics’,carriers’, workers’ and repairmen’s Liens and other similar Liens arising in the ordinary course of business for sums not yet dueor currently being contested in good faith by appropriate proceedings diligently conducted; (vii) attachment, judgment or othersimilar Liens arising in connection with court proceedings, provided that such Liens, in the aggregate, shall not exceed$20,000,000 at any one time outstanding; (viii) Liens created by or pursuant to the Mortgage Indenture of the Borrower; (ix)other Liens not otherwise referred to in the foregoing clauses (i) through (viii) above, provided that such Liens, in theaggregate, shall not secure obligations in excess of $20,000,000 at any one time; (x) Liens created for the sole purpose ofextending, renewing or replacing in whole or in part Debt secured by any Lien referred to in the foregoing clauses (i) through(vi) and (viii) above, provided that the principal amount of indebtedness secured thereby shall not exceed the principal amountof indebtedness so secured at the time of such extension, renewal or replacement and that such extension, renewal orreplacement, as the case may be, shall be limited to all or a part of the property or Debt that secured the Lien so extended,renewed or replaced (and any improvements on such property); and (xi) Liens on rights or other property purported to betransferred to the issuer of Eligible Securitization Bonds or another entity to secure Eligible Securitization Bonds; provided,further, that no Lien permitted under the foregoing clauses (i) through (xi) shall be placed upon any shares of any class ofequity security of any Significant Subsidiary unless the obligations of the Borrower to the Lenders and the LC Issuing Bankshereunder are simultaneously and ratably secured by such Lien pursuant to documentation satisfactory to the Lenders.(b)Limitation on Debt. Permit the total principal amount of all Debt of the Borrower and its Subsidiaries, determined ona consolidated basis and without duplication of liability therefor, at any time to exceed 65% of Capitalization determined as of the lastday of the most recently ended fiscal quarter of the Borrower; provided, however, that for purposes of this Section 5.02(b), (i) “Debt”and “Capitalization” shall not include (A) Hybrid Securities, (B) any Debt of any Subsidiary of the Borrower that is Non-RecourseDebt, (C) Eligible Securitization Bonds and (D) the Deferred Tax Note Obligations, and (ii) “Capitalization” shall exclude changes toother comprehensive income resulting from (x) pension and other post-retirement benefits liability adjustments and (y) mark-to-marketnon-cash adjustments relating to accounting for derivatives.(c)Mergers, Etc. Merge with or into or consolidate with or into any other Person, except that the Borrower may mergewith any other Person, provided that, immediately after giving effect to any such merger, (i) the Borrower is the surviving Person or themerger is to effect a change in the Borrower’s form of organization permitted by the proviso in Section 5.01(a)(ii), (ii) no event shallhave occurred and be continuing that constitutes an Event of Default or would constitute an Event of Default but for the requirementthat notice be given or time elapse or both, and (iii) the Borrower shall not be liable with respect to any Debt or allow its property to besubject to any Lien which would not be permissible with respect to it or its property under this Agreement on the date of suchtransaction.(d)Disposition of Assets. (i) Sell, lease, transfer or otherwise dispose of any shares of Common Equity of anySignificant Subsidiary, whether now owned or hereafter acquired by the Borrower, or permit any Significant Subsidiary to do so or (ii)sell, lease, transfer or otherwise dispose of (whether in one transaction or a series of transactions), or permit any Significant Subsidiaryto sell, lease, transfer or otherwise dispose of (whether in one transaction or a series of transactions), assets representing in theaggregate amount more than 10% (determined at the time of each such transaction) of its Consolidated Net Worth to any entity otherthan any wholly owned Subsidiary of the Borrower.(e)No Violation of Anti-Corruption Laws or Sanctions. Request any Borrowing or Letter of Credit, or use or permitany of its Subsidiaries or its or their respective directors, officers, employees and agents to use any Letter of Credit or the proceeds ofany Borrowing or Letter of Credit (A) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving ofmoney, or anything else of value, to any Person in violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing orfacilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country, or (C) in any mannerthat would result in the violation of any Sanctions applicable to any party hereto.ARTICLE VIEVENTS OF DEFAULT AND REMEDIESSECTION 6.01. Events of Default.Each of the following events shall constitute an “Event of Default” hereunder:(a)The Borrower shall fail to pay any principal of any Advance or any reimbursement obligation in respect of aLetter of Credit when the same becomes due and payable, or shall fail to pay interest thereon or any other amount payableunder this Agreement within five (5) Business Days after the same becomes due and payable; or(b)Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) inconnection with this Agreement shall prove to have been incorrect or misleading in any material respect when made; or(c)The Borrower shall fail to perform or observe (i) any term, covenant or agreement contained in Section 2.18(b)(ii)(A), 5.01(b) or 5.02 or (ii) any other term, covenant or agreement contained in this Agreement on its part to be performed or observedif the failure to perform or observe such other term, covenant or agreement shall remain unremedied for 30 days after written noticethereof shall have been given to the Borrower by the Administrative Agent or any Lender; or(d)The Borrower shall fail to pay any principal of or premium or interest on any Debt of the Borrower that isoutstanding in a principal amount in excess of $1,000,000 in the aggregate (but excluding Debt hereunder) when the same becomesdue and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shallcontinue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or(e)The occurrence of any event or the existence of any condition under any agreement or instrument relating to anyDebt of a Significant Subsidiary that is outstanding in a principal amount in excess of $1,000,000 in the aggregate, which occurrenceor event results in the declaration (after the applicable grace period, if any) of such Debt being due and payable, or required to beprepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or(f)The Borrower or any Significant Subsidiary shall generally not pay its debts as such debts become due, or shall admitin writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shallbe instituted by or against the Borrower or any Significant Subsidiary seeking to adjudicate it as bankrupt or insolvent, or seekingliquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any lawrelating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order forrelief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, inthe case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed for aperiod of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against,or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur;or the Borrower or any Significant Subsidiary shall take any organizational action to authorize or to consent to any of the actions setforth above in this subsection (f); or(g)Any judgment or order for the payment of money in excess of $20,000,000 shall be rendered against the Borrowerand either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall beany period of 10 consecutive Business Days during which a stay of enforcement of such judgment or order, by reason of a pendingappeal or otherwise, shall not be in effect; or(h)(i) An ERISA Plan of the Borrower or any ERISA Affiliate of the Borrower shall fail to maintain the minimumfunding standards required by Section 412 of the Code for any plan year or a waiver of such standard is sought or granted underSection 412(d) of the Code, or (ii) an ERISA Plan of the Borrower or any ERISA Affiliate of the Borrower is, shall have been or willbe terminated or the subject of termination proceedings under ERISA, or (iii) the Borrower or any ERISA Affiliate of the Borrowerhas incurred or will incur a liability to or on account of an ERISA Plan under Section 4062, 4063 or 4064 of ERISA, or (iv) anyERISA Termination Event with respect to an ERISA Plan of the Borrower or any ERISA Affiliate of the Borrower shall haveoccurred, and in the case of any event described in clauses (i) through (iv), such event could reasonably be expected to result in aMaterial Adverse Effect; or(i)The Parent shall cease to own (directly or indirectly) 100% of the Common Equity of the Borrower, provided,however, that in the case of indirect ownership, Persons other than the Parent may own Preferred Equity of intermediate Subsidiaries aslong as no such Preferred Equity is convertible into Common Equity; or(j)(i) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaningof Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of the Parent (orother securities convertible into such securities) representing 30% or more of the combined voting power of all securities of the Parententitled to vote in the election of directors; or (ii) commencing after the date of this Agreement, individuals who as of the date of thisAgreement were directors shall have ceased for any reason to constitute a majority of the Board of Directors of the Parent unless thePersons replacing such individuals were nominated by the stockholders or the Board of Directors of the Parent in accordance with theParent’s organizational documents.SECTION 6.02. Remedies.If any Event of Default shall occur and be continuing, then, and in any such event, the Administrative Agent (i) shall at therequest, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the obligation of each Lender to makeAdvances and the obligation of each LC Issuing Bank to issue Letters of Credit to be terminated, whereupon the same shall forthwithterminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare theAdvances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon theAdvances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protestor further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of anactual or deemed entry of an order for relief with respectto the Borrower or any Significant Subsidiary under the Federal Bankruptcy Code, (A) the obligation of each Lender to makeAdvances and the obligation of each LC Issuing Bank to issue Letters of Credit shall automatically be terminated and (B) theAdvances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand,protest or any notice of any kind, all of which are hereby expressly waived by the Borrower.SECTION 6.03. Cash Collateral Account.Notwithstanding anything to the contrary contained herein, no notice given or declaration made by the Administrative Agentpursuant to this Article VI shall affect (i) the obligation of any LC Issuing Bank to make any payment under any Letter of Credit inaccordance with the terms of such Letter of Credit or (ii) the obligations of each Lender in respect of each such Letter of Credit;provided, however, that if an Event of Default has occurred and is continuing, the Administrative Agent shall at the request, or maywith the consent, of the Majority Lenders, upon notice to the Borrower, require the Borrower to deposit with the Administrative Agentan amount in the cash collateral account (the “Cash Collateral Account”) described below equal to the LC Outstandings on such date.Such Cash Collateral Account shall at all times be free and clear of all rights or claims of third parties. The Cash Collateral Accountshall be maintained with the Administrative Agent in the name of, and under the sole dominion and control of, the AdministrativeAgent, and amounts deposited in the Cash Collateral Account shall bear interest at a rate equal to the rate generally offered by Bank ofAmerica for deposits equal to the amount deposited by the Borrower in the Cash Collateral Account, for a term to be determined by theAdministrative Agent, in its sole discretion. The Borrower hereby grants to the Administrative Agent for the benefit of the LC IssuingBanks and the Lenders a Lien in and hereby assigns to the Administrative Agent for the benefit of the LC Issuing Banks and theLenders all of its right, title and interest in, the Cash Collateral Account and all funds from time to time on deposit therein to secure itsreimbursement obligations in respect of Letters of Credit. If any drawings then outstanding or thereafter made are not reimbursed in fullimmediately upon demand or, in the case of subsequent drawings, upon being made, then, in any such event, the Administrative Agentmay apply the amounts then on deposit in the Cash Collateral Account, toward the payment in full of any of the LC Outstandings asand when such obligations shall become due and payable. Upon payment in full, after the termination of the Letters of Credit, of allsuch obligations, the Administrative Agent will repay and reassign to the Borrower any cash then in the Cash Collateral Account andthe Lien of the Administrative Agent on the Cash Collateral Account and the funds therein shall automatically terminate.ARTICLE VIITHE AGENTSECTION 7.01. Authorization and Action.Each LC Issuing Bank and Lender hereby appoints and authorizes the Administrative Agent to take such action as agent on itsbehalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, togetherwith such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement (including,without limitation, enforcement or collection of the Advances), the Administrative Agent shall not be required to exercise anydiscretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refrainingfrom acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders; provided, however,that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose theAdministrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt, anyaction that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification ortermination of property of a Defaulting Lender in violation of any Debtor Relief Law. The AdministrativeAgent agrees to give to each Lender and LC Issuing Bank prompt notice of each notice given to it by the Borrower pursuant to theterms of this Agreement.SECTION 7.02. Administrative Agent’s Reliance, Etc.Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken oromitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willfulmisconduct. Without limitation of the generality of the foregoing, the Administrative Agent: (i) may consult with legal counsel(including counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for anyaction taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makesno warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties orrepresentations (whether written or oral) made in or in connection with this Agreement; (iii) shall not have any duty to ascertain or toinquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Borroweror to inspect the property (including the books and records) of the Borrower; (iv) shall not be responsible to any Lender for the dueexecution, legality, validity, enforceability, genuineness, sufficiency or value of, or the perfection or priority of any lien or securityinterest created or purported to be created under or in connection with, this Agreement or any other instrument or document furnishedpursuant hereto; and (v) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate orother instrument or writing (which may be by facsimile, e-mail, electronic message, Internet or intranet website posting or otherdistribution) believed by it to be genuine and signed or sent by the proper party or parties.SECTION 7.03. Bank of America and Affiliates.With respect to its Commitment and the Advances made by it, Bank of America shall have the same rights and powers underthis Agreement as any other Lender and may exercise the same as though it were not the Administrative Agent; and the term “Lender”or “Lenders” shall, unless otherwise expressly indicated, include Bank of America in its individual capacity. Bank of America and itsaffiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of businesswith, the Borrower, any of its Subsidiaries and any Person who may do business with or own securities of the Borrower or any suchSubsidiary, all as if Bank of America were not the Administrative Agent and without any duty to account therefor to the Lenders.SECTION 7.04. Lender Credit Decision.Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lenderand based on the financial statements referred to in Section 4.01(e) and such other documents and information as it has deemedappropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will,independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and informationas it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.SECTION 7.05. Indemnification.The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower), ratably according tothe respective principal amounts of the Advances then outstanding to each of them (or if no Advances are at the time outstanding,ratably according to the respective amounts of their Commitments), from and against any and all liabilities, obligations, losses,damages, penalties, actions,judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, orasserted against the Administrative Agent in any way relating to or arising out of this Agreement or any action taken or omitted by theAdministrative Agent (in its capacity as such) under this Agreement, provided that no Lender shall be liable for any portion of suchliabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from theAdministrative Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimbursethe Administrative Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including reasonable counselfees) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification,amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights orresponsibilities under, this Agreement, to the extent that such expenses are reimbursable by the Borrower but for which theAdministrative Agent is not reimbursed by the Borrower.SECTION 7.06. Successor Administrative Agent.(a) The Administrative Agent may at any time give notice of its resignation to the Lenders, the LC Issuing Banks andthe Borrower. Upon receipt of any such notice of resignation, the Majority Lenders shall have the right, with the consent of theBorrower (such consent not to be unreasonably withheld or delayed), to appoint a successor, which shall be a bank with an office inthe United States of America and a combined capital and surplus of at least $500,000,000; provided that, the consent of the Borrowershall not be required if an Event of Default, or an event that would constitute an Event of Default with notice or lapse of time or both,has occurred and is continuing. If no such successor shall have been so appointed by the Majority Lenders and shall have acceptedsuch appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall beagreed by the Majority Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but shall not beobligated to), on behalf of the Lenders and the LC Issuing Banks, appoint a successor Administrative Agent meeting the qualificationsset forth above; provided that in no event shall any such successor Administrative Agent be a Defaulting Lender. Whether or not asuccessor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation EffectiveDate.(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (v) of the definition thereof,the Majority Lenders may, to the extent permitted by applicable law, by notice in writing to the Borrower and such Person removesuch Person as Administrative Agent and, with the consent of the Borrower (such consent not to be unreasonably withheld ordelayed), appoint a successor; provided that, the consent of the Borrower shall not be required if an Event of Default, or an event thatwould constitute an Event of Default with notice or lapse of time or both, has occurred and is continuing. If no such successor shallhave been so appointed by the Majority Lenders and shall have accepted such appointment within 30 days (or such earlier day as shallbe agreed by the Majority Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective inaccordance with such notice on the Removal Effective Date.(c) The Majority Lenders may at any time, to the extent permitted by applicable law, by notice in writing to theBorrower and to the Person serving as Administrative Agent remove such Person as Administrative Agent and, with the consent of theBorrower (such consent not to be unreasonably withheld or delayed), appoint a successor; provided that, the consent of the Borrowershall not be required if an Event of Default, or an event that would constitute an Event of Default with notice or lapse of time or both,has occurred and is continuing. If no such successor shall have been so appointed by the Majority Lenders and shall have acceptedsuch appointment by the Removal Effective Date, then such removal shall nonetheless become effective in accordance with suchnotice on the Removal Effective Date. On the Removal EffectiveDate, the Borrower shall pay in full all amounts due and payable to the removed Administrative Agent hereunder and under the otherLoan Documents.(d) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (1) the retiring orremoved Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and(2) except for any indemnity payments owed to the retiring or removed Administrative Agent, all payments, communications anddeterminations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender and eachLC Issuing Bank directly, until such time, if any, as the Majority Lenders appoint a successor Administrative Agent as provided forabove. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to andbecome vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent (other than anyrights to indemnity payments owed to the retiring or removed Administrative Agent), and the retiring or removed Administrative Agentshall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by theBorrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed betweenthe Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under theother Loan Documents, the provisions of this Article and Section 8.04 shall continue in effect for the benefit of such retiring orremoved Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be takenby any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.SECTION 7.07. Resignation of LC Issuing Banks.Any LC Issuing Bank may resign at any time by notifying the Administrative Agent, the Lenders and the Borrower. Subject tothe appointment and acceptance of a successor LC Issuing Bank as provided below, such retiring LC Issuing Bank shall remain a partyhereto and shall continue to have all the rights and obligations of an LC Issuing Bank under this Agreement and the other LoanDocuments with respect to Letters of Credit issued by it prior to such resignation, but shall not be required to issue additional Letters ofCredit or to extend, renew or increase any existing Letter of Credit. Upon receipt by the Borrower of such notice of intent to resign, theBorrower and such retiring LC Issuing Bank may agree to replace or terminate the outstanding Letters of Credit issued by such LCIssuing Bank, and shall notify the Administrative Agent of any such replacement or termination. Upon any such resignation, theMajority Lenders shall have the right to appoint a successor LC Issuing Bank acceptable to the Borrower. If no successor shall havebeen so appointed by the Majority Lenders and shall have accepted such appointment within 30 days after the retiring LC IssuingBank gives notice of its resignation, then the retiring LC Issuing Bank may appoint a successor LC Issuing Bank, with an office in theUnited States of America and having a combined capital and surplus of at least $500,000,000 or an Affiliate of any such bank. Uponthe acceptance of any appointment as LC Issuing Bank hereunder by a successor bank, such successor shall succeed to and becomevested with all the rights, powers, privileges and duties of the retiring LC Issuing Bank and the retiring LC Issuing Bank shall bedischarged from its duties and obligations hereunder. After an LC Issuing Bank’s resignation hereunder, the provisions of Sections2.12, 2.15 and 8.04 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was actingas an LC Issuing Bank.SECTION 7.08. Trust Indenture Act.In the event that the Administrative Agent or any of its Affiliates shall be or become an indenture trustee under the TrustIndenture Act of 1939 (as amended, the “Trust Indenture Act”) in respect of any securities issued or guaranteed by the Borrower, theparties hereto acknowledge and agree that any paymentor property received in satisfaction of or in respect of any of the Borrower’s obligations hereunder by or on behalf of Bank of Americain its capacity as Administrative Agent for the benefit of any Lender hereunder (other than Bank of America or an Affiliate of Bank ofAmerica) and that is applied in accordance with the terms hereof shall be deemed to be exempt from the requirements of Section 311 ofthe Trust Indenture Act pursuant to Section 311(b)(3) of the Trust Indenture Act.ARTICLE VIIIMISCELLANEOUSSECTION 8.01. Amendments, Etc.Subject to Section 2.09(d), no amendment or waiver of any provision of this Agreement, nor consent to any departure by theBorrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders, and thensuch waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however,that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (a) waive any ofthe conditions specified in Section 3.01 or 3.02, (b) increase the Commitments of the Lenders or subject the Lenders to any additionalobligations, (c) reduce the principal of, or interest (or rate of interest) on, the Advances or any fees or other amounts payable hereunder,(d) postpone any date fixed for any payment of principal of, or interest on, the Advances or any fees or other amounts payablehereunder, (e) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Advances, or change thedefinition of “Majority Lenders” or the number of Lenders that shall be required for the Lenders or any of them to take any actionhereunder, (f) change the provisions requiring pro rata sharing of payments under Section 2.14 or amend or waive Section 2.16 or(g) amend this Section 8.01; and provided further, that no amendment, waiver or consent shall, unless in writing and signed by theAdministrative Agent and the LC Issuing Banks in addition to the Lenders required above to take such action, affect the rights orduties of the Administrative Agent or the LC Issuing Banks under this Agreement, and provided further, that this Agreement may beamended and restated without the consent of any Lender, any LC Issuing Bank or the Administrative Agent if, upon giving effect tosuch amendment and restatement, such Lender, such LC Issuing Bank or the Administrative Agent, as the case may be, shall no longerbe a party to this Agreement (as so amended and restated) or have any Commitment or other obligation hereunder or under any Letterof Credit and shall have been paid in full all amounts payable hereunder to such Lender, such LC Issuing Bank or the AdministrativeAgent, as the case may be.Anything herein to the contrary notwithstanding, during such period as a Lender is a Defaulting Lender, to the fullest extentpermitted by applicable law, such Lender will not be entitled to vote in respect of amendments and waivers hereunder, and theCommitments and the outstanding Advances or other Extensions of Credit of such Lender hereunder will not be taken into account indetermining whether the Majority Lenders or all of the Lenders, as required, have approved any such amendment or waiver (and thedefinition of “Majority Lenders” will automatically be deemed modified accordingly for the duration of such period); provided, thatany such amendment or waiver that would increase or extend the term of the Commitment of such Defaulting Lender, extend the datefixed for the payment of principal or interest owing to such Defaulting Lender hereunder, reduce the principal amount of anyobligation owing to such Defaulting Lender, reduce the amount of or the rate or amount of interest on any amount owing to suchDefaulting Lender or of any fee payable to such Defaulting Lender hereunder, or alter the terms of this proviso, will require theconsent of such Defaulting Lender.SECTION 8.02. Notices, Etc.(a)Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be inwriting (including via electronic communication pursuant to Section 8.11) and mailed, emailed, sent by facsimile or delivered, if to theBorrower, at its address at 639 Loyola Avenue, New Orleans, Louisiana 70113, Attention: Stacey Lousteau, Assistant Treasurer,Email: slouste@entergy.com; if to any Bank or LC Issuing Bank, at its Domestic Lending Office specified opposite its name onSchedule I hereto; if to any other Lender, at its Domestic Lending Office specified in the Assignment and Assumption pursuantto which it became a Lender and if to the Administrative Agent, at its address at 100 North Tryon Street, Charlotte, North Carolina28255, Attention: Maggie Halleland, Facsimile: (980) 683-6306, Email: Maggie Halleland@baml.com; or, as to each party, at suchother address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall bedeemed to have been given on the date of receipt (i) if mailed, sent by facsimile or delivered by hand or overnight courier service andreceived during the normal business hours of such party as provided in this Section or in accordance with the latest unrevoked directionfrom such party given in accordance with this Section and (ii) if emailed and received in accordance with Section 8.11. If such noticesand communications are received after the normal business hours of such party, receipt shall be deemed to have been given upon theopening of the recipient’s next Business Day. Except as otherwise provided in Section 5.01(c), notices and other communicationsgiven by the Borrower to the Administrative Agent shall be deemed given to the Lenders.(b)Change of Address, etc. Any party hereto may change its address or facsimile number for notices and othercommunications hereunder by notice to the other parties hereto.SECTION 8.03. No Waiver; Remedies.No failure on the part of any Lender, any LC Issuing Bank or the Administrative Agent to exercise, and no delay in exercising,any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other orfurther exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of anyremedies provided by law.SECTION 8.04. Costs and Expenses; Indemnification.(a)The Borrower agrees to pay on demand all costs and expenses incurred by the Administrative Agent and the LCIssuing Banks in connection with the preparation, execution, delivery, syndication administration, modification and amendment of thisAgreement and the other Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel forthe Administrative Agent and the LC Issuing Banks with respect thereto and with respect to advising the Administrative Agent as to itsrights and responsibilities under this Agreement. Any invoices to the Borrower with respect to the aforementioned expenses shalldescribe such costs and expenses in reasonable detail. The Borrower further agrees to pay on demand all costs and expenses, if any(including, without limitation, counsel fees and expenses of outside counsel and of internal counsel), incurred by the AdministrativeAgent, the Lenders and the LC Issuing Banks in connection with the enforcement (whether through negotiations, legal proceedings orotherwise) of, and the protection of the rights of the Lenders under, this Agreement and the other Loan Documents, including, withoutlimitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 8.04(a).(b)If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made other than on the last day ofthe Interest Period for such Advance, as a result of a payment or Conversion pursuant to Section 2.09(b), 2.10, 2.11 or 2.13,acceleration of the maturity of the Advances pursuant to Section 6.02,assignment to another Lender upon demand of the Borrower pursuant to Section 8.07(e) for any other reason, the Borrower shall, upondemand by any Lender or any LC Issuing Bank (with a copy of such demand to the Administrative Agent), pay to the AdministrativeAgent for the account of such Lender or such LC Issuing Bank any amounts required to compensate such Lender or such LC IssuingBank for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including,without limitation, any loss (including loss of anticipated profits upon such Lender’s or such LC Issuing Bank’s representation to theBorrower that it has made reasonable efforts to mitigate such loss), cost or expense incurred by reason of the liquidation orreemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. Any Lender making a demandpursuant to this Section 8.04(b) shall provide the Borrower with a written certification of the amounts required to be paid to suchLender, showing in reasonable detail the basis for the Lender’s determination of such amounts; provided, however, that no Lendershall be required to disclose any confidential or proprietary information in any certification provided pursuant hereto, and the failure ofany Lender to provide such certification shall not affect the obligations of the Borrower hereunder.(c)The Borrower hereby agrees to indemnify and hold each Lender, each LC Issuing Bank, the Administrative Agentand each Related Party of any of the foregoing Persons (each, an “Indemnified Person”) harmless from and against any and all claims,damages, losses, liabilities, costs or expenses (including reasonable attorney’s fees and expenses, whether or not such IndemnifiedPerson is named as a party to any proceeding or is otherwise subjected to judicial or legal process arising from any such proceeding)that any of them may incur or which may be claimed against any of them by any Person or entity by reason of or in connection withthe execution, delivery or performance of this Agreement or any other Loan Document or any transaction contemplated hereby orthereby, or the use by the Borrower or any of its Subsidiaries of the proceeds of any Advance or the use by the Borrower or anybeneficiary of any Letter of Credit of such Letter of Credit, AND THE FOREGOING INDEMNIFICATION SHALL APPLYWHETHER OR NOT SUCH INDEMNIFIED LIABILITIES ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLEOR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART,BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNIFIED PERSON, except that no IndemnifiedPerson shall be entitled to any indemnification hereunder to the extent that such claims, damages, losses, liabilities, costs or expensesare finally determined by a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of suchIndemnified Person. The Borrower’s obligations under this Section 8.04(c) shall survive the repayment of all amounts owing to theLenders, the LC Issuing Banks, and the Administrative Agent under this Agreement and the termination of the Commitments. If and tothe extent that the obligations of the Borrower under this Section 8.04(c) are unenforceable for any reason, the Borrower agrees tomake the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law. The Borrower alsoagrees not to assert, and hereby waives, any claim against any Lender, any LC Issuing Bank, any of such Lender’s or such LC IssuingBank’s affiliates, or any of their respective directors, officers, employees, attorneys and agents, on any theory of liability, for special,indirect, consequential or punitive damages arising out of or otherwise relating to this Agreement or any other Loan Document, any ofthe transactions contemplated herein or therein or the actual or proposed use of the proceeds of the Advances or the use by theBorrower or any beneficiary of any Letter of Credit of such Letter of Credit. No Indemnified Person referred to in this subsection (c)shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by itthrough telecommunications, electronic or other information transmission systems in connection with this Agreement or the other LoanDocuments or the transactions contemplated hereby or thereby.SECTION 8.05. Right of Set-off.Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the grantingof the consent specified by Section 6.02 to authorize the Administrative Agent to declare the Advances due and payable pursuant tothe provisions of Section 6.02, each Lender and each LC Issuing Bank is hereby authorized at any time and from time to time, to thefullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at anytime held and other indebtedness at any time owing by such Lender or such LC Issuing Bank, as applicable, to or for the credit or theaccount of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement,whether or not such Lender or such LC Issuing Bank shall have made any demand under this Agreement and although suchobligations may be unmatured; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) allamounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisionsof Section 2.18(b)(iii) and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemedheld in trust for the benefit of the Administrative Agent, the LC Issuing Banks, and the Lenders, and (y) the Defaulting Lender shallprovide promptly to the Administrative Agent a statement describing in reasonable detail the obligations owing to such DefaultingLender as to which it exercised such right of setoff. Each Lender and each LC Issuing Bank agrees promptly to notify the Borrowerafter any such set-off and application made by such Lender or such LC Issuing Bank, as applicable, provided that the failure to givesuch notice shall not affect the validity of such set-off and application. The rights of each Lender and each LC Issuing Bank under thisSection 8.05 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Lender orsuch LC Issuing Bank may have.SECTION 8.06. Binding Effect.This Agreement shall become effective when it shall have been executed by the Borrower, the Lenders and the AdministrativeAgent and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, each LC Issuing Bankand each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign or delegate anyrights hereunder (or any interest herein) or duties or obligations under this Agreement or any other Loan Document without the priorwritten consent of the Administrative Agent and all the Lenders.SECTION 8.07. Assignments and Participations.(a)Successors and Assigns by Lenders Generally. No Lender may assign or otherwise transfer any of its rights orobligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way ofparticipation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a securityinterest subject to the restrictions of subsection (e) of this Section (and any other attempted assignment or transfer by any party heretoshall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than theparties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of thisSection and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) anylegal or equitable right, remedy or claim under or by reason of this Agreement.(b)Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rightsand obligations under this Agreement (including all or a portion of its Commitment and the Advances at the time owing to it); providedthat any such assignment shall be subject to the following conditions:i.Minimum Amounts.A. in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitmentand/or the Advances at the time owing to it or contemporaneous assignments to related Approved Funds (determinedafter giving effect to such assignments) that equal at least the amount specified in subsection (b)(i)(B) of this Section inthe aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimumamount need be assigned; andB. in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of theCommitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment isnot then in effect, the principal outstanding balance of the Advances of the assigning Lender subject to each suchassignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered tothe Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date)shall not be less than $5,000,000, unless each of the Administrative Agent and, so long as no Event of Default hasoccurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld ordelayed).ii.Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of allthe assigning Lender’s rights and obligations under this Agreement with respect to the Advances or the Commitment assigned.iii.Required Consents. No consent shall be required for any assignment except to the extent required bysubsection (b)(i)(B) of this Section and, in addition:A. the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall berequired unless (x) an Event of Default has occurred and is continuing at the time of such assignment, or (y) suchassignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Borrower shall be deemedto have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agentwithin five Business Days after having received notice thereof;B. the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed)shall be required for assignments if such assignment is to a Person that is not a Lender with a Commitment, an Affiliateof such Lender or an Approved Fund with respect to such Lender; andC. the consent of each LC Issuing Bank (such consent not to be unreasonably withheld or delayed)shall be required for any assignment.iv.Assignment and Assumption. The parties to each assignment shall execute and deliver to the AdministrativeAgent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided that theAdministrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of anyassignment.v.No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of theBorrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender, any Potential Defaulting Lender or any of theirrespective Subsidiaries, or any Person who, upon becominga Lender hereunder, would constitute a Defaulting Lender, a Potential Defaulting Lender or any of their respectiveSubsidiaries.vi.No Assignment to Natural Persons. No such assignment shall be made to a natural Person (or a holdingcompany, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural Person).vii.Certain Additional Payments. In connection with any assignment of rights and obligations of any DefaultingLender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forthherein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amountsufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participationsor subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the AdministrativeAgent, the applicable pro rata share of Advances previously requested but not funded by the Defaulting Lender, to each ofwhich the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities thenowed by such Defaulting Lender to the Administrative Agent, each LC Issuing Bank and each other Lender hereunder (andinterest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Advances and participations inLetters of Credit in accordance with its Percentage. Notwithstanding the foregoing, in the event that any assignment of rightsand obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with theprovisions of this subsection, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes ofthis Agreement until such compliance occurs.Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from andafter the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and,to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under thisAgreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, bereleased from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigningLender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled tothe benefits of Sections 2.12, 2.15 and 8.04 with respect to facts and circumstances occurring prior to the effective date of suchassignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a DefaultingLender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a DefaultingLender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with thissubsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations inaccordance with subsection (d) of this Section.(c)Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintainat its address referred to in Section 8.02 a copy of each Assignment and Assumption delivered to and accepted by it and aregister for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of theAdvances owing to, each Lender from time to time (the “Register”). The entries in the Register shall be conclusive and bindingfor all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Personwhose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to thecontrary. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time totime upon reasonable prior notice.(d)Participations. Each Lender may at any time sell participations to one or more banks, financial institutions or otherentities (other than a natural person, or a holding company, investment vehicle or trust for, or owned and operated for the primarybenefit of, a natural Person, or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in or to all or aportion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and theAdvances owing to it); provided, however, that (i) such Lender’s obligations under this Agreement (including, without limitation, itsCommitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other partieshereto for the performance of such obligations, (iii) such Lender shall remain the maker of any such Advance for all purposes of thisAgreement and (iv) the Borrower, the Administrative Agent, the LC Issuing Banks and the other Lenders shall continue to deal solelyand directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance ofdoubt, each Lender shall be responsible for the indemnity under Section 7.05 with respect to any payments made by such Lender to itsParticipant(s).Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shallretain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of thisAgreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant,agree to any amendment, modification or waiver with respect to the provision in Section 8.01 relating to amendments, waivers orconsents requiring unanimous consent of the Lenders that affects such Participant. The Borrower agrees that each Participant shall beentitled to the benefits of Sections 2.12 and 2.15 (subject to the requirements and limitations therein) to the same extent as if it were aLender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by law, eachParticipant also shall be entitled to the benefits of Section 8.05 as though it were a Lender, provided such Participant agrees to besubject to Section 2.16 as though it were a Lender. A Participant shall not be entitled to receive any greater payment under Sections2.12 and 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant,unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be aForeign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of theparticipation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(d) asthough it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of theBorrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and statedinterest) of each Participant’s interest in the Advances or other obligations under the Loan Documents (the “Participant Register”);provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of anyParticipant or any information relating to a Participant’s interest in any commitments, advances, letters of credit or its other obligationsunder any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment,advance, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name isrecorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice tothe contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have noresponsibility for maintaining a Participant Register.(e)Mitigation Obligations; Replacement of Lenders.i.Designation of a Different Applicable Lending Office. If any Lender requests compensation underSection 2.12, or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or anyGovernmental Body for the account of any Lender pursuant to Section2.15, then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different Applicable LendingOffice for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices,branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amountspayable pursuant to Section 2.12 or 2.15, as the case may be, in the future, and (ii) would not subject such Lender to anyunreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees topay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.ii.Replacement of Lenders. If any Lender requests compensation under Section 2.12, or if the Borrower isrequired to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Body for the account of anyLender pursuant to Section 2.15 and, in each case, such Lender has declined or is unable to designate a different ApplicableLending Office in accordance with Section 8.07(e)(i), or if any Lender is a Non-Consenting Lender, a Defaulting Lender or aPotential Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and theAdministrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to therestrictions contained in, and consents required by, Section 8.07(b)), all of its interests, rights (other than its existing rights topayments pursuant to Section 2.12 or Section 2.15) and obligations under this Agreement and the related Loan Documents toan Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts suchassignment); provided that:A.no event has occurred and is continuing that constitutes an Event of Default or that would constitute anEvent of Default but for the requirement that notice be given or time elapse or both;B.the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified inSection 8.07(b);C.such Lender shall have received payment of an amount equal to the outstanding principal of itsAdvances and participations in LC Outstandings, accrued interest thereon, accrued fees and all other amounts payableto it hereunder and under the other Loan Documents (including any amounts under Section 8.04(b)) from the assignee(to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all otheramounts);D.in the case of any such assignment resulting from a claim for compensation under Section 2.12 orpayments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensationor payments thereafter;E.such assignment does not conflict with applicable law; andF.in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, theapplicable assignee shall have consented to the applicable extension, amendment, waiver or consent.A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by suchLender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.(f)Certain Pledges. Anything in this Section 8.07 to the contrary notwithstanding, any Lender may at any timepledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender,including any pledge or assignment to secure obligations to a Federal Reserve Bank or any other central bank; provided that nosuch pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee orassignee for such Lender as a party hereto.(g)Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a specialpurpose funding vehicle (an “SPC”) of such Granting Lender identified as such in writing from time to time by the Granting Lender tothe Administrative Agent, the LC Issuing Banks and the Borrower, the option to provide to the Borrower all or any part of anyAdvance that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that(i) nothing herein shall constitute a commitment by any such SPC to make any Advance, (ii) if such SPC elects not to exercise suchoption or otherwise fails to provide all or any part of such Advance, the Granting Lender shall be obligated to make such Advancepursuant to the terms hereof and (iii) no SPC or Granting Lender shall be entitled to receive any greater amount pursuant to Section2.12 or 8.04(b) than the Granting Lender would have been entitled to receive had the Granting Lender not otherwise granted such SPCthe option to provide any Advance to the Borrower. The making of an Advance by an SPC hereunder shall utilize the Commitment ofthe Granting Lender to the same extent, and as if, such Advance were made by such Granting Lender. Each party hereto hereby agreesthat no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would otherwisebe liable so long as, and to the extent that, the related Granting Lender provides such indemnity or makes such payment. In furtheranceof the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to thedate that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC,it will not institute against or join any other person in instituting against such SPC any bankruptcy, reorganization, arrangement,insolvency or liquidation proceedings under the laws of the United States or any State thereof. Notwithstanding the foregoing, theGranting Lender unconditionally agrees to indemnify the Borrower, the LC Issuing Banks, the Administrative Agent and each Lenderagainst all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind ornature whatsoever which may be incurred by or asserted against the Borrower, the LC Issuing Banks, the Administrative Agent orsuch Lender, as the case may be, in any way relating to or arising as a consequence of any such forbearance or delay in the initiation ofany such proceeding against its SPC. Each party hereto hereby acknowledges and agrees that no SPC shall have the rights of a Lenderhereunder, such rights being retained by the applicable Granting Lender. Accordingly, and without limiting the foregoing, each partyhereby further acknowledges and agrees that no SPC shall have any voting rights hereunder and that the voting rights attributable toany Advance made by an SPC shall be exercised only by the relevant Granting Lender and that each Granting Lender shall serve asthe administrative agent and attorney-in-fact for its SPC and shall on behalf of its SPC receive any and all payments made for thebenefit of such SPC and take all actions hereunder to the extent, if any, such SPC shall have any rights hereunder. In addition,notwithstanding anything to the contrary contained in this Agreement any SPC may (i) with notice to, but without the prior writtenconsent of any other party hereto, assign all or a portion of its interest in any Advances to the Granting Lender and (ii) disclose on aconfidential basis any information relating to its Advances to any rating agency, commercial paper dealer or provider of any surety,guarantee or credit or liquidity enhancement to such SPC. This Section 8.07(g) may not be amended without the prior written consentof each Granting Lender, all or any part of whose Advance is being funded by an SPC at the time of such amendment.SECTION 8.08. Governing Law.THIS AGREEMENT AND ANY NOTE ISSUED PURSUANT TO SECTION 2.17 SHALL BE GOVERNED BY,AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.SECTION 8.09. Consent to Jurisdiction; Waiver of Jury Trial.(a)To the fullest extent permitted by law, the Borrower hereby irrevocably (i) submits to the exclusive jurisdiction of anyNew York State or Federal court sitting in New York City, Borough of Manhattan, and any appellate court from any thereof in anyaction or proceeding arising out of or relating to this Agreement, any other Loan Document or any Letter of Credit, and (ii) agrees thatall claims in respect of such action or proceeding shall be heard and determined in such New York State court or in such Federal court.The Borrower hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to themaintenance of such action or proceeding. The Borrower also irrevocably consents, to the fullest extent permitted by law, to the serviceof any and all process in any such action or proceeding by the mailing by certified mail of copies of such process to the Borrower at itsaddress specified in Section 8.02. The Borrower agrees, to the fullest extent permitted by law, that a final judgment in any such actionor proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner providedby law.(b)THE BORROWER, EACH LC ISSUING BANK, THE ADMINISTRATIVE AGENT AND THE LENDERSHEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING ORCOUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, ANYLETTER OF CREDIT, OR ANY INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER.SECTION 8.10. Execution in Counterparts.This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, eachof which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the sameagreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic (i.e., “pdf” or “tif”)format shall be effective as delivery of a manually executed counterpart of this Agreement.The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed toinclude electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity orenforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent andas provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the NewYork State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.SECTION 8.11. Electronic Communications.(a)The Borrower hereby agrees that, to the extent the Borrower is so able, it will provide to the Administrative Agent allinformation, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to this Agreement,including, without limitation, all notices, requests, financial statements, financial and other reports, certificates and other informationmaterials, but excluding any suchcommunication that (i) relates to a request for a new, or a conversion of an existing, borrowing or other extension of credit (includingany election of an interest rate or Interest Period relating thereto), (ii) relates to the payment of any principal or other amount due underthis Agreement prior to the scheduled date therefor, (iii) provides notice of any default or event of default under this Agreement or (iv)is required to be delivered to satisfy any condition precedent to the effectiveness of this Agreement and/or any borrowing or otherextension of credit thereunder (all such non-excluded communications being referred to herein collectively as “Communications”), bytransmitting the Communications in an electronic/soft medium in a format acceptable to the Administrative Agent tooploanswebadmin@citigroup.com. In addition, the Borrower agrees to continue to provide the Communications to the AdministrativeAgent in the manner specified in this Agreement but only to the extent requested by the Administrative Agent. To the extent theBorrower is unable to deliver any portion of the Communications in an electronic/soft medium form, the Borrower shall promptlydeliver hard copies of such Communications to the Administrative Agent.(b)The Borrower further agrees that the Administrative Agent may make the Communications available to the Lendersand the LC Issuing Banks by posting the Communications on SyndTrak, the Internet or another similar electronic system (the“Platform”). The Borrower acknowledges that the distribution of material through an electronic medium is not necessarily secure andthat there are confidentiality and other risks associated with such distribution.(c)THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENT PARTIES (AS DEFINEDBELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THEADEQUACY OF THE PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THECOMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING,WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, ISMADE BY THE AGENT PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN NOEVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVEOFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENTPARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER, ANY LC ISSUING BANK OR ANY OTHERPERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING, WITHOUT LIMITATION, DIRECT OR INDIRECT,SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT,CONTRACT OR OTHERWISE) ARISING OUT OF THE BORROWER’S OR THE ADMINISTRATIVE AGENT’STRANSMISSION OF COMMUNICATIONS THROUGH THE PLATFORM OR OTHERWISE THROUGH THE INTERNET,EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-APPEALABLEJUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED PRIMARILY FROM SUCH AGENTPARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.(d)The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mailaddress set forth above shall constitute effective delivery of the Communications to the Administrative Agent for purposes of thisAgreement. Each Lender and each LC Issuing Bank agrees that notice to it (as provided in the next sentence) specifying that theCommunications have been posted to the Platform shall constitute effective delivery of the Communications to such Lender or suchLC Issuing Bank for purposes of this Agreement. Each Lender and each LC Issuing Bank agrees to notify the Administrative Agent inwriting (including by electronic communication) from time to time of such Lender’s or such LC Issuing Bank’s e-mail address towhich the foregoing notice may be sent by electronic transmission and that the foregoing notice may be sent to such e-mail address.(e)Nothing herein shall prejudice the right of the Administrative Agent, any LC Issuing Bank or any Lender to give anynotice or other communication pursuant to this Agreement in any other manner specified in this Agreement.SECTION 8.12. Severability.Any provision of this Agreement that is prohibited, unenforceable or not authorized in any jurisdiction shall, as to suchjurisdiction, be ineffective to the extent of such prohibition, unenforceability or non-authorization without invalidating the remainingprovisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Without limiting theforegoing provisions of this Section 8.12, if and to the extent that the enforceability of any provisions in this Agreement relating toDefaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent or any LC IssuingBank, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.SECTION 8.13. Headings.Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of thisAgreement for any other purpose.SECTION 8.14. USA PATRIOT Act Notice. Each Lender that is subject to the Patriot Act, each LC Issuing Bank and theAdministrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower pursuant to the requirements of thePatriot Act that it is required to obtain, verify and record information that identifies the Borrower, which information includes the nameand address of the Borrower and other information that will allow such Lender, such LC Issuing Bank or the Administrative Agent, asapplicable, to identify the Borrower in accordance with the Patriot Act. The Borrower shall, and shall cause each of its Subsidiaries to,provide to the extent commercially reasonable, such information and take such actions as are reasonably requested by theAdministrative Agent, any LC Issuing Bank or any Lender in order to assist the Administrative Agent and the Lenders in maintainingcompliance with the Patriot Act.SECTION 8.15. Confidentiality. Each of the Administrative Agent, each Lender and each LC Issuing Bank agrees to maintain theconfidentiality of the Information (as defined below), except that Information may be disclosed (i) to its Affiliates and to its and itsAffiliates’ respective managers, administrators, trustees, partners, directors, officers, employees, agents, advisors and otherrepresentatives on a “need to know” basis (it being understood that the Persons to which such disclosure is made will be informed ofthe confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by anyregulatory authority purporting to have jurisdiction over it or its Affiliates (including any self-regulatory authority, such as theNational Association of Insurance Commissioners), (iii) to the extent required by applicable laws or regulations or by any subpoenaor similar legal process, (iv) to any other party hereto, (v) in connection with the exercise of any remedies hereunder or any action orproceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisionssubstantially the same as those of this Section 8.15, to (A) any assignee of or participant in, or any prospective assignee of orparticipant in, any of its rights or obligations under this Agreement or (B) any actual or prospective party (or its managers,administrators, trustees, partners, directors, officers, employees, agents, advisors and other representatives) to any swap or derivativeor similar transaction under which payments are to be made by reference to the Borrower and its obligations, this Agreement orpayments hereunder, (C) any rating agency, (D) the CUSIP Service Bureau or any similar organization or (E) any credit insuranceprovider relating to the Borrower and its obligations, (vii) with the consent of the Borroweror (viii) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 8.15 or (y)becomes available to the Administrative Agent, any Lender, the LC Issuing Bank or any of their respective Affiliates on anonconfidential basis from a source other than the Borrower. In addition, the Administrative Agent, the Lenders and the LC IssuingBanks may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar serviceproviders to the lending industry and service providers to the Administrative Agent, the Lenders and the LC Issuing Banks inconnection with the administration of this Agreement, the other Loan Documents and the Commitments.For purposes of this Section, “Information” means all information received from the Borrower or any of its Subsidiariesrelating to the Borrower or any of its Subsidiaries or any of their respective businesses, other than any such information that is availableto the Administrative Agent, any Lender or the LC Issuing Bank on a nonconfidential basis prior to disclosure by the Borrower or anyof its Subsidiaries, provided that, in the case of information received from the Borrower or any of its Subsidiaries after the RestatementEffective Date, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain theconfidentiality of Information as provided in this Section 8.15 shall be considered to have complied with its obligation to do so if suchPerson has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to itsown confidential information.SECTION 8.16. Entire Agreement.This Agreement, the Fee Letters and the promissory notes issued hereunder constitute the entire agreement among the partiesrelative to the subject matter hereof. Any previous agreement among the parties with respect to the subject matter hereof is supersededby this Agreement, except (i) as expressly agreed in any such previous agreement and (ii) for the Fee Letters. Except as is expresslyprovided for herein, nothing in this Agreement, expressed or implied, is intended to confer upon any party other than the parties heretoany rights, remedies, obligations or liabilities under or by reason of this Agreement.SECTION 8.17. Texas Revolving Credit Statute. If, notwithstanding the provisions of Section 8.08, Texas law shall be applied byany Governmental Body to this Agreement, any other Loan Document or the obligations of the Borrower hereunder or thereunder,the Borrower hereby agrees that Chapter 346 of the Texas Finance Code, as amended, shall not govern or in any manner apply to itsobligations hereunder.SECION 8.18. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicableto any Advance or Letter of Credit, together with all fees, charges and other amounts which are treated as interest on such Advance orLetter of Credit under applicable law (collectively, the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”)which may be contracted for, charged, taken, received or reserved by the Lender making such Advance or the LC Issuing Bankissuing such Letter of Credit in accordance with applicable law, the rate of interest payable in respect of such Advance or Letter ofCredit hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful,the interest and charges that would have been payable in respect of such Advance or Letter of Credit but were not payable as a resultof the operation of this Section 8.18 shall be cumulated and the interest and charges payable to such Lender or LC Issuing Bank inrespect of other Advances or Letters of Credit or periods shall be increased (but not above the Maximum Rate applicable thereto) untilsuch cumulated amount, together with interest thereon at the Applicable Margin to the date of repayment, shall have been received bysuch Lender or LC Issuing Bank; provided that if Texas law shall establish the Maximum Rate, the Maximum Rate shall be theapplicable weekly ceiling under Chapter 303 of the Texas Finance Code.SECTION 8.19. No Fiduciary Duty. The Credit Parties and their respective Affiliates (collectively, solely for purposes of thisSection, the “Lender Parties”), may have economic interests that conflict with those of the Borrower, its securities holders and/or theirAffiliates. The Borrower agrees that nothing in the Loan Documents or otherwise will be deemed to create an advisory, fiduciary oragency relationship or fiduciary or other implied duty between any Lender Party, on the one hand, and the Borrower, its securitiesholders or its Affiliates, on the other hand. The Borrower acknowledges and agrees that (i) the transactions contemplated by the LoanDocuments (including the exercise of rights and remedies hereunder and thereunder) are arm’s-length commercial transactionsbetween the Lender Parties, on the one hand, and the Borrower, on the other, and (ii) in connection therewith and with the processleading thereto, (x) no Lender Party has assumed an advisory or fiduciary responsibility in favor of the Borrower, its securities holdersor its Affiliates with respect to the transactions contemplated hereby (or the exercise of rights or remedies with respect thereto) or theprocess leading thereto (irrespective of whether any Lender Party has advised, is currently advising or will advise the Borrower, itssecurities holders or its Affiliates on other matters) or any other obligation to the Borrower except the obligations expressly set forth inthe Loan Documents, and (y) each Lender Party is acting solely as principal and not as the agent or fiduciary of the Borrower, itsmanagement, securities holders, creditors or any other Person. The Borrower acknowledges and agrees that it has consulted its ownlegal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgmentwith respect to such transactions and the process leading thereto. The Borrower agrees that it will not claim that any Lender Party hasrendered advisory services of any nature or respect, or owes a fiduciary or similar duty to the Borrower, in connection with suchtransaction or the process leading thereto.SECTION 8.20. Amendment and Restatement of Existing Credit Agreement. This Agreement continues in effect the ExistingCredit Agreement, and the Existing Credit Agreement shall be amended and restated in its entirety by the terms and provisions of thisAgreement, which shall supersede all terms and provisions of the Existing Credit Agreement effective from and after the RestatementEffective Date. This Agreement is not intended to, and shall not, constitute a novation of any indebtedness or other obligations owingby the Borrower under the Existing Credit Agreement or a waiver or release of any indebtedness or other obligations owing, or any“Event of Default” or event that, with the giving of notice or passage of time or both, would be an “Event of Default” (each asdefined in the Existing Credit Agreement) existing, under the Existing Credit Agreement based on any facts or events occurring orexisting at or prior to the execution and delivery of this Agreement. On the Restatement Effective Date, the credit facilities describedin the Existing Credit Agreement shall be amended, supplemented, modified and restated in their entirety by the credit facilitiesdescribed herein, and all “Outstanding Credits” (as defined in the Existing Credit Agreement) of the Borrower that are not being paidon such date and remain outstanding as of such date under the Existing Credit Agreement, shall be deemed to be Outstanding Creditsunder the corresponding facilities described herein, without further action by any Person.SECTION 8.21. Acknowledgment and Consent to Bail-In of EEA Financial Institutions.Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understandingamong any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any LoanDocument, to the extent such liability is unsecured, may be subject to the write-down and conversion powers of an EEA ResolutionAuthority and agrees and consents to, and acknowledges and agrees to be bound by:(a)the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any suchliabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution;and(b)the effects of any Bail-in Action on any such liability, including, if applicable:(i)a reduction in full or in part or cancellation of any such liability;(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownershipin such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it orotherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu ofany rights with respect to any such liability under this Agreement or any other Loan Document; or(iii)the variation of the terms of such liability in connection with the exercise of the write-downand conversion powers of any EEA Resolution Authority.SECTION 8.22. Certain ERISA Matters.(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y)covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for thebenefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower, that at least one of thefollowing is and will be true:i.Such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one ormore Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of theAdvances, the Letters of Credit, the Commitments or this Agreement,ii.The transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certaintransactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certaintransactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involvinginsurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collectiveinvestment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), isapplicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, theLetters of Credit, the Commitments and this Agreement,iii.(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within themeaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf ofsuch Lender to enter into, participate in, administer and perform the Advances, the Letters of Credit, the Commitments and thisAgreement, (C) the entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, theCommitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) tothe best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to suchLender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, theCommitments and this Agreement, oriv. such other representation, warranty and covenant as may be agreed in writing between the AdministrativeAgent, in its sole discretion, and such Lender.(b)In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or(2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediatelypreceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and(y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, forthe benefit of, the Administrative Agent and not, for the avoidance of doubt, to or for the benefit of the Borrower, that theAdministrative Agent is not a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participationin, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement (including inconnection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document orany documents related hereto or thereto).[The remainder of this page intentionally left blank.]IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officersthereunto duly authorized, as of the date first above written.ENTERGY NEW ORLEANS, LLCBy /s/ Steven C. McNeal Name: Steven C. McNealTitle: Vice President & TreasurerBANK OF AMERICA, N.A.,as Administrative Agent, LC Issuing Bank and BankBy /s/ Margaret A. Halleland Name: Margaret A. HallelandTitle: Vice PresidentSCHEDULE ILIST OF APPLICABLE LENDING OFFICESENTERGY NEW ORLEANS, LLCU.S. $25,000,000 Second Amended and Restated Credit AgreementName of Bank DomesticLending OfficeEurodollarLending Office Bank of America, N.A.100 North Tryon StreetNC1-007-17-18Charlotte, North Carolina 28255Attention: Maggie HallelandOffice: 980-386-0270Facsimile: 980-683-6306Email: Maggie.Halleland@baml.com100 North Tryon StreetNC1-007-17-18Charlotte, North Carolina 28255Attention: Maggie HallelandOffice: 980-386-0270Facsimile: 980-683-6306Email: Maggie.Halleland@baml.comSCHEDULE IICOMMITMENT SCHEDULEName of LenderCommitment Amount Bank of America, N.A.$25,000,000.00TOTAL$25,000,000.00 SCHEDULE IIIFRONTING COMMITMENT SCHEDULEName of LC Issuing BankFronting Commitment AmountBank of America, N.A.$10,000,000 TOTAL$10,000,000SCHEDULE IVEXISTING LETTERS OF CREDITLetter of Credit issued July 1, 2016, in the original face amount of $846,022.60 for the benefit of Midcontinental Independence SystemOperator, Inc.EXHIBIT A-1FORM OF NOTICE OF BORROWINGBank of America, N.A., as Administrative Agentfor the Lenders and the LC Issuing Banks partyto the Credit Agreementreferred to below101 North Tryon Street, NC1-001-05-46Charlotte, North Carolina 28255Fax: (704) 409-0486 1 [Date]Attention: Bank Loan SyndicationsLadies and Gentlemen:The undersigned, Entergy New Orleans, LLC, refers to the Second Amended and Restated Credit Agreement, dated as ofNovember 16, 2018 (as further amended, supplemented or modified as of the date hereof, the “Credit Agreement”, the terms definedtherein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, the LC Issuing Banks and Bankof America, N.A., as Administrative Agent for said Lenders and said LC Issuing Banks, and hereby gives you notice, irrevocably,pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, andin that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section2.02(a) of the Credit Agreement:(i)The Business Day of the Proposed Borrowing is , 20 .(ii)The Type of Advances to be made in connection with the Proposed Borrowing is [Base Rate Advances] [EurodollarRate Advances].(iii)The aggregate amount of the Proposed Borrowing is $ .(iv)Wire instructions:Bank: [*]ABA #: [*]Acct. #: [*]Acct. Name: [*]1. Note: Please confirm Address.(v)The Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is [one week][___ month[s]]2 The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of theProposed Borrowing:(A)the representations and warranties contained in Section 4.01 of the Credit Agreement (excluding thosecontained in the last sentence of subsection (e) and in subsections (f) and (n) thereof) are true and correct, before and aftergiving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of suchdate;(B) the Proposed Borrowing is being made in accordance with the terms and conditions of the City CouncilAuthorization; and(C)no event has occurred and is continuing, or would result from such Proposed Borrowing or from theapplication of the proceeds therefrom, that constitutes an Event of Default or would constitute an Event of Default but for therequirement that notice be given or time elapse or both.Very truly yours,ENTERGY NEW ORLEANS, LLCBy Name:Title:2. Delete for Base Rate Advances..EXHIBIT A-2FORM OF NOTICE OF CONVERSIONBank of America, N.A., as Administrative Agentfor the Lenders and the LC Issuing Banks partyto the Credit Agreementreferred to below101 North Tryon Street, NC1-001-05-46Charlotte, North Carolina 28255Fax: (704) 409-0486 1 [Date]Attention: Bank Loan SyndicationsLadies and Gentlemen:The undersigned, Entergy New Orleans, LLC refers to the Second Amended and Restated Credit Agreement, dated as ofNovember 16, 2018 (as further amended, supplemented or modified as of the date hereof, the “Credit Agreement”, the terms definedtherein being used herein as therein defined), among the undersigned, certain Lenders party thereto, the LC Issuing Banks and Bank ofAmerica, N.A., as Administrative Agent for said Lenders and said LC Issuing Banks, and hereby gives you notice, irrevocably,pursuant to Section 2.10 of the Credit Agreement, that the undersigned hereby requests a Conversion under the Credit Agreement, andin that connection sets forth below the information relating to such Conversion (the “Proposed Conversion”) as required bySection 2.10 of the Credit Agreement:(i)The Business Day of the Proposed Conversion is __________, _____.(ii)The Type of Advances comprising the Proposed Conversion is [Base Rate Advances] [Eurodollar RateAdvances].(iii)The aggregate amount of the Proposed Conversion is $__________.(iv)The Type of Advances to which such Advances are proposed to be Converted is [Base Rate Advances][Eurodollar Rate Advances].(v)The Interest Period for each Advance made as part of the Proposed Conversion is [one week] [___month(s)]. 2 1. Note: Please confirm address.2. Delete for Base Rate AdvancesThe undersigned hereby represents and warrants that the following statements are true on the date hereof, and will be true onthe date of the Proposed Conversion:(A)The Borrower’s request for the Proposed Conversion is made in compliance with Section 2.10 of the CreditAgreement; and\(B)No Event of Default has occurred and is continuing or would result from the Proposed Conversion. 3 Very truly yours,ENTERGY NEW ORLEANS, LLCBy Name:Title:3. The certification in clause (B) is required only for any request to Convert Advances to Eurodollar Rate Advances.EXHIBIT A-3FORM OF REQUEST FOR ISSUANCE[Date]Bank of America, N.A., as Administrative Agentfor the Lenders and the LC Issuing Banks partyto the Credit Agreementreferred to below101 North Tryon Street, NC1-001-05-46Charlotte, North Carolina 28255Fax: (704) 409-0486 1 Ladies and Gentlemen:The undersigned, Entergy New Orleans, LLC (the “Borrower”), refers to the Second Amended and Restated CreditAgreement, dated as of November 16, 2018 (as further amended, supplemented or modified as of the date hereof, the “CreditAgreement”, the terms defined therein being used herein as therein defined), among the undersigned, the Lenders and the LC IssuingBanks party thereto and the Administrative Agent, and hereby gives you notice, pursuant to Section 2.03 of the Credit Agreement, thatthe Borrower hereby requests the issuance of a Letter of Credit (the “Requested Letter of Credit”) in accordance with the followingterms:(i) the requested date of [issuance] [extension] [modification] [amendment] of the Requested Letter of Credit (which isa Business Day) is _____________;(ii) the expiration date of the Requested Letter of Credit requested hereby is ___________; 2 (iii) the proposed stated amount of the Requested Letter of Credit is _______________;3 (iv) the beneficiary of the Requested Letter of Credit is: [insert name and address of beneficiary];1. Note: Please confirm address.2. Date may not be later than the fifth Business Day prior to the Termination Date.3. Must be minimum of $100,000.(v) the conditions under which a drawing may be made under the Requested Letter of Credit are as follows:___________________; and(vi) the purpose of the Requested Letter of Credit is : ____________.Please select any of the following that apply:□ Attachments hereto impose additional terms and conditions on the Borrower and/or the applicable LC Issuing Bank and areincorporated into this Request for Issuance as if fully set forth herein, (e.g. sample language or form of the Requested Letter ofCredit).□ Requested Letter of Credit to be issued in transferable form.□ Requested Letter of Credit is to contain an automatic extension clause with (specify all that apply):(i) a notification period of (______) days in the event of non-extension;(ii) [one] [multiple] renewal period(s) of (______) [year] [months];(iii) a final expiration date of (_________________)(iv) insert drawing option: Beneficiary received a notice of non-extension of the expiration date of the Credit and hasnot received a satisfactory substitute letter of credit.All banking charges, other than the applicable LC Issuing Bank’s charges, are for account of:□ Beneficiary □ the BorrowerUpon the issuance of the Letter of Credit (or the amendment of the Letter of Credit that constitutes an Extension of Credit) byan LC Issuing Bank in response to this request, the Borrower shall be deemed to have represented and warranted that the conditions toan issuance of a Letter of Credit (or an amendment of a Letter of Credit that constitutes an Extension of Credit, as applicable) that arespecified in Article III of the Credit Agreement have been satisfied.ENTERGY NEW ORLEANS, LLCBy Name:Title:EXHIBIT BFORM OF ASSIGNMENT AND ASSUMPTIONThis Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and isentered into by and between [the][each] 1 Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each] 2 Assigneeidentified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]3 hereunder are several and not joint.] 4 Capitalized terms used but not defined herein shall have the meanings given tothem in the Second Amended and Restated Credit Agreement identified below (as further amended, the “Credit Agreement”), receiptof a copy of which is hereby acknowledged by [the][each] Assignee. The Standard Terms and Conditions set forth in Annex 1attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if setforth herein in full.For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respectiveAssignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subjectto and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by theAdministrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacityas a Lender][their respective capacities as Lenders] under the Credit Agreement and any other documents or instruments deliveredpursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights andobligations of [the Assignor][the respective Assignors] under the respective facilities identified below (including without limitation anyletters of credit, and guarantees included in such facilities), and (ii) to the extent permitted to be assigned under applicable law, allclaims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in theirrespective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the CreditAgreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any waybased on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutoryclaims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (therights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above beingreferred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any]Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by [the][any]Assignor.1.Assignor[s]: ____________________________________________________________1.For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the firstbracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.2.For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the firstbracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.3.Select as appropriate.4.Include bracketed language if there are either multiple Assignors or multiple Assignees.2.Assignee[s]: ____________________________________________________________[Assignee is an [Affiliate][Approved Fund] of [identify Lender]]3.Borrower(s): Entergy New Orleans, LLC4.Administrative Agent: Bank of America, N.A., as the administrative agent under the Credit Agreement5.Credit Agreement: $25,000,000 Second Amended and Restated Credit Agreement, dated as ofNovember 16, 2018, among Entergy New Orleans, LLC, the Lenders parties thereto, Bank of America,N.A., as Administrative Agent, and the LC Issuing Banks parties thereto6.Assigned Interest[s]:Assignor[s] 5Assignee[s] 6FacilityAssigned 7Aggregate Amount ofCommitment/Advances for allLenders 8Amount ofCommitment/AdvancesAssigned 8Percentage Assigned ofCommitment/Advances 9CUSIP Number $$% $$% $$% [7.Trade Date:______________] 10 [Page break]5.List each Assignor, as appropriate.6.List each Assignee, as appropriate.7.Fill in the appropriate terminology for the types of facilities under the Credit Agreement that are being assigned under this Assignment (e.g.,“Revolving Credit Commitment”, etc.)8.Amount to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the EffectiveDate.9.Set forth, to at least 9 decimals, as a percentage of the Commitment/Advances of all Lenders thereunder.10.To be completed if the Assignor(s) and the Assignee(s) intend that the minimum assignment amount is to be determined as of the Trade Date.Effective Date: _____________ ___, 20___ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BETHE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]The terms set forth in this Assignment and Assumption are hereby agreed to:ASSIGNOR[S] 11 [NAME OF ASSIGNOR]By:______________________________Title:[NAME OF ASSIGNOR]By:______________________________Title:ASSIGNEE[S] 12 [NAME OF ASSIGNEE]By:______________________________Title:[NAME OF ASSIGNEE]By:______________________________Title:[Consented to and] 13 Accepted:Bank of America, N.A., asAdministrative AgentBy: _________________________________Title:11.Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable).12.Add additional signature blocks as needed. Include both Fund/Pension Plan and manager making the trade (if applicable).13.To be added only if the consent of the Administrative Agent is required by the terms of the Credit Agreement.Consented to:[NAME OF LC ISSUING BANK] 14 , asLC Issuing BankBy: ________________________________Title:[Consented to:ENTERGY NEW ORLEANS, LLCBy: ________________________________Title:] 15 14. Insert signature block for each LC Issuing Bank.15. To be added only if the consent of the Borrower is required by the terms of the Credit Agreement.ANNEX 1$25,000,000 Second Amended and Restated Credit Agreement, dated as of November __, 2018, among Entergy New Orleans, LLC,the Lenders parties thereto, Bank of America, N.A., as Administrative Agent, and the LC Issuing Banks parties thereto STANDARD TERMS AND CONDITIONS FORASSIGNMENT AND ASSUMPTION1. Representations and Warranties.1.1 Assignor[s]. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverseclaim, (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment andAssumption and to consummate the transactions contemplated hereby and (iv) it is not a Defaulting Lender or a PotentialDefaulting Lender; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in orin connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability,genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of theBorrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document, or (iv) theperformance or observance by the Borrower, any of its Subsidiaries or Affiliates or any other Person of any of their respectiveobligations under any Loan Document.1.2. Assignee[s]. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and hastaken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactionscontemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assigneeunder Section 8.07 of the Credit Agreement (subject to such consents, if any, as may be required thereunder), (iii) from andafter the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extentof [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect todecisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion inmaking its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copyof the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financialstatements delivered pursuant to Sections 5.01(c)(i) and 5.01(c)(ii) thereof, as applicable, and such other documents andinformation as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumptionand to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent orany other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis anddecision to enter into this Assignment and Assumption and to purchase [the][such] Assigned Interest, and (vii) attached to theAssignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement,duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance on theAdministrative Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deemappropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and(ii) it will perform in accordance withtheir terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] AssignedInterest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignee whether such amounts haveaccrued prior to, on or after the Effective Date. The Assignor[s] and the Assignee[s] shall make all appropriate adjustments inpayments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directlybetween themselves. Notwithstanding the foregoing, the Administrative Agent shall make all payments of interest, fees or otheramounts paid or payable in kind from and after the Effective Date to [the][the relevant] Assignee.3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto andtheir respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, whichtogether shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumptionby facsimile or in electronic (i.e., “pdf” or “tif”) format shall be effective as delivery of a manually executed counterpart of thisAssignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law ofthe State of New York.EXHIBIT C-1[RESERVED]EXHIBIT C-2[RESERVED]EXHIBIT C-3[RESERVED]EXHIBIT D[RESERVED]EXHIBIT E-1FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Lenders That Are Not PartnershipsFor U.S. Federal Income Tax Purposes)U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Second Amended and Restated Credit Agreement, dated as of November 16, 2018 (as furtheramended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Entergy New Orleans, LLC, Bankof America, N.A., as the administrative agent (the “Administrative Agent”), and each lender and letter of credit issuer from time to timeparty thereto.Pursuant to the provisions of Section 2.15(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the solerecord and beneficial owner of the Advance(s) (as well as any promissory note(s) evidencing such Advance(s)) in respect of which it isproviding this certificate, (ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percentshareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporationrelated to the Borrower as described in Section 881(c)(3)(C) of the Code.The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status onIRS Form W-8BEN or W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on thiscertificate changes, the undersigned shall promptly so inform the Administrative Agent and the Borrower, and (2) the undersigned shallhave at all times furnished the Administrative Agent and the Borrower with a properly completed and currently effective certificate ineither the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding suchpayments.Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to themin the Credit Agreement.[NAME OF LENDER]By: Name:Title:Date: ________ __, 20[ ]EXHIBIT E-2FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Participants That Are Not PartnershipsFor U.S. Federal Income Tax Purposes)U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Second Amended and Restated Credit Agreement, dated as of November 16, 2018 (as furtheramended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Entergy New Orleans, LLC, Bankof America, N.A., as the administrative agent (the “Administrative Agent”), and each lender and letter of credit issuer from time to timeparty thereto.Pursuant to the provisions of Section 2.15(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the solerecord and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within themeaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of the Borrower within the meaning of Section871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BENor W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, theundersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lenderwith a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to theundersigned, or in either of the two calendar years preceding such payments.Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to themin the Credit Agreement.[NAME OF PARTICIPANT]By: Name:Title:Date: ________ __, 20[ ]EXHIBIT E-3FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Participants That Are PartnershipsFor U.S. Federal Income Tax Purposes)U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Second Amended and Restated Credit Agreement, dated as of November 16, 2018 (as furtheramended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Entergy New Orleans, LLC, Bankof America, N.A., as the administrative agent (the “Administrative Agent”), and each lender and letter of credit issuer from time to timeparty thereto.Pursuant to the provisions of Section 2.15(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the solerecord owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are thesole beneficial owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirectpartners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or businesswithin the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholderof the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is acontrolled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following formsfrom each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or W-8BEN-E or (ii) anIRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of such partner’s/member’s beneficial ownersthat is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the informationprovided on this certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at alltimes furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which eachpayment is to be made to the undersigned, or in either of the two calendar years preceding such payments.Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to themin the Credit Agreement.[NAME OF PARTICIPANT]By: Name:Title:Date: ________ __, 20[ ]EXHIBIT E-4FORM OF U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Lenders That Are PartnershipsFor U.S. Federal Income Tax Purposes)U.S. TAX COMPLIANCE CERTIFICATE(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)Reference is hereby made to the Second Amended and Restated Credit Agreement, dated as of November 16, 2018 (as furtheramended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Entergy New Orleans, LLC, Bankof America, N.A., as the administrative agent (the “Administrative Agent”), and each lender and letter of credit issuer from time to timeparty thereto.Pursuant to the provisions of Section 2.15(g) of the Credit Agreement, the undersigned hereby certifies that (i) it is the solerecord owner of the Advance(s) (as well as any promissory note(s) evidencing such Advance(s)) in respect of which it is providing thiscertificate, (ii) its direct or indirect partners/members are the sole beneficial owners of such Advance(s) (as well as any promissorynote(s) evidencing such Advance(s)), (iii) with respect to the extension of credit pursuant to the Credit Agreement or any other LoanDocument, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loanagreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (iv) noneof its direct or indirect partners/members is a ten percent shareholder of the Borrower within the meaning of Section 871(h)(3)(B) ofthe Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as describedin Section 881(c)(3)(C) of the Code.The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one ofthe following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN orW-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or W-8BEN-E from each of suchpartner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersignedagrees that (1) if the information provided on this certificate changes, the undersigned shall promptly so inform the AdministrativeAgent and the Borrower, and (2) the undersigned shall have at all times furnished the Administrative Agent and the Borrower with aproperly completed and currently effective certificate in either the calendar year in which each payment is to be made to theundersigned, or in either of the two calendar years preceding such payments.Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to themin the Credit Agreement.[NAME OF LENDER]By: Name:Title:Date: ________ __, 20[ ]Exhibit 10(b)16FILING PUBLIC UTILITYSystem Energy Resources, Inc.Rate Schedule FERC No. 2PUBLIC UTILITIES RECEIVING SERVICEUNDER RATE SCHEDULEEntergy Arkansas, Inc.Entergy Louisiana, LLCEntergy Mississippi, Inc.Entergy New Orleans, LLCSERVICE TO BE PROVIDED UNDER RATE SCHEDULEWholesale Sale of Electric PowerUnit Power Sales AgreementTHIS AGREEMENT, made, entered into, and effective as of this 10th day of June, 1982, as amended from time to timethereafter, and as revised to comply with Federal Energy Regulatory Commission (“FERC”) Opinion Nos. 446 and 446-A and FERCOrder No.614, between and among Entergy Arkansas, Inc. (“EAI”), Entergy Louisiana, LLC (“ELL”), Entergy Mississippi, Inc.(“EMI”), Entergy New Orleans, LLC (“ENOL”) and System Energy Resources, Inc. (“System Energy”).WITNESSETH THAT:WHEREAS, System Energy was incorporated on February 11, 1974 under the laws of the State of Arkansas to own certainfuture generating capacity for the Entergy System, of which EAI, ELL, EMI and ENOL (“System Companies”) are members; andWHEREAS, System Energy has accordingly undertaken the ownership and financing of an undivided interest in, andconstruction of, the Grand Gulf Generating Station, a one-unit, nuclear-fueled electric generating station on the east bank of theMississippi River near Port Gibson, Mississippi (“Project”); andWHEREAS, the System Companies own and operate electric generating, transmission and distribution facilities in Arkansas,Louisiana and Mississippi and generate, transmit and sell electric energy both at retail and wholesale in such states; andWHEREAS, System Energy has agreed to sell to EAI, ELL, EMI and ENOL (“Purchasers”) specified percentages of all of thecapacity and energy available to System Energy from the Project, and the System Companies have agreed to join with System Energy,before the date Unit I of the Project is placed in service, in executing an agreement which will set forth in detail the terms andconditions for the sale of such capacity and energy by System Energy to the System Companies; andWHEREAS, Unit 1 is expected to be placed in commercial operation in the first quarter of 1983;NOW, THEREFORE, System Energy and the System Companies mutually understand and agree as follows:1.1 System Energy shall, subject to the terms and conditions of this Agreement, make available, or cause to be madeavailable, to the Purchasers all of the capacity and energy which shall be available to System Energy at the Project, including testenergy produced during the course of the construction and testing of Unit 1 of the Project (“Power”).1.2 The Purchasers shall, subject to the terms and conditions of this Agreement, be entitled to receive all of the Power whichshall be available to System Energy at the Project in accordance with their respective Entitlement Percentages. The EntitlementPercentages are as follows: Entitlement Percentages Unit No. 1EAI36%ELL14%EMI33%ENOL17% 100%1.3 Commencing with the earlier of (a) the date of commercial operation of the Unit or (b) December 31, 1984 andcontinuing monthly thereafter until this Agreement is terminated pursuant to the provisions of Section 9 hereof, in consideration of theright to receive its Entitlement Percentage of such Power from the unit, each Purchaser will pay System Energy an amount determinedpursuant to the Monthly Grand Gulf Power Charge Formula, which is attached hereto as Appendix 1.2. The performance of the obligations of System Energy hereunder shall be subject to the receipt and continued effectivenessof all authorizations of governmental regulatory authorities at the time necessary to permit System Energy to perform its duties andobligations hereunder, including the receipt and continued effectiveness of all authorizations by governmental regulatory authorities atthe time necessary to permit the completion by System Energy of the construction of the Project, the operation of the Project, and forSystem Energy to make available to the Purchasers all of the Power available to System Energy at the Project. System Energy shall useits best efforts to secure and maintain all such authorizations by governmental regulatory authorities.3. System Energy shall operate and maintain the Project in accordance with good utility practice. Outages for inspection,maintenance, refueling, repairs and replacements shall be scheduled in accordance with good utility practice and, insofar as practicable,shall be mutually agreed to by System Energy and the Purchasers. 4. Delivery of Power sold to the Purchasers pursuant to this Agreement shall occur at the Project’s step-up transformer andshall be made in the form of three-phase, sixty hertz alternating current at a nominal voltage of 500 kilovolts. System Energy willsupply and maintain all necessary metering equipment for determining the quantity and conditions of delivery under this Agreement.System Energy will furnish to the Purchasers such summaries of meter reading and other metering information as may reasonably berequested.5. Monthly bills shall be calculated in accordance with the provisions of the Monthly Grand Gulf Power Charge Formula,attached hereto as Appendix 16. Nothing contained herein shall be construed as affecting in any way the right of System Energy to unilaterally makeapplication to FERC for a change in the rates contained herein or any other term or condition of this Agreement under Section 205 ofthe Federal Power Act and pursuant to FERC Rules and Regulations promulgated thereunder.7. No Purchaser shall be entitled to set off against any payment required to be made by it under this Agreement (a) anyamounts owed by System Energy to any Purchaser or (b) the amount of any claim by any Purchaser against System Energy. Theforegoing, however, shall not affect in any other way the rights and remedies of any Purchaser with respect to any such amounts owedto any Purchaser by System Energy or any such claim by any Purchaser against System Energy.8. The invalidity and unenforceability of any provision of this Agreement shall not affect the remaining provisions hereof.9. This Agreement shall continue until terminated by mutual agreement of all parties hereto.10. This Agreement shall be binding upon the parties hereto and their successors and assigns, but no assignment hereof, or ofany right to any funds due or to become due under this Agreement, shall in any event relieve either any Purchaser or System Energy ofany of their respective obligations hereunder,or, in the case of the Purchasers, reduce to any extent their entitlement to receive all of the Power available to System Energy from timeto time at the Project.11. The agreements herein set forth have been made for the benefit of the Purchasers and System Energy and their respectivesuccessors and assigns and no other person shall acquire or have any right under or by virtue of this Agreement.12. The Purchasers and System Energy may, subject to the provisions of this Agreement, enter into a further agreement oragreements between the Purchasers and System Energy, setting forth detailed terms and provisions relating to the performance by thePurchasers and System Energy of their respective obligations under this Agreement. No agreement entered into under this Section 12shall, however, alter to any substantive degree the obligations of any party to this Agreement in any manner inconsistent with any ofthe foregoing sections of this Agreement.13. Each of the Purchasers shall, at any time and from time to time, be entitled to assign all of its right, title and interest in andto all of the power to which any of them shall be entitled under this Agreement, but no Purchaser shall, by such assignment, be relievedof any of its obligations and duties under this Agreement except through the payment to System Energy, by or on behalf of suchPurchaser, of the amount or amounts which such Purchaser shall be obligated to pay pursuant to the terms of this Agreement.IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year firstabove writtenSYSTEM ENERGY RESOURCES, INC., formerly MIDDLE SOUTHENERGY, INC.By:/S/F W. LewisENTERGY ARKANSAS, INC., formerlyARKANSAS POWER AND LIGHT COMPANYBy:/S/Jerry MauldenENTERGY LOUISIANA, LLC, formerlyLOUISIANA POWER AND LIGHT COMPANYBy:/S/J. WyattENTERGY MISSISSIPPI, INC., formerlyMISSISSIPPI POWER AND LIGHT COMPANYBy:/S/D. C. LutkinENTERGY NEW ORLEANS, LLC, formerlyNEW ORLEANS PUBLIC SERVICE INC.By:/S/James M. CainAttachment AAppendix 1SYSTEM ENERGY RESOURCES, INC.MONTHLY GRAND GULF POWER CHARGE FORMULA1.GENERALThis Grand Gulf Power Charge Formula (“PCF”) sets out the procedures that shall be used to determine the monthly amountswhich System Energy Resources, Inc. (“SERI”) shall charge Entergy Arkansas, Inc. (“EAI”); Entergy Louisiana, LLC(“ELL”); Entergy Mississippi, Inc. (“EMI”); and Entergy New Orleans, LLC (“ENOL”) (referred to hereafter, collectively, as“Purchasers”, or, individually, as “Purchaser”), for capacity and energy from the Grand Gulf Nuclear Station (“Grand Gulf”)pursuant to the Unit Power Sales Agreement (“UPSA”) between SERI and the Purchasers to which this document is attachedas Appendix 1. The monthly charges for capacity (“Monthly Capacity Charges”) shall be determined in accordance with theprovisions of Section 2 below. The monthly charges for fuel (“Monthly Fuel Charges”) shall be determined in accordance withthe provisions of Section 3 below. The Monthly Capacity Charges and the Monthly Fuel Charges determined in accordancewith the provisions of this PCF shall be billed to the Purchasers monthly in accordance with the provisions of Section 4 below.2.MONTHLY CAPACITY CHARGEThe Monthly Capacity Charge to be billed to each of the Purchasers for any service month shall be determined by applying theMonthly Capacity Charge Formula set out in Attachment A to the applicable cost data.3.MONTHLY FUEL CHARGEThe Monthly Fuel Charge to be billed to each of the Purchasers for any service month shall be determined by applying theMonthly Fuel Charge Formula set out in Attachment B to fuel cost data for the service month.4.BILLINGOn or before the fifth workday of each month SERI shall render a billing to each of the Purchasers reflecting the Purchaser’sMonthly Capacity Charge and Monthly Fuel Charge for the immediately preceding service month. In addition, any applicableand appropriate adjustments shall be reflected in each of the monthly billings. The monthly billings shall be payable inimmediately available funds on or before the 15th day of such month. After the 15th day of such month, interest shall accrue onany balance due to SERI, or owed by SERI, at the rate required for refunds rendered pursuant to the requirements of Section35.19.a of the Code of Federal Regulations. Entergy Services Inc., acting as agent for SERI and the Purchasers, may preparethe necessary billings to the Purchasers and arrange for payment in accordance with the above requirements.5.EFFECTIVE DATE AND TERMThis PCF shall be effective for service rendered on and after December 12, 1995 and shall continue in effect until modified orterminated in accordance with the provisions of this PCF or applicable regulations or laws.Attachment ASYSTEM ENERGY RESOURCES, INC.MONTHLY CAPACITY CHARGE FORMULADETERMINATION OF MONTHLY CAPACITY CHARGESMONTH, XXXXLine NoDESCRIPTIONAMOUNTREFERENCE/SOURCE1.CAPACITY REVENUE REQUIREMENT Page 3, Line 12.CREDIT, PER STIPULATION AND AGREEMENT IN DOCKET NO. FA89-28 SERI Rate Schedule FERC No. 63.ADJUSTMENT TO REFLECT UNPROTECTED EXCESS ADIT PER TAX CUTSAND JOBS ACT OF 2017 Attachment E4.ADJUSTED CAPACITY REVENUE REQUIREMENT Line 1 - Line 2 - Line 35.MONTHLY CAPACITY CHARGE FOR EAI 36% * Line 46.MONTHLY CAPACITY CHARGE FOR ELL 14% * Line 47.MONTHLY CAPACITY CHARGE FOR EMI 33% * Line 48.MONTHLY CAPACITY CHARGE FOR ENOL 17% * Line 4Attachment ASYSTEM ENERGY RESOURCES, INC.MONTHLY CAPACITY CHARGE FORMULADEVELOPMENT OF RATE BASE (1)MONTH, XXXXLine NoDESCRIPTIONAMOUNTREFERENCE/SOURCE1PLANT IN SERVICE FERC Accounts 101, 1062ACCUMULATED DEPRECIATION & AMORTIZATION FERC Accounts 108, 111 (2)3NET UTILITY PLANT Line 1 Plus Line 24NUCLEAR FUEL FERC Accounts 120.2-120.45AMORTIZATION OF NUCLEAR FUEL FERC Account 120.56MATERIALS & SUPPLIES FERC Accounts 154, 1637PREPAYMENTS FERC Account 1658DEFERRED REFUELING OUTAGE COSTS FERC Account 182.39ACCUMULATED DEFERRED INCOME TAXES FERC Accounts 190, 281, 282, 28310RATE BASE Sum of Lines 3 - 9 NOTES:(1)TO BE DETERMINED BASED ON DATA AS OF THE END OF THE MONTH IMMEDIATELY PRECEDING THE CURRENT SERVICE MONTH.(2)THE BALANCE FOR ACCUMULATED DEPRECIATION AND AMORTIZATION IS TO BE REDUCED BY ANY DECOMMISSIONING RESERVEAND RESERVE FOR DISPOSAL OF NUCLEAR FUEL INCLUDED IN FERC ACCOUNTS 108 AND 111 WHICH REPRESENT MONIES HELD BYTHIRD PARTIES.SYSTEM ENERGY RESOURCES, INC.MONTHLY CAPACITY CHARGE FORMULADEVELOPMENT OF CAPACITY REVENUE REQUIREMENT (1)MONTH, XXXXLineNoDESCRIPTIONAMOUNTREFERENCE/SOURCE 1CAPACITY REVENUE REQUIREMENT Determined as described in Note 2 below.2OPERATION & MAINTENANCE EXPENSE (3) FERC Accounts 517, 519-525, 528-532, 556, 557, 560-573, 901-905,920-931, 9353DEPRECIATION EXPENSE FERC Account 403-Excluding Decommissioning Exp4DECOMMISSIONING EXPENSE (4) FERC Account 403-Decommissioning Expense5AMORTIZATION EXPENSE FERC Accounts 404, 407.3, 407.46TAXES OTHER THAN INCOME TAXES FERC Account 408.17CURRENT STATE INCOME TAX Page 4, Line 188CURRENT FEDERAL INCOME TAX Page 4, Line 259PROVISION FOR DEFERRED INCOME TAX-STATE State Portion of FERC Accounts 410.1, 411.1 (5)10PROVISION FOR DEFERRED INCOME TAX-FEDERAL Federal Portion of FERC Accounts 410.1, 411.1 (5)11INVESTMENT TAX CREDIT-NET FERC Account 411.412GAINS/LOSSES ON DISPOSITION OF UTILITY PLANT FERC Accounts 411.6, 411.713UTILITY OPERATING EXPENSES Sum of Lines 2 - 12 14UTILITY OPERATING INCOME Line 1 minus Line 1315VERIFICATION: 16RATE BASE Page 2, Line 1017RATE OF RETURN ON RATE BASE 12*(Line 14 / Line 16)(Must equal Line 18) 18COST OF CAPITAL Weighted Cost Rate from Page 5, Line 6NOTES:1)ALL EXPENSES ARE TO BE THOSE FOR THE CURRENT SERVICE MONTH. 2)THE CAPACITY REVENUE REQUIREMENT FOR THE SERVICE MONTH IS THE VALUE THAT RESULTS IN A UTILITY OPERATING INCOMEWHICH, WHEN DIVIDED BY THE RATE BASE (DETERMINED IN ACCORDANCE WITH PAGE 2) AND MULTIPLIED BY 12 PRODUCES A RATE OFRETURN ON RATE BASE EQUAL TO THE COST OF CAPITAL (DETERMINED IN ACCORDANCE WITH PAGE 5). 3)EXCLUSIVE OF FUEL EXPENSE IN FERC ACCOUNT 518. 4)SHOULD THE FERC APPROVE A CHANGE IN SYSTEM ENERGY’S SCHEDULE OF ANNUAL DECOMMISSIONING EXPENSES DURING THESERVICE MONTH, THE MONTHLY LEVEL IN EFFECT AS OF THE END OF THE MONTH SHALL BE UTILIZED. OTHERWISE, THE AMOUNTCHARGED TO FERC ACCOUNT 403 FOR THE SERVICE MONTH SHALL BE UTILIZED, AS SHOWN ON ATTACHMENT C. 5)RESTRICTED TO THOSE ITEMS FOR WHICH CORRESPONDING TIMING DIFFERENCES ARE INCLUDED IN THE ADJUSTMENTS TO NET INCOMEBEFORE INCOME TAX (SEE PAGE 4, LINE 10).SYSTEM ENERGY RESOURCES, INC.MONTHLY CAPACITY CHARGE FORMULADEVELOPMENT OF CURRENT INCOME TAX EXPENSEMONTH, XXXXLineNoDESCRIPTIONAMOUNTREFERENCE/SOURCE 1CAPACITY REVENUE REQUIREMENT Page 3, Line 12OPERATION 8, MAINTENANCE EXPENSE Page 3, Line 23DEPRECIATION EXPENSE Page 3, Line 34DECOMMISSIONING EXPENSE Page 3, Line 45AMORTIZATION EXPENSE Page 3, Line 56TAXES OTHER THAN INCOME Page 3, Line 67NET INCOME BEFORE INCOME TAXES Line 1 - (Sum of Lines 2-6)8ADJUSTMENTS TO NET INCOME BEFORE INCOME TAX: 9INTEREST SYNCHRONIZATION Rate Base (Page 2, Line 10) * (-1) * Total Debt Rate(Page 5, Line 4)/1210OTHER ADJUSTMENTS See Note 111TOTAL ADJUSTMENTS Line 9 plus Line 1012TAXABLE INCOME Line 7 plus Line 11 COMPUTATION OF STATE INCOME TAX 13STATE TAXABLE INCOME BEFORE ADJUSTMENTS Line 1214NET ADJUSTMENT TO STATE TAXABLE INCOME See Note 115STATE TAXABLE INCOME Line 13 plus Line 1416STATE INCOME TAX BEFORE ADJUSTMENTS Line 15 * Mississippi State Tax Rate(2)17ADJUSTMENTS TO STATE TAX See Note 118CURRENT STATE INCOME TAX Sum of Lines 16 - 17 COMPUTATION OF FEDERAL INCOME TAX 19FEDERAL TAXABLE INCOME BEFORE ADJUSTMENTS Line 1220CURRENT STATE INCOME TAX DEDUCTION Line 18 (Shown as deduction)21OTHER ADJUSTMENTS TO FEDERAL TAXABLE INCOME See Note 122FEDERAL TAXABLE INCOME Sum of Lines 19-2123FEDERAL INCOME TAX BEFORE ADJUSTMENTS Line 22 * Federal Tax Rate(2)24ADJUSTMENTS TO FEDERAL TAX See Note 125CURRENT FEDERAL INCOME TAX Sum of Lines 23 - 24NOTES:1)ITEMS FROM MONTHLY TAX DETERMINATION THAT ARE APPROPRIATE FOR RATEMAKING PURPOSES.2)RATE IN EFFECT AT THE END OF THE SERVICE MONTH.SYSTEM ENERGY RESOURCES, INC.MONTHLY CAPACITY CHARGE FORMULADEVELOPMENT OF COST OF CAPITAL (1)MONTH, XXXXLINENOCAPITAL SOURCECAPITAL AMOUNT (2)(3)CAPITALIZATIONRATIO (4)COST RATEWEIGHTEDCOST RATE (8)1DEBT 2LONG TERMFERC Accts 221, 224, 225, 226, 181, 189 (5) 3SHORT TERM (6) 4TOTAL TERM (7) 5COMMON EQUITYFERC Accts 201, 208, 216 (SEE NOTE 9) 6TOTAL NA NOTES:(1)TO BE DETERMINED BASED ON DATA AS OF THE END OF THE MONTH IMMEDIATELY PRECEDING THE CURRENT SERVICE MONTH.(2)LONG TERM DEBT SHALL INCLUDE ALL ISSUES AND REFLECT THE PRINCIPAL AMOUNT.(3)SHORT TERM DEBT SHALL INCLUDE ONLY THAT PORTION NOT REFLECTED IN THE CALCULATION OF SERI’S RATE FOR ALLOWANCE FORFUNDS USED DURING CONSTRUCTION.(4)APPLICABLE CAPITAL AMOUNT DIVIDED BY THE TOTAL CAPITAL AMOUNT.(5)AVERAGE COST RATE FOR ALL OUTSTANDING ISSUES INCLUDING APPLICABLE AMORTIZATION OF DEBT DISCOUNT, PREMIUM, ANDEXPENSE TOGETHER WITH AMORTIZATION OF LOSS OR GAIN ON REACQUIRED DEBT.(6)THE AVERAGE COST RATE FOR ELIGIBLE SHORT TERM DEBT.(7)WEIGHTED AVERAGE COST RATE FOR LONG TERM DEBT AND SHORT TERM DEBT.(8)CAPITALIZATION RATIO FOR THE APPLICABLE CAPITAL SOURCE MULTIPLIED BY THE CORRESPONDING COST RATE.(9)THE COMMON EQUITY COST RATE SHALL BE AS FOLLOWS: A.FOR SERVICE FROM DECEMBER 12, 1995 THROUGH JULY 30, 2000 THE RATE SHALL BE 10.58%. B.FOR SERVICE AFTER JULY 30, 2000 THE RATE SHALL BE 10.94%.Attachment BSYSTEM ENERGY RESOURCES, INC.MONTHLY FUEL CHARGE FORMULAMONTH, XXXXLine NoDESCRIPTIONAMOUNTREFERENCE/SOURCE 1FUEL EXPENSE FOR APPLICABLE SERVICE MONTH FERC Account 5182MONTHLY FUEL CHARGE FOR EAI 36% * Line 13MONTHLY FUEL CHARGE FOR ELL 14% * Line 14MONTHLY FUEL CHARGE FOR EMI 33% * Line 15MONTHLY FUEL CHARGE FOR ENOL 17% * Line 1 Attachment CSystem Energy Resources, Inc.Grand Gulf Decommissioning ModelRevenue Requirement Summary($000) Revenue RequirementLineNo.YearOwnedPortionLeasedPortionTotal119956,8131,2088,0212199611,1951,99713,1923199711,1951,99713,1924199811,1951,99713,1925199911,1951,99713,1926200011,1951,99713,1927200113,6242,43116,0558200213,6242,43116,0559200313,6242,43116,05510200413,6242,43116,05511200513,6242,43116,05512200616,5902,96019,55013200716,5902,96019,55014200816,5902,96019,55015200916,5902,96019,55016201016,5902,96019,55017201120,1843,60123,78518201220,1843,60123,78519201320,1843,60123,78520201420,1843,60123,78521201520,1842,10122,28522201624,550024,55023201718,412018,412242018000252019000262020000272021000282022000292023000302024000312025000322026000332027000342028000352029000362030000372031000System Energy Resources, Inc.Grand Gulf Decommissioning ModelRevenue Requirement Summary($000) Revenue RequirementLineNo.YearOwnedPortionLeasedPortionTotal382032000392033000402034000412035000422036000432037000442038000452039000462040000472041000482042000492043000502044000 Attachment DSystem Energy Resources, Inc.Depreciation RatesEffective as of October 1, 2017, the following depreciation rates will be utilized to determine depreciation and amortizationcosts on Grand Gulf plant assets.Attachment EExhibit 21Subsidiaries of Entergy Corporation as of December 31, 2018Certain subsidiaries, which if considered in the aggregate as a single subsidiary would not constitute a significant subsidiary as of December 31, 2018, havebeen omitted.Name of Company State of Incorporation Entergy Corporation Delaware Entergy Utility Affiliates Holdings, LLC Texas Entergy Utility Affiliates, LLC Texas Entergy Utility Holding Company, LLC Texas Entergy Holdings Company LLC Delaware Entergy Arkansas, LLC Texas Arkansas Power & Light Company, LLC Arkansas Entergy Arkansas Restoration Funding, LLC Delaware Entergy Louisiana, LLC Texas Entergy Holdings Company LLC Delaware Prudential Oil & Gas L.L.C. Texas Gulf States Utilities Company Texas Varibus L.L.C. Texas Southern Gulf Railway LLC Texas Entergy Louisiana Investment Recovery Funding I, L.L.C. Louisiana Louisiana Power & Light Company, LLC Delaware Entergy New Orleans, LLC Texas Entergy New Orleans Storm Recovery Funding I, L.L.C. Louisiana New Orleans Public Service, Inc. Louisiana Entergy Mississippi, LLC Texas Jackson Gas Light Company Mississippi Entergy Power & Light Company Mississippi The Light, Heat and Water Company of Jackson, Mississippi Mississippi Mississippi Power & Light Company Mississippi Entergy Utility Assets Holdings, LLC Texas Entergy Louisiana Properties, LLC Texas System Fuels, Inc. Louisiana Entergy Utility Assets, LLC Texas Entergy Utility Holding Company, LLC Texas Entergy Holdings Company LLC Delaware Entergy Arkansas, LLC Texas Arkansas Power & Light Company, LLC Arkansas Entergy Arkansas Restoration Funding, LLC Delaware Entergy Louisiana, LLC Texas Entergy Holdings Company LLC Delaware Prudential Oil & Gas L.L.C. Texas Gulf States Utilities Company Texas Varibus L.L.C. Texas Southern Gulf Railway LLC Texas Entergy Louisiana Investment Recovery Funding I, L.L.C. Louisiana Louisiana Power & Light Company, LLC Delaware Entergy New Orleans, LLC Texas Entergy New Orleans Storm Recovery Funding I, L.L.C. Louisiana New Orleans Public Service, Inc. Louisiana Entergy Mississippi, LLC Texas Jackson Gas Light Company Mississippi Entergy Power & Light Company Mississippi The Light, Heat and Water Company of Jackson, Mississippi Mississippi Mississippi Power & Light Company Mississippi Entergy Utility Group, Inc. Texas System Fuels, Inc. Louisiana Entergy Utility Holding Company, LLC Texas Entergy Holdings Company LLC Delaware Entergy Arkansas, LLC Texas Arkansas Power & Light Company, LLC Arkansas Entergy Arkansas Restoration Funding, LLC Delaware Entergy Louisiana, LLC Texas Entergy Holdings Company LLC Delaware Prudential Oil & Gas L.L.C. Texas Gulf States Utilities Company Texas Varibus L.L.C. Texas Southern Gulf Railway LLC Texas Entergy Louisiana Investment Recovery Funding I, L.L.C. Louisiana Louisiana Power & Light Company, LLC Delaware Entergy New Orleans, LLC Texas Entergy New Orleans Storm Recovery Funding I, L.L.C. Louisiana New Orleans Public Service, Inc. Louisiana Entergy Mississippi, LLC Texas Jackson Gas Light Company Mississippi Entergy Power & Light Company Mississippi The Light, Heat and Water Company of Jackson, Mississippi Mississippi Mississippi Power & Light Company Mississippi Entergy Utility Holding Company, LLC Texas Entergy Holdings Company LLC Delaware Entergy Arkansas, LLC Texas Arkansas Power & Light Company, LLC Arkansas Entergy Arkansas Restoration Funding, LLC Delaware Entergy Louisiana, LLC Texas Entergy Holdings Company LLC Delaware Prudential Oil & Gas L.L.C. Texas Gulf States Utilities Company Texas Varibus L.L.C. Texas Southern Gulf Railway LLC Texas Entergy Louisiana Investment Recovery Funding I, L.L.C. Louisiana Louisiana Power & Light Company, LLC Delaware Entergy New Orleans, LLC Texas Entergy New Orleans Storm Recovery Funding I, L.L.C. Louisiana New Orleans Public Service, Inc. Louisiana Entergy Mississippi, LLC Texas Jackson Gas Light Company Mississippi Entergy Power & Light Company Mississippi The Light, Heat and Water Company of Jackson, Mississippi Mississippi Mississippi Power & Light Company Mississippi Entergy Texas, Inc. Texas Entergy Texas Restoration Funding, LLC Delaware Entergy Gulf States Reconstruction Funding I, LLC Delaware Prudential Oil & Gas L.L.C. Texas Southern Gulf Railway LLC Texas GSG&T, Inc. Texas System Energy Resources, Inc. Arkansas Entergy Services Holding, Inc. Delaware Entergy Services, LLC Louisiana Entergy Account Services, LLC Delaware Entergy Operations, Inc. Delaware Entergy Enterprises, Inc. Louisiana Entergy Nuclear, Inc. Delaware TLG Services, Inc. Connecticut Entergy Nuclear PFS Company Delaware Entergy Nuclear Potomac Company Delaware Entergy Finance Holding, Inc. Arkansas Entergy Nuclear Holding Company # 1 Delaware Entergy Nuclear Generation Company Massachusetts Entergy Nuclear New York Investment Company, LLC Delaware Entergy Nuclear Indian Point 3, LLC Delaware Entergy Nuclear Holding Company # 2 Delaware Entergy Nuclear Operations, Inc. Delaware Entergy Nuclear Fuels Company Delaware Entergy Nuclear Vermont Finance Company Delaware Entergy Nuclear Holding Company, LLC Delaware Entergy Nuclear Midwest Investment Company, LLC Delaware Entergy Nuclear Palisades, LLC Delaware Entergy Nighthawk GP, LLC Delaware Entergy Nighthawk LP, LLC Delaware Entergy Nuclear Holding Company # 3, LLC Delaware Entergy Nuclear Indian Point 2, LLC Delaware Entergy Nuclear Nebraska, LLC Delaware Entergy Nuclear Vermont Investment Company, LLC Delaware Vermont Yankee Asset Retirement Management, LLC Delaware Entergy Power Marketing Holding I, Inc. Delaware Entergy Power Marketing Properties, LLC Delaware Entergy Power Marketing Holding II, Inc. Delaware Entergy Amalgamated Competitive Holdings, LLC Delaware Entergy Power Operations U.S. Inc. Delaware Entergy Power Gas Operations, LLC Delaware EWO Wind II, LLC Delaware Entergy Power Ventures, LLC Delaware EWO Marketing, LLC Delaware EAM Nelson Holding, LLC Delaware EK Holding III, LLC Delaware Entergy Power Investment Holding, Inc. Delaware Entergy Asset Management, Inc. Delaware Entergy Power, LLC Delaware Entergy International Holdings, LLC Delaware Entergy Global, LLC Arkansas Entergy International LTD LLC Delaware Exhibit 24February 26, 2019TO: Alyson M. MountDaniel T. FalstadRe: Power of Attorney - Form 10-KEntergy Corporation, referred to herein as the Company, will file with the Securities and Exchange Commission its Annual Report onForm 10-K for the year ended December 31, 2018, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.The Company and the undersigned persons, in their respective capacities as directors and/or officers of the Company, as specified inAttachment I, do each hereby make, constitute and appoint Alyson M. Mount and Daniel T. Falstad and each of them, their true andlawful Attorneys (with full power of substitution) for each of the undersigned and in his or her name, place and stead to sign and causeto be filed with the Securities and Exchange Commission the aforementioned Annual Report on Form 10-K and any amendmentsthereto.Yours very truly,ENTERGY CORPORATIONBy: /s/ Leo P. Denault Leo P. Denault Director, Chairman of the Boardand Chief Executive Officer /s/ John R. Burbank /s/ Alexis M. HermanJohn R. Burbank Alexis M. HermanDirector Director /s/ Patrick J. Condon /s/ Stuart L. LevenickPatrick J. Condon Stuart L. LevenickDirector Director /s/ Leo P. Denault /s/ Blanche L. LincolnLeo P. Denault Blanche L. LincolnDirector, Chairman of the Board,and Chief Executive Officer Director /s/ Kirkland H. Donald /s/ Karen A. PuckettKirkland H. Donald Karen A. PuckettDirector Director /s/ Philip L. Frederickson /s/ Andrew S. MarshPhilip L. Frederickson Andrew S. MarshDirector Executive Vice President and Chief FinancialOfficer ATTACHMENT IEntergy CorporationChairman of the Board and Chief Executive Officer - Leo P. Denault (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors - John R. Burbank, Patrick J. Condon, Leo P. Denault, Kirkland H. Donald, Philip L. Frederickson, Alexis M. Herman,Stuart L. Levenick, Blanche L. Lincoln and Karen A. PuckettFebruary 26, 2018TO: Alyson M. Mount.Daniel T. FalstadRe: Power of Attorney - Form 10-KEntergy Arkansas, LLC., Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc. andSystem Energy Resources, Inc. (collectively referred to herein as the Companies) will each file with the Securities and ExchangeCommission its Annual Report on Form 10-K for the year ended December 31, 2018, pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934.The Companies and the undersigned persons, in their respective capacities as directors and/or officers of the Companies, as specified inAttachment I, do each hereby make, constitute and appoint Alyson M. Mount and Daniel T. Falstad and each of them, their true andlawful Attorneys (with full power of substitution) for each of the undersigned and in his or her name, place and stead to sign and causeto be filed with the Securities and Exchange Commission the aforementioned Annual Report on Form 10-K and any amendmentsthereto.Yours very truly,ENTERGY ARKANSAS, LLCENTERGY LOUISIANA, LLCENTERGY MISSISSIPPI, LLCENTERGY NEW ORLEANS, LLCENTERGY TEXAS, INC. SYSTEM ENERGY RESOURCES, INC./s/ A. Christopher Bakken, III /s/ Steven C. McNealA. Christopher Bakken, IIIDirector of System Energy Resources, Inc. Steven C. McNealDirector of System Energy Resources, Inc. /s/ Haley R. Fisackerly /s/ Sallie T. RainerHaley R. FisackerlyDirector, Chairman of the Board, President and ChiefExecutive Officer of Entergy Mississippi, LLC Sallie T. RainerDirector, Chair of the Board, President and Chief ExecutiveOfficer of Entergy Texas, Inc. /s/ Paul D. Hinnenkamp /s/ David D. EllisPaul D. HinnenkampDirector of Entergy Arkansas, LLC, Entergy Louisiana,LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLCand Entergy Texas, Inc. David D. EllisDirector, Chairman of the Board, President and ChiefExecutive Officer of Entergy New Orleans, LLC /s/ Andrew S. Marsh /s/ Laura R. LandreauxAndrew S. MarshDirector and Executive Vice President and Chief FinancialOfficer of Entergy Arkansas, LLC, Entergy Louisiana, LLC,Entergy Mississippi, LLC, Entergy New Orleans, LLC,Entergy Texas, Inc. and System Energy Resources, Inc. Laura R. LandreauxDirector, Chairman of the Board, President and ChiefExecutive Officer of Entergy Arkansas, LLC /s/ Phillip R. May, Jr. /s/ Roderick K. WestPhillip R. May, Jr.Director, Chairman of the Board, President and ChiefExecutive Officer of Entergy Louisiana, LLC Roderick K. WestDirector of Entergy Arkansas, LLC, Entergy Louisiana, LLC,Entergy Mississippi, LLC, Entergy New Orleans, LLC andEntergy Texas, Inc. Director, Chairman of the Board, President and ChiefExecutive Officer of System Energy Resources, Inc. ATTACHMENT IEntergy Arkansas, LLCChairman of the Board, President and Chief Executive Officer - Laura R. Landreaux (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors - Paul D. Hinnenkamp, Laura R. Landreaux, Andrew S. Marsh and Roderick K. WestEntergy Louisiana, LLCChairman of the Board, President and Chief Executive Officer - Phillip R. May, Jr. (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors - Paul D. Hinnenkamp, Andrew S. Marsh, Phillip R. May, Jr. and Roderick K. WestEntergy Mississippi, LLCChairman of the Board, President and Chief Executive Officer - Haley R. Fisackerly (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors - Haley R. Fisackerly, Paul D. Hinnenkamp, Andrew S. Marsh and Roderick K. WestEntergy New Orleans, LLCChairman of the Board, President and Chief Executive Officer - David D. Ellis (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors - David D. Ellis, Paul D. Hinnenkamp, Andrew S. Marsh and Roderick K. WestEntergy Texas, Inc.Chair of the Board of Directors, President and Chief Executive Officer - Sallie T. Rainer (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors -Paul D. Hinnenkamp, Andrew S. Marsh, Sallie T. Rainer and Roderick K. WestSystem Energy Resources, Inc.Chairman of the Board, President and Chief Executive Officer - Roderick K. West (principal executive officer)Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)Directors - A. Christopher Bakken, III, Andrew S. Marsh, Steven C. McNeal and Roderick K. WestExhibit 31(a)CERTIFICATIONSI, Leo P. Denault, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Leo P. DenaultLeo P. DenaultChairman of the Board and Chief Executive Officerof Entergy CorporationDate: February 26, 2019Exhibit 31(b)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Corporation;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President andChief Financial Officer of Entergy CorporationDate: February 26, 2019Exhibit 31(c)CERTIFICATIONSI, Laura R. Landreaux, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Arkansas, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Laura R. LandreauxLaura R. LandreauxChair of the Board, President, andChief Executive Officer of Entergy Arkansas, LLCDate: February 26, 2019Exhibit 31(d)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Arkansas, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Arkansas, LLCDate: February 26, 2019Exhibit 31(e)CERTIFICATIONSI, Phillip R. May, Jr., certify that:1.I have reviewed this annual report on Form 10-K of Entergy Louisiana, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Phillip R. May, Jr.Phillip R. May, Jr.Chairman of the Board, President, and Chief ExecutiveOfficer of Entergy Louisiana, LLCDate: February 26, 2019Exhibit 31(f)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Louisiana, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Louisiana, LLCDate: February 26, 2019Exhibit 31(g)CERTIFICATIONSI, Haley R. Fisackerly, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Mississippi, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Haley R. FisackerlyHaley R. FisackerlyChairman of the Board, President, andChief Executive Officerof Entergy Mississippi, LLCDate:February 26, 2019Exhibit 31(h)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Mississippi, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Mississippi, LLCDate: February 26, 2019Exhibit 31(i)CERTIFICATIONSI, David D. Ellis, certify that:1.I have reviewed this annual report on Form 10-K of Entergy New Orleans, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ David D. EllisDavid D. EllisChairman of the Board, President, andChief Executive Officer of Entergy New Orleans, LLCDate: February 26, 2019Exhibit 31(j)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of Entergy New Orleans, LLC;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officer ofEntergy New Orleans, LLCDate: February 26, 2019Exhibit 31(k)CERTIFICATIONSI, Sallie T. Rainer, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Texas, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Sallie T. RainerSallie T. RainerChair of the Board, President, andChief Executive Officer of Entergy Texas, Inc.Date: February 26, 2019Exhibit 31(l)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of Entergy Texas, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Texas, Inc.Date: February 26, 2019Exhibit 31(m)CERTIFICATIONSI, Roderick K. West, certify that:1.I have reviewed this annual report on Form 10-K of System Energy Resources, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Roderick K. WestRoderick K. WestChairman of the Board, President, and Chief ExecutiveOfficer of System Energy Resources, Inc.Date: February 26, 2019Exhibit 31(n)CERTIFICATIONSI, Andrew S. Marsh, certify that:1.I have reviewed this annual report on Form 10-K of System Energy Resources, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (asdefined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designedunder our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; andd)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during theregistrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or personsperforming the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financialreporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and reportfinancial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant's internal control over financial reporting./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof System Energy Resources, Inc.Date: February 26, 2019Exhibit 32(a)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Leo P. Denault, Chairman of the Board and Chief Executive Officer of Entergy Corporation (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Leo P. DenaultLeo P. DenaultChairman of the Board andChief Executive Officerof Entergy CorporationDate: February 26, 2019Exhibit 32(b)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Corporation (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President andChief Financial Officer of Entergy CorporationDate: February 26, 2019Exhibit 32(c)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Laura R. Landreaux, Chair of the Board, President, and Chief Executive Officer of Entergy Arkansas, LLC (the “Company”),certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Laura R. LandreauxLaura R. Landreaux Chair of the Board, President, and Chief Executive Officer of Entergy Arkansas, LLCDate: February 26, 2019Exhibit 32(d)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Arkansas, LLC (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Arkansas, LLCDate: February 26, 2019Exhibit 32(e)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Phillip R. May, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy Louisiana, LLC (the“Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Phillip R. May, Jr.Phillip R. May, Jr.Chairman of the Board, President,and Chief Executive Officer of Entergy Louisiana, LLCDate: February 26, 2019Exhibit 32(f)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Louisiana, LLC (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Louisiana, LLCDate: February 26, 2019Exhibit 32(g)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Haley R. Fisackerly, Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, LLC (the“Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Haley R. FisackerlyHaley R. FisackerlyChairman of the Board, President, and Chief ExecutiveOfficer of Entergy Mississippi, LLCDate: February 26, 2019Exhibit 32(h)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Mississippi, LLC (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Mississippi, LLCDate: February 26, 2019Exhibit 32(i)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, David D. Ellis, Chairman of the Board, President, and Chief Executive Officer of Entergy New Orleans, LLC (the“Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ David D. EllisDavid D. EllisChairman of the Board, President, andChief Executive Officer ofEntergy New Orleans, LLCDate: February 26, 2019Exhibit 32(j)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy New Orleans, LLC (the “Company”),certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy New Orleans, LLCDate: February 26, 2019Exhibit 32(k)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Sallie T. Rainer, Chair of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Sallie T. RainerSallie T. RainerChair of the Board, President, andChief Executive Officerof Entergy Texas, Inc.Date: February 26, 2019Exhibit 32(l)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Texas, Inc. (the “Company”), certifypursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof Entergy Texas, Inc.Date: February 26, 2019Exhibit 32(m)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Roderick K. West, Chairman of the Board, President, and Chief Executive Officer of System Energy Resources, Inc. (the“Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Roderick K. WestRoderick K. WestChairman of the Board, President, and Chief ExecutiveOfficer of System Energy Resources, Inc.Date: February 26, 2019Exhibit 32(n)CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of System Energy Resources, Inc. (the “Company”),certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fullycomplies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company as of the dates and for the periods presented in the Report./s/ Andrew S. MarshAndrew S. MarshExecutive Vice President and Chief Financial Officerof System Energy Resources, Inc.Date: February 26, 2019

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