Entergy Corporation
and Subsidiaries
2021 Annual Report
Entergy Corporation and Subsidiaries 2021
Entergy, a Fortune 500 company headquartered in New Orleans, powers life for 3 million customers across
Arkansas, Louisiana, Mississippi and Texas. Entergy is creating a cleaner, more resilient energy future for
everyone with our diverse power generation portfolio, including increasingly carbon-free energy sources. With
roots in the Gulf South region for more than a century, Entergy is a recognized leader in corporate citizenship,
delivering more than $100 million in economic benefits to local communities through philanthropy and advocacy
efforts annually over the last several years. Our approximately 12,500 employees are dedicated to powering life
today and for future generations.
In addition to our Annual Report to Shareholders, Entergy produces an Integrated Report, highlighting our
economic, environmental and social performance. Producing an Integrated Report reinforces our belief that our
stakeholders – customers, employees, communities and owners – are linked and that we must deliver sustainable
value to all stakeholders in order to succeed.
We encourage you to visit our 2021 Integrated Report at integratedreport.entergy.com.
Contents
1
7
12
13
17
52
53
58
59
60
62
64
65
197
198
199
Letter to Our Stakeholders
Forward-Looking Information and Regulation G Compliance
Comparison of Five-Year Cumulative Return
Definitions
Management’s Financial Discussion and Analysis
Report of Management
Report of Independent Registered Public Accounting Firm
Consolidated Income Statements
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Balance Sheets
Consolidated Statements of Changes in Equity
Notes to Financial Statements
Board of Directors
Executive Officers
Investor Information
The future is on
As we look forward, into 2022 and beyond, I’m extremely optimistic and excited about Entergy’s future. I
see unmatched resilience and capability among our team of approximately 12,500 employees along with
the significant and unique opportunities we’re cultivating.
As we all experienced, 2021 in many ways was a continuation of 2020. Our team was faced with the
unpredictability of the pandemic, continued social and political turmoil, and extreme historic weather
events. And once again our team was up to the challenge. We remain united around our values,
committed to our stakeholders, and diligent in our actions. Because of our disciplined approach, we were
able to deliver on our strategic, operational, and financial objectives.
It is evident that our customers are driving our investment needs. And as their priorities turn to resiliency
and sustainability, we are partnering with them to achieve the outcomes they desire. These investments
will benefit all of our stakeholders and especially help customers meet their objectives. They will
strengthen our communities by providing cleaner air while creating great jobs, energize our employees
through the development of new and exciting solutions, and deliver value to our owners by capturing
unique growth opportunities.
While many are seeing 2022 as a year to move on, to start planning for the future under a new normal, we
already made that pivot. For Entergy it is a time to keep moving forward, just as we did in 2020 and 2021.
Delivering results
Despite the headwinds faced in 2021, we remained resilient. We delivered on our commitments.
Strategically
We are enhancing our ability to help our customers achieve their business goals and aspirations.
Specifically, we stood up a new customer organization and selected our first-ever Chief Customer Officer.
This team will work side by side with our customers to find new ways to meet their reliability,
affordability, and decarbonization goals. Our customer team is actively working to help our customers
reduce their scope 1 and scope 2 carbon emissions.
We also created a new Sustainable Planning, Development, and Operations organization. To drive greater
strategic direction and collaboration in addressing stakeholders’ sustainability expectations, we aligned
key internal teams to implement strategies to decarbonize our portfolio and respond to our customers’
sustainability needs while maintaining affordability and reliability. We also updated our long-term supply
plan to significantly increase renewable capacity. We expect 11 gigawatts of renewable capacity by the
end of 2030. That is more than double the estimate in our previous plan. Since the beginning of 2021, we
issued renewable requests for proposals totaling close to 2,000 megawatts.
Entergy completed the tax equity partnership for Searcy Solar in Arkansas. We designed this innovative
structure to help facilitate the economics of utility ownership while better aligning the interests of the
project owner and tax equity partner. This is an important step to make renewable plant ownership the
most economic choice for our customers.
1 In Texas, we proposed the Orange County Advanced Power Station. If approved, this will be our first
hydrogen-capable plant and will provide efficient power in the near term with the flexibility to utilize
clean hydrogen to produce energy in the future.
Our exit from the merchant business is nearly complete as we finalized the sale of Indian Point Energy
Center in New York. We also received approval from the Nuclear Regulatory Commission to sell our last
remaining wholesale nuclear unit, the Palisades Power Plant in Michigan. We expect the Palisades
transaction to be completed in mid-2022.
Diversity, inclusion, and belonging continues to be a key focus area for our Board, executive team and
employees as we work to maintain our winning culture. To that end, we created the Diversity and
Workforce Strategies Center of Excellence. The team has expanded our workforce development efforts
and developed new standards for hiring. We concluded 2021 with gains in both female and diverse
representation toward the goal of reflecting the rich diversity of the communities we serve.
Operationally
We continue to pursue operational excellence on behalf of our customers. Years of hard work and
strategic capital investment led to measurable system improvements as we achieved our best transmission
reliability performance in more than 20 years. Distribution service reliability also improved in 2021.
We completed the installation of more than 3 million advanced meters last year. This new technology
gives our customers valuable data about their energy use that will help to empower them to better control
both the use of electricity and what they spend. Advanced meters also provide a foundation for other
customer and grid technology investments that will further improve service and reliability.
In response to the damage caused by Hurricane Ida, we deployed the largest restoration workforce in our
history. This storm presented significant challenges, and we devised innovative solutions to restore power
to customers and communities sooner than otherwise would have been expected given the extent of the
damage. We deployed portable generators for key businesses and community services. We procured
materials and supplies from non-traditional sources, including utilizing pipe from the halted Keystone
Pipeline to harden the foundation of new distribution structures in areas with soft soil. This nimble,
unprecedented approach is just one of the ways we worked with partners to rethink how we model storm-
response for the future.
Financially
Entergy delivered once again in 2021 on its financial commitments and finished with a strong financial
foundation. We maintained solid liquidity throughout the year. Further, Moody’s reduced our cash flow
metric threshold, acknowledging the reduced risk to the overall company associated with successfully
exiting the wholesale merchant business. The funded status of our pension obligation also improved,
which benefits our Moody’s cash flow metric. These changes, combined with our ATM program
transactions, mean that our remaining equity need through 2024 is roughly one fourth of what we
communicated at our 2020 analyst day.
Storm recovery remains an area of significant progress for the company. We expect to receive more than
$3 billion in securitization proceeds by midyear, which includes a $1 billion down payment against
Hurricane Ida costs.
2 Entergy’s 2021 adjusted earnings per share of $6.02 was in the top half of our guidance range for the sixth
year in a row. This represents a 6.5% compound annual growth rate over the past five years. We also
achieved on our objective to align dividend growth with earnings growth, raising our dividend by 6% in
the fourth quarter of 2021. Entergy’s stock performance was in the second quartile total shareholder
return in 2021 compared to our Philadelphia Utility Sector Index peer group, which did not meet our top
quartile objective. As we consistently deliver steady, predictable earnings and dividend growth and make
progress capturing the unprecedented growth opportunities in front of us, we expect to see that success
reflected in improved stock price performance relative to our peers.
We see opportunities
Over the past several years, I have used this letter to describe how we continue to enhance our focus on
meeting the desires of our customers. By paying close attention to what matters to them—by listening—
we are better able to identify and develop investment opportunities.
Moreover, as we collaborate with customers to develop enhanced solutions, it has become clear that the
opportunity to grow the company is greater than initially believed.
Our customers are adapting to a changing world, and we stand ready to provide products and services
designed to help make that transition easier. We’re going beyond the basic tenets of reliability and
affordability (although make no mistake those are the bedrock of all we do) and working on the outcomes
that our customers desire.
For our residential customers, investments in digital customer channels, automated metering, asset
management, and resilience provide insights and tools to help them better manage their energy usage, pay
their bills, and adapt their service.
For business customers, this means lower electricity prices while also helping them meet their
sustainability objectives.
Two key opportunities for incremental growth have emerged from collaboration with our customers:
accelerating investment in system resilience and sustainability.
Resilience acceleration
Resilience is an area in which we have invested heavily for many years—more than $10 billion over the
last five years. And during recent major weather events, these investments have proven to be sound.
Structures built to more robust engineering standards were able to withstand the stress of extreme
weather.
Yet, as the frequency and intensity of these storms continue to increase, we need to do our part to make
the grid more durable and resilient as our customers work harder to enhance the durability of their own
homes and businesses. After the weather events of 2020, we embarked on developing a resilience
acceleration program to meet the new challenges presented by these changing weather patterns. This
resilience work will benefit our stakeholders through less damage, lower restoration costs, fewer
interruptions, and quicker recovery times after major storms.
3
These improvements also benefit our restoration workers, who in many cases are personally affected by
the storms. This proactive investment strategy creates value for our owners by reducing the impact of
storm risk on the balance sheet and delivering more affordable customer outcomes while driving a growth
opportunity.
Based on our early analysis, we could accelerate $5 billion to $15 billion of resilience investments,
representing a major point of focus as we evolve the business to be increasingly reliable and customer-
centric.
Sustainability
We have been a leader in environmental sustainability for over 20 years, and we are committed to
continuing to lead well into the future. In 2000, Entergy was the first utility to set CO2 reduction goals,
which we exceeded. We continued to raise the bar by setting new goals to reduce our utility carbon
emission rate by 50% from 2000 levels by 2030 and achieve net zero carbon emissions by 2050. Entergy
has one of the cleanest largescale utility generation fleets in the nation, including more than five gigawatts
of carbon-free nuclear capacity, a fleet of highly efficient gas resources, and a fast-growing portfolio of
renewable resources.
We see major increasing demand to deploy renewable offerings given both our environmental objectives
and the favorable operational and economic environment of renewable generation. In fact, under our
current plan, we now believe we will achieve our 2030 objective years earlier than originally expected.
Our customers are demanding more, particularly the large concentration of commercial and industrial
customers across Entergy’s service area. Again, directed by our customers’ desired outcomes, we are
finding potential opportunities to accelerate our investments in clean generation to help them meet their
decarbonization objectives.
We see strong interest for products designed to help customers reduce their scope 2 emissions from their
electricity purchases, including green tariffs. As this demand increases, it creates the potential to
accelerate renewables deployment beyond the 11 gigawatts currently planned by the end of 2030.
Clean electrification is also a primary means by which customers can achieve their sustainability
objectives. Entergy has a large industrial customer base – 44% of our 2021 demand came from industrial
customers. Some view this as a risk, thinking that industries like chlor alkali, petrochemical, refineries,
steel, and liquified natural gas export could not transition into a low-carbon future. We fundamentally
disagree.
Our industrial customers are efficient, diverse producers with infrastructure and labor competitive
advantages. Gulf Coast refineries produce a wide variety of feedstocks and finished products that are
highly integrated into the value chain, and this is not going away.
Even as products like cars evolve toward more sustainable options, the components of the products will
still be needed. The electric vehicles of tomorrow will still have tires, frames, and dashboards, all created
from feedstocks produced by Entergy’s industrial customers.
4
Nearly all of our large industrial customers have aggressive decarbonization goals, including net-zero
carbon emissions by 2050 or earlier. While some developed their decarbonization goals earlier than
others, all have customers and investors who increasingly demand progress on this dimension as we move
toward a cleaner future.
As I mentioned, we are working with our customers to develop products that will reduce their scope 2
emissions. But our customers’ needs go far beyond that. Many of them have on-site equipment and
processes that utilize fossil fuels and emit carbon dioxide. To achieve their decarbonization goals, these
customers will need to modify their operations and processes to eliminate scope 1 emissions. They are
evaluating a wide set of solutions including electrification, carbon capture and storage, clean hydrogen,
biofuels, and energy efficiency. Electrification is a top choice to replace and decarbonize aging equipment
such as boilers, turbines, and compressors. Carbon capture and storage and clean hydrogen will also need
to be powered by clean generation.
The magnitude of the opportunity is substantial, and the time is now. We see an addressable market
equivalent to 25% of Entergy’s current utility load by 2030, and more than double our current
sales by 2050. We are actively engaged in strategic conversations with our largest customers to
understand their needs. It’s clear that customers recognize Entergy as a valued partner to help them
achieve their decarbonization objectives. The solutions we design today will deliver meaningful outcomes
for all our stakeholders.
This opportunity is unique to Entergy, and we intend to seize it.
In closing
So, let me end where I started: I am excited about Entergy’s future – both imminently, and in the long
run.
Our employees have proven they are prepared to help power the lives of our stakeholders today,
tomorrow, and for future generations. And over the last several years they have demonstrated they are
ready for anything.
Our enhanced focus on the needs and desires of our customers has revealed significant and exciting
investment opportunities that are unique in the industry.
Everyone at Entergy is energized by the difference we can make in our communities with both our
philanthropy and our daily business decisions.
And we’re humbled and privileged by the role we play in helping the lives of those we touch.
Whether you are a customer, community member, employee, and/or owner – thank you. We are grateful
to serve you. We are committed to delivering meaningful outcomes for each of you to the exclusion of
none. There will always be disruptions and surprises in the world, but Entergy is resilient and ready for
anything that may occur.
5
Fundamentally, I believe the future is on for all of us, and Entergy will help lead the way.
Leo P. Denault
Chairman of the Board and Chief Executive Officer
March 25, 2022
6 FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE
Forward-Looking Information
In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each
makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals,
projections, strategies, and future events or performance. Such statements are “forward-looking
statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as
“may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,”
“potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify
forward-looking statements but are not the only means to identify these statements. Although each of
these registrants believes that these forward-looking statements and the underlying assumptions are
reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is
based on information current as of the date of this combined report and speaks only as of the date on
which such statement is made. Except to the extent required by the federal securities laws, these
registrants undertake no obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise.
Forward-looking statements involve a number of risks and uncertainties. There are factors that could
cause actual results to differ materially from those expressed or implied in the forward-looking
statements, including (a) those factors discussed or incorporated by reference in Item 1A. Risk Factors
contained in the Form 10-K for the year ended December 31, 2021, (b) those factors discussed or
incorporated by reference in Management’s Financial Discussion and Analysis contained in the Form
10-K for the year ended December 31, 2021, and (c) the following factors (in addition to others
described elsewhere in this combined report and in subsequent securities filings):
•
•
•
•
•
•
•
resolution of pending and future rate cases and related litigation, 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, as well as delays in cost recovery
resulting from these proceedings;
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 market rules and market and system
conditions in the MISO markets, the allocation of MISO system transmission upgrade costs,
the MISO-wide base rate of return on equity allowed or any MISO-related charges and credits
required by the FERC, and the effect of planning decisions that MISO makes with respect to
future transmission investments by the Utility operating companies;
changes in utility regulation, including with respect to retail and wholesale competition, the
ability to recover net utility assets and other potential stranded costs, and the application of
more stringent return on equity criteria, transmission reliability requirements or market power
criteria by the FERC or the U.S. Department of Justice;
changes in the regulation or regulatory oversight of Entergy’s owned or operated nuclear
generating facilities and nuclear materials and fuel, including with respect to the planned
shutdown and sale of Palisades, and the effects of new or existing safety or environmental
concerns regarding nuclear power plants and fuel;
resolution of pending or future applications, and related regulatory proceedings and litigation,
for license modifications or other authorizations required of nuclear generating facilities and
the effect of public and political opposition on these applications, regulatory proceedings, and
litigation;
the performance of and deliverability of power from Entergy’s generation resources, including
the capacity factors at Entergy’s nuclear generating facilities;
increases in costs and capital expenditures that could result from changing regulatory
7
FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Continued)
•
requirements, changing economic conditions, and emerging operating and industry issues;
the commitment of substantial human and capital resources required for the safe and reliable
operation and 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 other energy-related commodities;
the prices and availability of fuel and power Entergy must purchase for its Utility customers,
and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
• volatility and changes in markets for electricity, natural gas, uranium, emissions allowances,
and other energy-related commodities, 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 hedging and risk management transactions to governmental
regulation;
changes in environmental laws and regulations, agency positions or associated litigation,
including requirements for reduced emissions 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
of contaminated sites, wetlands protection and permitting, and changes in costs of compliance
with environmental laws and regulations;
changes in laws and regulations, agency positions, or associated litigation related to protected
species and associated critical habitat designations;
the effects of changes in federal, state, or local laws and regulations, and other governmental
actions or policies, including changes in monetary, fiscal, tax, environmental, trade/tariff,
domestic purchase requirements, or energy policies;
the effects of full or partial shutdowns of the federal government or delays in obtaining
government or regulatory actions or decisions;
•
•
•
• uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and
nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees
charged by the U.S. government or other providers related to such sites;
•
• variations in weather and the occurrence of hurricanes and other storms and disasters, including
uncertainties associated with efforts to remediate the effects of hurricanes (including from
Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Hurricane Ida), ice storms, or other
weather events and the recovery of costs associated with restoration, including accessing
funded storm reserves, federal and local cost recovery mechanisms, securitization, and
insurance, as well as any related unplanned outages;
effects of climate change, including the potential for increases in extreme weather events and
sea levels or coastal land and wetland loss;
the risk that an incident at any nuclear generation facility in the U.S. could lead to the
assessment of significant retrospective assessments and/or retrospective insurance premiums as
a result of Entergy’s participation in a secondary financial protection system and a utility
industry mutual insurance company;
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, including completion of projects timely and
within budget and to obtain the anticipated performance or other benefits, and its 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
8
FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Continued)
•
•
•
•
•
•
•
and events and circumstances that could influence economic conditions in those areas,
including power prices, and the risk that anticipated load growth may not materialize;
changes to federal income tax laws and regulations, including the continued impact of the Tax
Cuts and Jobs Act and its intended and unintended consequences on financial results and future
cash flows;
the effects of Entergy’s strategies to reduce tax payments;
changes in the financial markets and regulatory requirements for the issuance of securities,
particularly as they affect access to capital and Entergy’s ability to refinance existing securities
and fund investments and acquisitions;
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes
in general corporate ratings, and changes in the rating agencies’ ratings criteria;
changes in inflation and interest rates;
the effects 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 changes relating to new, developing, or alternative sources of
generation such as distributed energy and energy storage, renewable energy, energy efficiency,
demand side management and other measures that reduce load and government policies
incentivizing development of the foregoing, and (iii) competition from other companies
offering products and services to Entergy’s customers based on new or emerging technologies
or alternative sources of generation;
•
•
• Entergy’s ability to effectively formulate and implement plans to reduce its carbon emission
rate and aggregate carbon emissions, including its commitment to achieve net-zero carbon
emissions by 2050, and the potential impact on its business of attempting to achieve such
objectives;
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 a catastrophic event such as a nuclear
accident or a natural gas pipeline explosion;
the effects of a global event or pandemic, such as the COVID-19 global pandemic, including
economic and societal disruptions; volatility in the capital markets (and any related increased
cost of capital or any inability to access the capital markets or draw on available bank credit
facilities); reduced demand for electricity, particularly from commercial and industrial
customers; increased or unrecoverable costs; supply chain, vendor, and contractor delays, cost
increases or other disruptions; delays in completion of capital or other construction projects,
maintenance, and other operations activities, including prolonged or delayed outages; impacts
to Entergy’s workforce availability, health, or safety; increased cybersecurity risks as a result
of many employees telecommuting; increased late or uncollectible customer payments;
regulatory delays; executive orders affecting, or increased regulation of, Entergy’s business;
changes in credit ratings or outlooks as a result of any of the foregoing; or other adverse
impacts on Entergy’s ability to execute on its business strategies and initiatives or, more
generally, on Entergy’s results of operations, financial condition, and liquidity;
• Entergy’s ability to attract and retain talented management, directors, and employees with
specialized skills;
changes in accounting standards and corporate governance;
• Entergy’s ability to attract, retain, and manage an appropriately qualified workforce;
•
• declines in the market prices of marketable securities and resulting funding requirements and
the effects on benefits costs for Entergy’s defined benefit pension and other postretirement
benefit plans;
9
FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Continued)
•
•
•
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 decommission Entergy’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 shutdown and
sale of Palisades;
the effectiveness of Entergy’s risk management policies and procedures and the ability and
willingness of its counterparties to satisfy their financial and performance commitments; and
• Entergy and its subsidiaries’ ability to successfully execute on their business strategies,
•
including their ability to complete strategic transactions that Entergy may undertake.
10
FORWARD-LOOKING INFORMATION AND REGULATION G COMPLIANCE (Concluded)
Regulation G Compliance
This report includes the non-GAAP financial measure of adjusted earnings per share. The reconciliation
of this measure to the most directly comparable GAAP measure is below.
GAAP to Non-GAAP Reconciliation - Adjusted Earnings and Earnings Per Share
($ in millions, except diluted average common shares outstanding)
Net income attributable to ETR Corp
Less adjustments:
Utility – gain on sale
Utility – income tax valuation allowance
Utility – provision for uncertain tax position
Utility – state corporate income tax rate change
P&O – state corporate income tax rate change
EWC
ETR Adjusted Earnings
Diluted average common shares outstanding (in millions)
2021
1,118
11
(8)
(5)
29
(1)
(123)
1,215
202
(After-tax, $ per share)(a)
Net income attributable to ETR Corp
Less adjustments:
Utility – gain on sale
Utility – income tax valuation allowance
Utility – provision for uncertain tax position
Utility – state corporate income tax rate change
EWC
ETR Adjusted Earnings
Calculations may differ due to rounding
(a) Per share amounts are calculated by dividing the corresponding earnings (loss) by the diluted average number of common shares
0.05
(0.04)
(0.02)
0.14
(0.61)
6.02
5.54
outstanding for the period.
11
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
The following graph compares the performance of the common stock of Entergy Corporation with the
Philadelphia Utility Index and the S&P 500 Index (each of which includes Entergy Corporation) for the
last five years ended December 31.
$250
$200
$150
$100
Entergy Corporation
Philadelphia Utility Index
S&P 500 Index
2016
2017
2018
2019
2020
2021
Entergy Corpration
Philadelphia Utility Index
S&P 500 Index
2016
$100.00
$100.00
$100.00
2017
$115.90
$112.82
$121.82
2018
$128.18
$116.79
$116.47
2019
$185.00
$148.11
$153.13
2020
$159.64
$152.14
$181.29
2021
$186.98
$179.90
$233.28
Assumes $100 invested at the closing price on Dec. 31, 2016, in Entergy Corporation common stock, the
Philadelphia Utility Index and the S&P 500 Index, and reinvestment of all dividends.
Source: Bloomberg
12
Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym
Term
DEFINITIONS
AFUDC
ALJ
ANO 1 and 2
APSC
ASU
Board
Cajun
capacity factor
City Council
COVID-19
D.C. Circuit
DOE
Entergy
Entergy Corporation
Entergy Gulf States, Inc.
Entergy Gulf States
Louisiana
Entergy Louisiana
Entergy Texas
Entergy Wholesale
Commodities
EPA
ERCOT
FASB
FERC
FitzPatrick
Allowance for Funds Used During Construction
Administrative Law Judge
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
Arkansas Public Service Commission
Accounting Standards Update issued by the FASB
Board of Directors of Entergy Corporation
Cajun Electric Power Cooperative, Inc.
Actual plant output divided by maximum potential plant output for the period
Council of the City of New Orleans, Louisiana
The novel coronavirus disease declared a pandemic by the World Health
Organization and the Centers for Disease Control and Prevention in March 2020
U.S. Court of Appeals for the District of Columbia Circuit
United States Department of Energy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation, a Delaware corporation
Predecessor company for financial reporting purposes to Entergy Gulf States
Louisiana that included the assets and business operations of both Entergy Gulf
States Louisiana and Entergy Texas
Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company
formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.
and the successor company to Entergy Gulf States, Inc. for financial reporting
purposes. The term is also used to refer to the Louisiana jurisdictional business of
Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the
business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana, LLC, a Texas limited liability company formally created as part
of the combination of Entergy Gulf States Louisiana and the company formerly
known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public
utility company and the successor to Old Entergy Louisiana for financial reporting
purposes.
Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional
separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas
jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy’s non-utility business segment primarily comprised of the ownership,
operation, and decommissioning 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 customers
United States Environmental Protection Agency
Electric Reliability Council of Texas
Financial Accounting Standards Board
Federal Energy Regulatory Commission
James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an
Entergy subsidiary in the Entergy Wholesale Commodities business segment,
which was sold in March 2017
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System
Energy
13
Abbreviation or Acronym
Term
DEFINITIONS (Continued)
GWh
HLBV
Independence
Indian Point 2
Indian Point 3
IRS
ISO
kV
kW
kWh
LDEQ
LPSC
Mcf
MISO
MMBtu
MPSC
MW
MWh
Nelson Unit 6
Gigawatt-hour(s), which equals one million kilowatt-hours
Hypothetical liquidation at book value
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25%
by Entergy Mississippi, and 7% by Entergy Power, LLC
Unit 2 of Indian Point Energy Center (nuclear), previously owned by an Entergy
subsidiary in the Entergy Wholesale Commodities business segment, which ceased
power production in April 2020 and was sold in May 2021
Unit 3 of Indian Point Energy Center (nuclear), previously owned by an Entergy
subsidiary in the Entergy Wholesale Commodities business segment, which ceased
power production in April 2021 and was sold in May 2021
Internal Revenue Service
Independent System Operator
Kilovolt
Kilowatt, which equals one thousand watts
Kilowatt-hour(s)
Louisiana Department of Environmental Quality
Louisiana Public Service Commission
1,000 cubic feet of gas
Midcontinent
organization
Independent System Operator,
Inc., a
regional
transmission
One million British Thermal Units
Mississippi Public Service Commission
Megawatt(s), which equals one thousand kilowatts
Megawatt-hour(s)
Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is
co-owned by Entergy Louisiana (57.5%) and Entergy Texas (42.5%) and 10.9% of
which is owned by an Entergy subsidiary in the Entergy Wholesale Commodities
business segment
Net debt to net capital ratio Gross debt less cash and cash equivalents divided by total capitalization less cash
and cash equivalents
NRC
NYPA
Palisades
Parent & Other
Pilgrim
PPA
PRP
PUCT
Nuclear Regulatory Commission
New York Power Authority
Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy
Wholesale Commodities business segment
The portions of Entergy not included in the Utility or Entergy Wholesale
Commodities segments, primarily consisting of the activities of the parent
company, Entergy Corporation
Pilgrim Nuclear Power Station (nuclear), previously owned by an Entergy subsidiary
in the Entergy Wholesale Commodities business segment, which ceased power
production in May 2019 and was sold in August 2019
Purchased power agreement or power purchase agreement
Potentially responsible party (a person or entity that may be responsible for
remediation of environmental contamination)
Public Utility Commission of Texas
14 Abbreviation or Acronym
Term
DEFINITIONS (Concluded)
Registrant Subsidiaries
River Bend
RTO
SEC
System Agreement
System Energy
TWh
Unit Power Sales
Agreement
Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC,
Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources,
Inc.
River Bend Station (nuclear), owned by Entergy Louisiana
Regional transmission organization
Securities and Exchange Commission
Agreement, effective January 1, 1983, as modified, among the Utility operating
companies relating to the sharing of generating capacity and other power
resources. The agreement terminated effective August 2016.
System Energy Resources, Inc.
Terawatt-hour(s), which equals one billion kilowatt-hours
Agreement, dated as of June 10, 1982, as amended and approved by the FERC,
among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New
Orleans, and System Energy, relating to the sale of capacity and energy from
System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric
power, with a small amount of natural gas distribution
Utility operating companies Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans,
and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), previously owned by an Entergy
subsidiary in the Entergy Wholesale Commodities business segment, which ceased
power production in December 2014 and was disposed of in January 2019
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy
Louisiana
weather-adjusted usage
White Bluff
Electric usage excluding the effects of deviations from normal weather
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas
15 [This page intentionally left blank]
16
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.
•
•
The Utility business segment includes the generation, transmission, distribution, and sale of electric power
in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and
operation of a small natural gas distribution business.
The Entergy Wholesale Commodities business segment includes the ownership, operation, and
decommissioning of nuclear power plants located in the northern United States and the sale of the electric
power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also
provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that
sell the electric power produced by those plants to wholesale customers. See “Entergy Wholesale
Commodities Exit from the Merchant Power Business” below for discussion of the operation and
planned shutdown and sale of each of the Entergy Wholesale Commodities nuclear power plants, including
the planned shutdown and sale of Palisades, the only remaining operating plant in Entergy Wholesale
Commodities’ merchant nuclear fleet.
Following are the percentages of Entergy’s consolidated revenues generated by its operating segments and
the percentage of total assets by operating segment. Net income or loss generated by the operating segments is
discussed in the sections that follow.
Segment
% of Revenue
2020
2019
2021
Utility
Entergy Wholesale Commodities
Parent & Other (a)
94
6
88
12
— — —
91
9
2021
100
2
(2)
% of Total Assets
2020
2019
96
7
(3)
96
8
(4)
See Note 13 to the financial statements for further financial information regarding Entergy’s business segments.
(a)
Parent & Other includes eliminations, which are primarily intersegment activity.
Hurricane Ida
In August 2021, Hurricane Ida caused extensive damage to the Entergy distribution and, to a lesser extent,
transmission systems across Louisiana resulting in widespread power outages. Total restoration costs for the repair
and/or replacement of the electrical system damaged by Hurricane Ida for Entergy Louisiana and Entergy New
Orleans are currently estimated to be approximately $2.7 billion. Also, Utility revenues in 2021 were adversely
affected by extended power outages resulting from the hurricane.
Entergy has recorded accounts payable for the estimated costs incurred that were necessary to return
customers to service. Entergy recorded corresponding regulatory assets of approximately $1.1 billion and
construction work in progress of approximately $1.6 billion. Entergy recorded the regulatory assets in accordance
with its accounting policies and based on the historic treatment of such costs in its service area because management
believes that recovery through some form of regulatory mechanism is probable. There are well-established
mechanisms and precedent for addressing these catastrophic events and providing for recovery of prudently incurred
storm costs in accordance with applicable regulatory and legal principles. Because Entergy has not gone through
the regulatory process regarding these storm costs, there is an element of risk, and Entergy is unable to predict with
certainty the degree of success it may have in its recovery initiatives, the amount of restoration costs that it may
ultimately recover, or the timing of such recovery.
17
Entergy is considering all available avenues to recover storm-related costs from Hurricane Ida, including
federal government assistance and securitization financing. In September 2021, Entergy Louisiana filed an
application at the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of
approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs
associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy
Louisiana sought approval for the creation and funding of a $1 billion restricted escrow account for Hurricane Ida
restoration costs. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves.
In February 2022, Entergy New Orleans filed with the City Council a securitization application requesting that the
City Council review Entergy New Orleans’s storm reserve and increase the storm reserve funding level to
$150 million, to be funded through securitization. Storm cost recovery or financing will be subject to review by
applicable regulatory authorities.
Results of Operations
2021 Compared to 2020
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other,
and Entergy comparing 2021 to 2020 showing how much the line item increased or (decreased) in comparison to the
prior period.
Entergy
Wholesale
Commodities
Utility
Parent &
Other (a)
Entergy
(In Thousands)
2020 Net Income (Loss) Attributable to Entergy
Corporation
$1,800,223
($64,951)
($346,938) $1,388,334
Operating revenues
Fuel, fuel-related expenses, and gas purchased for
resale
Purchased power
Other regulatory charges (credits) - net
Other operation and maintenance
Asset write-offs, impairments, and related charges
Taxes other than income taxes
Depreciation and amortization
Other income (deductions)
Interest expense
Other expenses
Income taxes
Preferred dividend requirements of subsidiaries
and noncontrolling interest
2021 Net Income (Loss) Attributable to Entergy
1,873,960
(244,705)
5
1,629,260
878,372
362,066
97,019
179,005
—
44,050
128,953
75,588
43,153
(1,723)
546,520
15,357
5,339
—
(213,173)
237,002
(36,121)
(57,624)
(87,105)
(9,098)
(85,248)
(130,318)
(4)
4
—
163
—
(479)
(129)
9,063
14,976
—
(103,322)
893,725
367,409
97,019
(34,005)
237,002
7,450
71,200
(2,454)
49,031
(86,971)
312,880
(18,064)
—
(28)
(18,092)
Corporation
$1,490,420
($122,877)
($249,051) $1,118,492
(a)
Parent & Other includes eliminations, which are primarily intersegment activity.
Results of operations for 2021 include a charge of $340 million ($268 million net-of-tax), reflected in
“Asset write-offs, impairments, and related charges,” as a result of the sale of the Indian Point Energy Center in
May 2021. See Note 14 to the financial statements for further discussion of the sale of the Indian Point Energy
Center.
18
Results of operations for 2020 include resolution of the 2014-2015 IRS audit, which resulted in a reduction
in deferred income tax expense of $230 million that includes a $396 million reduction in deferred income tax
expense at Utility related to the basis of assets contributed in the 2015 Entergy Louisiana and Entergy Gulf States
Louisiana business combination, including the recognition of previously uncertain tax positions, and deferred
income tax expense of $105 million at Entergy Wholesale Commodities and $61 million at Parent and Other
resulting from the revaluation of net operating losses as a result of the release of the reserves. See Note 3 to the
financial statements for further discussion of the IRS audit resolution.
Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing 2021 to 2020:
2020 operating revenues
Fuel, rider, and other revenues that do not
significantly affect net income
Retail electric price
Volume/weather
System Energy provision for rate refund
Return of unprotected excess accumulated
deferred income taxes to customers
2021 operating revenues
Amount
(In Millions)
$9,171
1,409
404
55
25
(19)
$11,045
The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel,
purchased power, and other costs such that the revenues and expenses associated with these items generally offset
and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes
the revenue variance associated with these items.
The retail electric price variance is primarily due to:
•
•
•
•
•
an increase in Entergy Arkansas’s formula rate plan rates effective May 2021;
increases in Entergy Louisiana’s overall formula rate plan revenues, including an interim increase effective
April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station, an
increase in the transmission recovery mechanism effective September 2020, an interim increase effective
December 2020 due to the inclusion of the first-year revenue requirement for the Washington Parish Energy
Center, and increases in the transmission and distribution recovery mechanisms effective September 2021;
increases in Entergy Mississippi’s formula rate plan rates effective April 2020, April 2021, and July 2021;
an interim increase in Entergy New Orleans’s formula rate plan revenues resulting from the recovery of
New Orleans Power Station costs, effective November 2020, and a rate increase effective November 2021;
and
the implementation of the generation cost recovery rider, which includes the first-year revenue requirement
for the Montgomery County Power Station, effective January 2021, an increase in the transmission cost
recovery factor rider effective March 2021, and an increase in the distribution cost recovery factor rider
effective March 2021, each at Entergy Texas.
See Note 2 to the financial statements for further discussion of the regulatory proceedings discussed above.
19
The volume/weather variance is primarily due to an increase of 3,574 GWh, or 3%, in billed electricity
usage, including the effect of more favorable weather on residential sales and an increase in industrial usage,
partially offset by a decrease in weather-adjusted residential usage and a decrease in usage during the unbilled sales
period. The increase in industrial usage is primarily due to an increase in demand from expansion projects,
primarily in the transportation, metals, and chemicals industries, and an increase in demand from cogeneration
customers. The decrease in weather-adjusted residential usage was primarily due to the impact that the COVID-19
pandemic had on prior year usage.
The System Energy provision for rate refund variance is due to a provision for rate refund recorded in 2020
to reflect a one-time credit of $25 million provided for in the Federal Power Act section 205 filing made by System
Energy in December 2020. The one-time credit was made in the first quarter 2021. See Note 2 to the financial
statements for further discussion of the proceedings involving System Energy at the FERC.
The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at
the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of
unprotected excess accumulated deferred income taxes began in second quarter 2018. In 2021, $87 million was
returned to customers through reductions in operating revenues as compared to $68 million in 2020. There is no
effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See
Note 2 to the financial statements for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.
Billed electric energy sales for Utility for the years ended December 31, 2021 and 2020 are as follows:
Residential
Commercial
Industrial
Governmental
Total retail
Sales for resale
Total
2021
2020
(GWh)
%
Change
35,669
26,818
49,819
2,438
114,744
16,656
131,400
35,173
26,466
47,117
2,414
111,170
13,658
124,828
1
1
6
1
3
22
5
See Note 19 to the financial statements for additional discussion of operating revenues.
Entergy Wholesale Commodities
Operating revenues for Entergy Wholesale Commodities decreased from $943 million for 2020 to $698
million for 2021 primarily due to the shutdown of Indian Point 2 in April 2020 and the shutdown of Indian Point 3
in April 2021.
20
Following are key performance measures for Entergy Wholesale Commodities for 2021 and 2020:
Owned capacity (MW) (a)
GWh billed
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor
GWh billed
Average energy price ($/MWh)
Average capacity price ($/kW-month)
Refueling outage days:
2021
1,205
11,328
97%
9,836
$54.56
$0.26
2020
2,246
20,581
93%
18,863
$40.33
$1.92
Palisades
—
52
(a)
The reduction in owned capacity is due to the shutdown of the 1,041 MW Indian Point 3 plant in April
2021.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $2,478 million for 2020 to $2,657 million for
2021 primarily due to:
•
•
•
•
•
•
•
•
•
an increase of $49 million in compensation and benefits costs in 2021 primarily due to higher incentive-
based compensation accruals in 2021 as compared to prior year, lower healthcare claims activity in 2020 as
a result of the COVID-19 pandemic, an increase in healthcare cost rates, and an increase in net periodic
pension and other postretirement benefits costs as a result of a decrease in the discount rate used to value
the benefit liabilities. See “Critical Accounting Estimates” below and Note 11 to the financial statements
for further discussion of pension and other postretirement benefit costs;
an increase of $28 million in distribution operations expenses primarily due to higher reliability costs;
an increase of $27 million primarily due to an increase in contract costs related to customer solutions and
sustainability initiatives, including customer service center support and enhanced customer billing;
an increase of $20 million in non-nuclear generation expenses primarily due to higher expenses associated
with plants placed in service, including the Lake Charles Power Station, which began commercial operation
in March 2020; the New Orleans Power Station, which began commercial operation in May 2020; the
Washington Parish Energy Center, purchased in November 2020; and the Montgomery County Power
Station, which began commercial operation in January 2021;
an increase of $16 million in nuclear generation expenses primarily due to higher nuclear labor costs,
including contract labor, and a higher scope of work performed in 2021 as compared to 2020;
an increase of $15 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to
the financial statements for further information on the recovery of these costs;
the effects of recording final judgments to resolve claims in the Waterford 3 damages case and the Grand
Gulf damages case in 2020 and the River Bend damages case in 2021, each against the DOE related to spent
nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $18 million
in 2020 of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense
compared to the reimbursement of approximately $4 million in 2021. See Note 8 to the financial statements
for discussion of the spent nuclear fuel litigation;
lower nuclear insurance refunds of $13 million; and
several individually insignificant items.
21
The increase was partially offset by a decrease of $19 million in meter reading expenses as a result of the
deployment of advanced metering systems and a gain of $15 million, recorded in 2021, on the sale of a pipeline.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from
higher assessments and increases in franchise taxes resulting from an increase in revenue collected.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including
the Lake Charles Power Station, the Montgomery County Power Station, and the Washington Parish Energy Center.
Other regulatory charges (credits) - net includes:
•
•
•
•
•
•
•
regulatory charges of $44 million, recorded in the fourth quarter 2020 at Entergy Arkansas, to reflect the
2019 historical year netting adjustment included in the APSC’s December 2020 order in the 2020 formula
rate plan proceeding. See Note 2 to the financial statements for discussion of Entergy Arkansas’s 2020
formula rate plan filing;
regulatory credits of $47 million, recorded in 2020 at Entergy Arkansas, to reflect the amortization of the
2018 historical year netting adjustment reflected in the 2019 formula rate plan filing. See Note 2 to the
financial statements for discussion of Entergy Arkansas’s 2019 formula rate plan filing;
the reversal in 2021 of the remaining $39 million regulatory liability for Entergy Arkansas’s 2019 historical
year netting adjustment as part of its 2020 formula rate plan proceeding. See Note 2 to the financial
statements for discussion of Entergy Arkansas’s 2020 formula rate plan filing;
regulatory charges of $33 million, recorded in the fourth quarter 2020 at Entergy Louisiana, due to a
settlement with the IRS related to the uncertain tax position regarding Hurricane Katrina and Hurricane Rita
Louisiana Act 55 financing because the savings will be shared with customers. See Note 3 to the financial
statements for further discussion of the settlement and savings obligation;
regulatory charges of $29 million, recorded in the first quarter 2020 at Entergy Louisiana, due to a
settlement with the IRS related to the uncertain tax position regarding the Hurricane Isaac Louisiana Act 55
financing because the savings will be shared with customers. See Note 3 to the financial statements for
further discussion of the settlement and savings obligation;
regulatory credits of $20 million, recorded in the second quarter 2021 at Entergy Mississippi, to reflect the
effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding. See Note 2 to the
financial statements for discussion of Entergy Mississippi’s 2021 formula rate plan filing; and
regulatory credits of $19 million, recorded in the fourth quarter 2021 at Entergy Mississippi, to reflect that
the 2021 earned return is below the formula bandwidth. See Note 2 to the financial statements for
discussion of Entergy Mississippi’s formula rate plan filings.
In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-
related expenses and nuclear decommissioning trust earnings plus asset retirement obligation related costs collected
in revenue.
Other income increased primarily due to changes in decommissioning trust fund activity, including portfolio
rebalancing of the decommissioning trust funds in 2021, partially offset by a decrease in the allowance for equity
funds used during construction due to higher construction work in progress in 2020, including the Lake Charles
Power Station project and the Montgomery County Power Station project.
Interest expense increased primarily due to:
•
•
•
the issuances by Entergy Louisiana of $1.1 billion of 0.62% Series mortgage bonds, $300 million of 2.90%
Series mortgage bonds, and $300 million of 1.60% Series mortgage bonds, each in November 2020;
the issuances by Entergy Louisiana of $500 million of 2.35% Series mortgage bonds and $500 million of
3.10% Series mortgage bonds, each in March 2021;
the issuance by Entergy Louisiana of $1 billion of 0.95% Series mortgage bonds in October 2021;
22 •
•
the issuance by Entergy Mississippi of $170 million of 3.50% Series mortgage bonds in May 2020 and an
additional $200 million in a reopening of the same series in March 2021; and
a decrease in the allowance for borrowed funds used during construction due to higher construction work in
progress in 2020, including the Lake Charles Power Station project and the Montgomery County Power
Station project.
The increase was partially offset by the repayments by Entergy Louisiana of $200 million of 5.25% Series mortgage
bonds and $100 million of 4.70% Series mortgage bonds, each in December 2020 and the repayment by Entergy
Louisiana of $200 million of 4.8% Series mortgage bonds in May 2021.
See Note 5 to the financial statements for a discussion of long-term debt.
Noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of
Entergy Arkansas’s tax equity partnership for the Searcy Solar facility under HLBV accounting. Entergy Arkansas
has recorded a regulatory charge of $18 million in 2021 to defer the difference between the losses allocated to the
tax equity partner under the HLBV method of accounting and the earnings/loss that would have been allocated to
the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial
statements for discussion of the HLBV method of accounting.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $500 million for 2020 to $287 million for 2021
primarily due to:
•
•
a decrease of $162 million resulting from the absence of expenses from Indian Point 2, after it was shut
down in April 2020, and Indian Point 3, after it was shut down in April 2021; and
a decrease of $53 million in severance and retention expenses. Severance and retention expenses were
incurred in 2021 and 2020 due to management’s strategy to exit the Entergy Wholesale Commodities
merchant power business.
See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below for a discussion of
management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’
merchant nuclear fleet. See Note 13 to the financial statements for further discussion of severance and retention
expenses.
Asset write-offs, impairments, and related charges for 2021 include a charge of $340 million ($268 million
net-of-tax) as a result of the sale of the Indian Point Energy Center in May 2021, partially offset by the effect of
recording in 2021 a final judgment in the amount of $83 million ($66 million net-of-tax) to resolve the Indian Point
2 third round and Indian Point 3 second round combined damages case against the DOE related to spent nuclear fuel
storage costs. Asset write-offs, impairments, and related charges for 2020 include impairment charges of $19
million ($15 million net-of-tax) primarily as a result of expenditures for capital assets. These costs were charged to
expense as incurred as a result of the impaired fair 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 exit the Entergy Wholesale Commodities merchant power business. See “Entergy Wholesale
Commodities Exit from the Merchant Power Business” below for a discussion of management’s strategy to shut
down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 14
to the financial statements for a discussion of the impairment of long-lived assets and the sale of the Indian Point
Energy Center. See Note 8 to the financial statements for further discussion of spent nuclear fuel litigation.
Taxes other than income taxes decreased primarily due to lower ad valorem taxes and lower payroll taxes.
23 Depreciation and amortization expenses decreased primarily due to:
•
•
the absence of depreciation expense from Indian Point 2, after it was shut down in April 2020, and from
Indian Point 3, after it was shut down in April 2021; and
the effect of recording in 2021 a final judgment to resolve claims in the Palisades damages case against the
DOE related to spent nuclear fuel storage costs. The damages awarded included $9 million of spent nuclear
fuel storage costs previously recorded as depreciation expense. See Note 8 to the financial statements for
discussion of spent nuclear fuel litigation.
Other income decreased primarily due to lower gains on decommissioning trust fund investments including
the absence of earnings from nuclear decommissioning trust funds that were transferred in the sale of the Indian
Point Energy Center in May 2021. The decrease was partially offset by lower non-service pension costs. See Notes
15 and 16 to the financial statements for a discussion of decommissioning trust fund investments. See Note 14 to
the financial statements for a discussion of the sale of the Indian Point Energy Center. See Note 11 to the financial
statements for a discussion of pension and other postretirement benefits costs.
Other expenses decreased primarily due to the absence of decommissioning expense from Indian Point 2
and Indian Point 3, after the sale of the Indian Point Energy Center in May 2021. See Note 14 to the financial
statements for a discussion of the sale of the Indian Point Energy Center.
Income Taxes
The effective income tax rates were 14.6% for 2021 and (9.5%) for 2020. See Note 3 to the financial
statements for a reconciliation of the federal statutory rate of 21% to the effective income tax rates, and for
additional discussion regarding income taxes.
2020 Compared to 2019
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Results of Operations” in
Item 7 of Entergy’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on
February 26, 2021 for discussion of results of operations for 2020 compared to 2019.
Entergy Wholesale Commodities Exit from the Merchant Power Business
Entergy sold its FitzPatrick plant to Exelon in March 2017 and, as discussed below, transferred its Vermont
Yankee plant to NorthStar in January 2019, sold its Pilgrim plant to Holtec in August 2019, and sold its Indian Point
plants to Holtec in May 2021. Entergy also sold the Rhode Island State Energy Center, a natural gas-fired
combined cycle generating plant, in December 2015. As of December 31, 2021, Entergy Wholesale Commodities’
only remaining operating nuclear plant is the 811 MW Palisades plant, which is under contract to be sold, subject to
certain conditions, after it is shut down in May 2022.
These plant sales and the contract to sell Palisades are the result of a strategy that Entergy has undertaken to
manage and reduce the risk of the Entergy Wholesale Commodities business, including exiting the merchant power
business. Management evaluated the challenges for each of the plants based on a variety of factors such as their
market for both energy and capacity, their size, their contracted positions, and the amount of investment required to
continue to operate and maintain the safety and integrity of the plants, including the estimated asset retirement costs.
Entergy Wholesale Commodities also includes the ownership of Big Rock Point, a non-operating nuclear
facility in Michigan, that was acquired when Entergy purchased the Palisades nuclear plant. Big Rock Point is
under contract to be sold with the Palisades plant. In addition, Entergy Wholesale Commodities provides operations
and management services, including decommissioning-related services, to nuclear power plants owned by non-
affiliated entities in the United States. A relatively minor portion of the Entergy Wholesale Commodities business
24 is the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to
wholesale customers.
Shutdown and Disposition of Vermont Yankee
On December 29, 2014, the Vermont Yankee plant ceased power production and entered its
decommissioning phase. In November 2016, Entergy entered into an agreement to transfer 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 transaction included the transfer of the nuclear
decommissioning trust fund and the asset retirement obligation 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 of Vermont agencies and other interested parties that set forth the terms on which the
agencies and parties supported the Vermont Public Utility Commission’s approval of the transaction. The
agreements provided additional financial assurance for decommissioning, spent fuel management and site
restoration, and detailed the site restoration standards. In October 2018 the NRC issued an order approving the
application to transfer Vermont Yankee’s license to NorthStar for decommissioning. In December 2018 the
Vermont Public Utility Commission 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 credit facility was guaranteed by Entergy Corporation. A subsidiary of Entergy assumed the
obligations under the credit facility, and it remains outstanding. At the closing 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 the
balance outstanding on the credit facility, as well as borrowing fees and costs incurred by Entergy in connection
with the credit facility.
See Note 14 to the financial statements for discussion of the closing of the Vermont Yankee transaction.
Shutdown and Sale of Pilgrim
In October 2015, Entergy determined that it would close the Pilgrim plant, and Pilgrim ceased operations in
May 2019. See Note 14 to the financial statements for discussion of the impairment charges associated with the
decision to cease operations earlier than expected.
On July 30, 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a
Holtec subsidiary 100% of the equity interests in Entergy Nuclear Generation Company, LLC, the owner of Pilgrim,
for $1,000 (subject to adjustments for net liabilities and other amounts). On August 22, 2019, the NRC approved
the transfer of Pilgrim’s facility licenses to Holtec. On August 26, 2019, Entergy and Holtec closed the transaction.
The sale of Entergy Nuclear Generation Company, LLC to Holtec included the transfer of the nuclear
decommissioning trust and obligation for spent fuel management and plant decommissioning. The transaction
resulted in a loss of $190 million ($156 million net-of-tax) in 2019. See Note 14 to the financial statements for
discussion of the closing of the Pilgrim transaction.
25 Shutdown and Sale of Indian Point 2 and Indian Point 3
In April 2007, Entergy submitted to the NRC a joint application to renew the operating licenses for Indian
Point 2 and Indian Point 3 for an additional 20 years. In January 2017, Entergy reached a settlement with New
York State, several State agencies, and Riverkeeper, Inc., under which Indian Point 2 and Indian Point 3 would
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 license renewals and issuance of contested
permits and similar authorizations. In September 2018 the NRC issued renewed operating licenses for Indian Point
2 through April 2024 and for Indian Point 3 through April 2025. Pursuant to the January 2017 settlement
agreement, Indian Point 2 ceased commercial operations on April 30, 2020, and Indian Point 3 ceased commercial
operations on April 30, 2021. See Note 14 to the financial statements for discussion of the impairment charges
associated with the decision to shut down the Indian Point plants.
In April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests
in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3 to a Holtec subsidiary for
decommissioning the plants. In November 2019, Entergy and Holtec submitted a license transfer application to the
NRC. The NRC issued an order approving the application in November 2020, subject to the NRC’s authority to
condition, revise, or rescind the approval order based on the resolution of four pending hearing requests. In January
2021 the NRC issued an order denying all four hearing requests challenging the license transfer application. In
January 2021, New York State filed a petition for review with the D.C. Circuit asking the court to vacate the NRC’s
January 2021 order denying the State’s hearing request, as well as the NRC’s November 2020 order approving the
license transfers. In March 2021 additional parties also filed petitions for review with the D.C. Circuit seeking
review of the same NRC orders. In March 2021 the court consolidated all of the appeals into the same proceeding.
Pursuant to an April 2021 settlement among Entergy, Holtec, New York State, and several other parties, discussed
below, all petitioners to the D.C. Circuit proceeding withdrew their pending appeals, and the court terminated the
consolidated proceeding in June 2021.
In November 2019, Entergy and Holtec also submitted a petition to the New York State Public Service
Commission (NYPSC) seeking an order from the NYPSC disclaiming jurisdiction or abstaining from review of the
transaction or, alternatively, approving the transaction. Closing was also conditioned on obtaining from the New
York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as
being consistent with applicable standards. In April 2021, Entergy and Holtec filed a joint settlement proposal with
the NYPSC that resolved all issues among all parties, including financial assurance, site restoration, financial
reporting, continued funding for state and local emergency management and response activities, a memorandum of
understanding with local taxing jurisdictions, and the dismissal of the federal appeals described in the preceding
paragraph. In May 2021 the NYPSC approved the joint settlement proposal and the transaction.
The transaction closed in May 2021. The sale included the transfer of the licenses, spent fuel,
decommissioning liabilities, and nuclear decommissioning trusts for the three units. The transaction resulted in a
charge of $340 million ($268 million net-of-tax) in the second quarter of 2021. See Note 14 to the financial
statements for discussion of the closing of the Indian Point transaction.
Planned Shutdown and Sale of Palisades
Almost all of the Palisades output is sold under a power purchase agreement with Consumers Energy,
entered into when the plant was acquired in 2007, that is scheduled to expire in 2022. The PPA prices currently
exceed market prices. In December 2016, Entergy reached an agreement with Consumers Energy to amend the
existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers
Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was
subject to regulatory approvals, including approval by the Michigan Public 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.
26 In September 2017 the Michigan Public Service Commission issued an order conditionally approving the
PPA amendment transaction, 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 continues to operate Palisades under the existing PPA with Consumers Energy,
instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades
nuclear power plant permanently no later than May 31, 2022. As a result of the increase in the expected operating
life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceeded
the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage
spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 are no longer charged
to expense as incurred, but recorded as assets and depreciated or amortized, subject to the typical periodic
impairment reviews prescribed in the accounting rules.
On July 30, 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a
Holtec subsidiary 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site.
The sale will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management
and plant decommissioning. In February 2020 the parties signed an amendment to the purchase and sale agreement
to remove the closing condition that the nuclear decommissioning trust fund must have a specified amount and
Entergy agreed to contribute $20 million to the nuclear decommissioning trust fund at closing, among other
amendments. Pursuant to a subsequent agreement the $20 million was paid to Holtec in September 2021. At the
closing of the sale transaction, the Holtec subsidiary will pay $1,000 (subject to adjustment for net liabilities and
other amounts) for the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site.
The Palisades transaction is subject to certain closing conditions, including: the permanent shutdown of
Palisades and the transfer of all nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC regulatory
approval for the transfer of the Palisades and Big Rock Point operating and independent spent fuel storage
installation licenses; receipt of a favorable private letter ruling from the IRS; and, the Pilgrim transaction having
closed. In December 2020, Entergy and Holtec submitted a license transfer application to the NRC requesting
approval to transfer the Palisades and Big Rock Point licenses from Entergy to Holtec. In February 2021 several
parties filed with the NRC petitions to intervene and requests for hearing challenging the license transfer
application. In March 2021, Entergy and Holtec filed answers opposing the petitions to intervene and hearing
requests, and the petitioners filed replies. In March 2021 an additional party also filed a petition to intervene and
request for hearing. Entergy and Holtec filed an answer to the March 2021 petition in April 2021. The NRC issued
an order approving the application in December 2021, subject to the NRC’s authority to condition, revise, or rescind
the approval order based on the resolution of four pending requests for hearing. In January 2022, Holtec submitted
a supplement to the approved license transfer application to the NRC to reflect changes to Holtec’s planned
decommissioning organizational structure for Palisades.
Subject to the above conditions, the Palisades transaction is expected to close in mid-2022. As of
December 31, 2021, Entergy’s adjusted net investment in Palisades was ($50) million. The primary variables in the
ultimate loss or gain that Entergy will incur on the transaction are the values of the nuclear decommissioning trust
and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the
level of any unrealized deferred tax balances at closing. Palisades completed its final refueling outage in October
2020.
Costs Associated with Exit of the Entergy Wholesale Commodities Business
Entergy incurred approximately $12 million in costs in 2021, $71 million in costs in 2020, and $91 million
in costs in 2019 associated with management’s strategy to exit the Entergy Wholesale Commodities merchant
power business, primarily employee retention and severance expenses and other benefits-related costs, and
contracted economic development contributions. Entergy expects to incur employee retention and severance
27 expenses of approximately $5 million in 2022 associated with the exit from the merchant power business. See Note
13 to the financial statements for further discussion of these costs.
Entergy Wholesale Commodities incurred $5 million in 2021, $19 million in 2020, and $100 million in
2019 of impairment charges related to nuclear fuel spending, nuclear refueling outage spending, expenditures for
capital assets, and asset retirement obligation revisions. These costs were charged to expense as incurred as a result
of the impaired value of certain 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 exit the Entergy
Wholesale Commodities merchant power business. See Note 14 to the financial statements for further discussion of
the impairment charges.
Liquidity and Capital Resources
This section discusses Entergy’s capital structure, capital spending plans and other uses of capital, sources
of capital, and the cash flow activity presented in the cash flow statement.
Capital Structure
Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is
primarily due to the net issuance of debt in 2021. See Note 5 to the financial statements for a discussion of long-
term debt.
Debt to capital
Effect of excluding securitization bonds
Debt to capital, excluding securitization bonds (a)
Effect of subtracting cash
Net debt to net capital, excluding securitization bonds (a)
December 31,
2021
December 31,
2020
69.5%
(0.1%)
69.4%
(0.3%)
69.1%
68.3%
(0.2%)
68.1%
(1.7%)
66.4%
(a)
Calculation excludes the New Orleans and Texas securitization bonds, which are non-recourse to Entergy
New Orleans and Entergy Texas, respectively.
As of December 31, 2021, 22.2% of the debt outstanding is at the parent company, Entergy Corporation, 77.3% is at
the Utility, and 0.5% is at Entergy Wholesale Commodities. Net debt consists of debt less cash and cash
equivalents. Debt consists of notes payable and commercial paper, finance lease obligations, and long-term debt,
including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’
preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses
the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they
provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the
securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements.
Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition
and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition
because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash
equivalents on hand.
The Utility operating companies and System Energy seek to optimize their capital structures in accordance
with regulatory requirements and to control their cost of capital while also maintaining equity capitalization at a
level consistent with investment-grade debt ratings. To the extent that their operating cash flows are in excess of
planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend to their parent, or
both, in appropriate amounts to maintain the capital structure. To the extent that their operating cash flows are
insufficient to support planned investments, the Utility operating companies and System Energy may issue
28 incremental debt or reduce dividends, or both, to maintain their capital structures. In addition, Entergy may make
equity contributions to the Utility operating companies and System Energy to maintain their capital structures in
certain circumstances such as financing of large transactions or payments that would materially alter the capital
structure if financed entirely with debt and reduced dividends.
Long-term debt, including the currently maturing portion, makes up most of Entergy’s total debt
outstanding. Following are Entergy’s long-term debt principal maturities and estimated interest payments as of
December 31, 2021. To estimate future interest payments for variable rate debt, Entergy used the rate as of
December 31, 2021. The amounts below include payments on System Energy’s Grand Gulf sale-leaseback
transaction, which are included in long-term debt on the balance sheet.
Long-term debt maturities and
estimated interest payments
2022
2023
Utility
Entergy Wholesale Commodities
Parent and Other
Total
$1,017
141
763
$1,921
$3,141
—
99
$3,240
2024
(In Millions)
$2,929
—
99
$3,028
2025-2026
after 2026
$3,345
—
1,896
$5,241
$22,112
—
3,171
$25,283
Note 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
June 2026. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the
total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn
commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending
on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended
December 31, 2021 was 1.60% on the drawn portion of the facility.
As of December 31, 2021, amounts outstanding and capacity available under the $3.5 billion credit facility
are:
Capacity
Borrowings
Letters of
Credit
Capacity
Available
$3,500
$165
$6
$3,329
(In Millions)
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as
defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s
credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance
with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if
Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or
is in bankruptcy or insolvency proceedings, an acceleration of the Entergy 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 of December 31, 2021, Entergy Corporation had $1.201 billion of commercial paper outstanding. The
weighted-average interest rate for the year ended December 31, 2021 was 0.28%.
29
Finance lease obligations are a minimal part of Entergy’s overall capital structure. Following are Entergy’s
payment obligations under those leases.
2022
2023
Finance lease payments
$15
$15
2024
(In Millions)
$13
2025-2026
after 2026
$22
$16
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 facilities available as of December 31, 2021 as follows:
Company
Entergy Arkansas
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy Mississippi
Entergy Mississippi
Entergy New Orleans
Entergy Texas
Expiration
Date
April 2022
June 2026
June 2026
April 2022
April 2022
April 2022
June 2024
June 2026
Amount of
Facility
$25 million (b)
$150 million (c)
$350 million (c)
$10 million (d)
$35 million (d)
$37.5 million (d)
$25 million (c)
$150 million (c)
Interest
Rate
(a)
2.75%
1.23%
1.32%
1.60%
1.60%
1.60%
1.73%
1.60%
Amount Drawn
as of
December 31, 2021
—
—
$125 million
—
—
—
—
—
Letters of Credit
Outstanding as of
December 31, 2021
—
—
—
—
—
—
—
$1.3 million
(a)
(b)
(c)
(d)
The interest rate is the estimated interest rate as of December 31, 2021 that would have been applied to
outstanding borrowings under the facility.
Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts
receivable at Entergy Arkansas’s option.
The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the
borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy
Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its
accounts receivable at Entergy 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 its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
30
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy
Texas each entered into an uncommitted standby letter of credit facility 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, 2021:
Company
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
Amount of
Uncommitted
Facility
$25 million
$125 million
$65 million
$15 million
$80 million
Letter of
Credit Fee
0.78%
0.78%
0.78%
1.00%
0.875%
Letters of Credit Issued as
of December 31, 2021
(a) (b)
$8.5 million
$15.0 million
$9.3 million
$1.0 million
$79.6 million
(a)
(b)
As of December 31, 2021, letters of credit posted with MISO covered financial transmission right exposure
of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. See Note 15 to the financial
statements for discussion of financial transmission rights.
As of December 31, 2021, in addition to the $9.3 million in MISO letters of credit, Entergy Mississippi has
$1 million in non-MISO letters of credit outstanding under this facility.
Operating Lease Obligations and Guarantees of Unconsolidated Obligations
Entergy has a minimal amount of operating lease obligations and guarantees in support of unconsolidated
obligations. Entergy’s guarantees in support of unconsolidated obligations are not likely to have a material effect on
Entergy’s financial condition, results of operations, or cash flows. Following are Entergy’s payment obligations as
of December 31, 2021 on non-cancelable operating leases with a term over one year:
2022
2023
Operating lease payments
$65
$56
Leases are discussed in Note 10 to the financial statements.
Other Obligations
2024
(In Millions)
$48
2025-2026
after 2026
$44
$15
Entergy currently expects to contribute approximately $200 million to its pension plans and approximately
$42.8 million to other postretirement plans in 2022, although the 2022 required pension contributions will be known
with more certainty when the January 1, 2022 valuations are completed, which is expected by April 1, 2022. See
“Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and Note 11 for
a discussion of qualified pension and other postretirement benefits funding.
Entergy has $712 million of unrecognized tax benefits and interest net of unused tax attributes for which the
timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective
settlement of tax positions. See Note 3 to the financial statements for additional information regarding
unrecognized tax benefits.
In addition, the Registrant Subsidiaries enter into fuel and purchased power agreements that contain
minimum purchase obligations. The Registrant Subsidiaries each have rate mechanisms in place to recover fuel,
purchased power, and associated costs incurred under these purchase obligations.
31
Capital Expenditure Plans and Other Uses of Capital
Following are the amounts of Entergy’s planned construction and other capital investments by operating
segment for 2022 through 2024.
Planned construction and capital investments
2022
2023
(In Millions)
2024
Utility:
Generation
Transmission
Distribution
Utility Support
Total
Entergy Wholesale Commodities and Other
Total
$1,105
755
1,285
580
3,725
10
$3,735
$1,235
765
1,535
440
3,975
—
$3,975
$1,580
795
1,620
310
4,305
—
$4,305
In addition to the planned spending in the table above, the Utility also expects to pay for $885 million of
capital investments in 2022 related to Hurricane Ida restoration work that has been accrued as of December 31,
2021.
Planned construction and capital investments refer to amounts Entergy plans to spend on routine capital
projects that are necessary to support reliability of its service, equipment, or systems and to support normal
customer growth. In addition to routine capital projects, they also refer to amounts Entergy plans to spend on non-
routine capital investments for which Entergy is either contractually obligated, has Board approval, or otherwise
expects to make to satisfy regulatory or legal requirements. Amounts include the following types of construction
and capital investments:
•
Investments in generation projects to modernize, decarbonize, and diversify Entergy’s portfolio, including
the Sunflower Solar Facility, Walnut Bend Solar Facility, West Memphis Solar Facility, Orange County
Advanced Power Station, St. Jacques Louisiana Solar, and potential construction of additional generation.
Investments in Entergy’s Utility nuclear fleet.
Transmission spending to drive reliability and resilience while also supporting renewables expansion.
•
•
• Distribution and Utility Support spending to improve reliability, resilience, and customer experience
through projects focused on asset renewals and enhancements and grid stability.
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 transform its generation portfolio with new generation resources. Opportunities resulting
from the supply plan initiative, including new projects or the 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 of business
restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market
volatility, economic trends, changes in project plans, and the ability to access capital.
32
Renewables
Sunflower Solar Facility
In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an
approximately 100 MW solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower
County, Mississippi. The estimated base purchase price is approximately $138.4 million. The estimated total
investment, including the base purchase price and other related costs, for Entergy Mississippi to acquire the
Sunflower Solar Facility is approximately $153.2 million. The purchase is contingent upon, among other things,
obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and
permitting agencies. The project is being built by Sunflower County Solar Project, LLC, an indirect subsidiary of
Recurrent Energy, LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the
other purchase contingencies have been met. In December 2018, Entergy Mississippi filed a joint petition with
Sunflower Solar Project with the MPSC for Sunflower Solar Project to construct and for Entergy Mississippi to
acquire and thereafter own, operate, improve, and maintain the solar facility. Entergy Mississippi proposed
revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment
mechanism, 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. In December 2019 the
MPSC approved Entergy Mississippi’s proposed revisions to its formula rate plan to provide for an interim capacity
rate adjustment mechanism. Recovery through the interim capacity rate adjustment requires MPSC approval for
each new resource. In August 2019 consultants retained by the Mississippi Public Utilities Staff filed a report
expressing concerns regarding the project economics. In March 2020, Entergy Mississippi filed supplemental
testimony addressing questions and observations raised by the consultants retained by the Mississippi Public
Utilities Staff and proposing an alternative structure for the transaction that would reduce its cost. A hearing before
the MPSC was held in March 2020. In April 2020 the MPSC issued an order approving certification of the
Sunflower Solar Facility and its recovery through the interim capacity rate adjustment mechanism, subject to certain
conditions including: (i) that Entergy Mississippi pursue a partnership structure through which the partnership
would acquire and own the facility under the build-own-transfer agreement and (ii) that if Entergy Mississippi does
not consummate the partnership structure under the terms of the order, there will be a cap of $136 million on the
level of recoverable costs. Closing is targeted to occur by the end of the second quarter 2022.
Walnut Bend Solar Facility
In October 2020, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the
100 MW Walnut Bend Solar Facility is in the public interest. Entergy Arkansas primarily requested cost recovery
through the formula rate plan rider. In July 2021 the APSC granted Entergy Arkansas’s petition and approved the
acquisition of the resource and cost recovery through the formula rate plan rider. In addition, the APSC directed
Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership. In January
2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax
equity partnership is obtained. Entergy Arkansas views the progress of the outreach to potential tax equity investors
and the current status of the discussions as consistent with its expectations for the timeline for achieving a tax equity
partnership. Closing was expected to occur in 2022. The counter-party has notified Entergy Arkansas that it is
seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule.
Negotiations are ongoing, but at this time the project is not expected to achieve commercial operation in 2022.
West Memphis Solar Facility
In January 2021, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the
180 MW West Memphis Solar Facility is in the public interest. In October 2021 the APSC granted Entergy
Arkansas’s petition and approved the acquisition of the West Memphis Solar Facility and cost recovery through the
formula rate plan rider. In addition, the APSC directed Entergy Arkansas to file a report within 180 days detailing
its efforts to obtain a tax equity partnership. Closing is expected to occur in 2023.
33 2021 Solar Certification and the Geaux Green Option
In November 2021, Entergy Louisiana filed an application with the LPSC seeking certification of and
approval for the addition of four new solar photovoltaic resources with a nameplate capacity of 475 megawatts (the
2021 Solar Portfolio) and the implementation of a new green tariff, the Geaux Green Option (Rider GGO). The
2021 Solar Portfolio consists of four resources that are expected to provide $242 million in net benefits to Entergy
Louisiana’s customers. These resources, all of which would be constructed in Louisiana, include (i) Vacherie Solar
Energy Center, a 150 megawatt resource in St. James Parish; (ii) Sunlight Road Solar, a 50 megawatt resource in
Washington Parish; (iii) St. Jacques Louisiana Solar, a 150 megawatt resource in St. James; and (iv) Elizabeth Solar
Facility, a 125 megawatt resource in Allen Parish. St. Jacques Louisiana Solar would be acquired through a build-
own-transfer agreement; the remaining resources involve power purchase agreements. The filing proposes to
recover the costs of the power purchase agreements through the fuel adjustment clause and the acquisition costs
through the formula rate plan.
The proposed Rider GGO is a voluntary rate schedule that would enhance Entergy Louisiana’s ability to
help customers meet their sustainability goals by allowing customers to align some or all of their electricity
requirements with renewable energy from the resources. Because subscription fees from Rider GGO participants
would help to offset the cost of the resources, the design of Rider GGO also preserves the benefits of the 2021 Solar
Portfolio for non-participants by providing them with the reliability and capacity benefits of locally-sited solar
generation at a discounted price.
The LPSC has established a procedural schedule that is expected to result in an LPSC decision by the end of
2022. Discovery is currently underway.
Other Generation
Orange County Advanced Power Station
In September 2021, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s
certificate of convenience and necessity to construct, own, and operate the Orange County Advanced Power Station,
a new 1,215 MW combined-cycle combustion turbine facility to be located in Bridge City, Texas at an expected
total cost of $1.2 billion inclusive of the estimated costs of the generation facilities, transmission upgrades,
contingency, an allowance for funds used during construction, and necessary regulatory expenses, among others.
The project includes combustion turbine technology with dual fuel capability, able to co-fire up to 30% hydrogen by
volume upon commercial operation and upgradable to support 100% hydrogen operations in the future. In
December 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A hearing on the
merits is scheduled for April 2022. A final order by the PUCT is expected in September 2022. Subject to receipt of
required regulatory approvals and other conditions, the facility is expected to be in-service by May 2026.
Dividends and Stock Repurchases
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among
other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share
from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future
investment opportunities. At its January 2022 meeting, the Board declared a dividend of $1.01 per share. Entergy
paid $775 million in 2021, $748 million in 2020, and $712 million in 2019 in cash dividends 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 common stock. According to the plans, these shares can be newly issued shares, treasury
34 stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to
repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.
In addition to the authority to fund grant exercises, the Board has authorized share repurchase programs to
enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a
$500 million share repurchase program. As of December 31, 2021, $350 million of authority remains under the
$500 million share repurchase program. The amount of repurchases may vary as a result of material changes in
business results or capital spending or new investment opportunities, or if limitations in the credit markets continue
for a prolonged period.
Sources of Capital
Entergy’s sources to meet its capital requirements and to fund potential investments include:
•
•
•
•
•
•
internally generated funds;
cash on hand ($443 million as of December 31, 2021);
storm reserve escrow accounts;
debt and equity issuances in the capital markets, including debt issuances to refund or retire currently
outstanding or maturing indebtedness;
bank financing under new or existing facilities or commercial paper; and
sales of assets.
Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses,
including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in
the future. In addition to the financings necessary to meet capital requirements and contractual obligations, the
Registrant Subsidiaries expect to continue, when economically feasible, to retire higher-cost debt and replace it with
lower-cost debt if market conditions permit.
Provisions within the organizational documents relating to preferred stock or membership interests of
certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on
their common and preferred equity. All debt and preferred equity issuances by the Registrant Subsidiaries require
prior regulatory approval and their debt issuances are also subject to issuance tests set forth in bond indentures and
other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to
meet foreseeable capital needs for the next twelve months and beyond.
The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy.
The City Council has concurrent jurisdiction over Entergy New Orleans’s securities issuances with maturities longer
than one year. The APSC has concurrent jurisdiction over Entergy Arkansas’s issuances of securities secured by
Arkansas property, including first mortgage bond issuances. No regulatory approvals are necessary for Entergy
Corporation to issue securities. The current FERC-authorized short-term borrowing limits and long-term financing
authorization for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas,
and System Energy are effective through October 2023. Entergy Arkansas has obtained first mortgage bond/
secured financing authorization from the APSC that extends through December 2022. Entergy New Orleans also
has obtained long-term financing authorization from the City Council that extends through December 2023.
Entergy Arkansas, Entergy Louisiana, and System Energy each has obtained long-term financing authorization from
the FERC that extends through October 2023 for issuances by the nuclear fuel company variable interest entities. In
addition to borrowings from commercial banks, the Registrant Subsidiaries may also borrow from the Entergy
System money pool and from other internal short-term borrowing arrangements. The money pool and the other
internal borrowing arrangements are inter-company borrowing arrangements designed to reduce Entergy’s
subsidiaries’ dependence on external short-term borrowings. Borrowings from internal and external short-term
borrowings combined may not exceed the FERC-authorized limits. See Notes 4 and 5 to the financial statements
for further discussion of Entergy’s borrowing limits, authorizations, and amounts outstanding.
35 Equity Issuances and Equity Distribution Program
In January 2021, Entergy entered into an equity distribution sales agreement with several counterparties
establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to
time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of
Entergy common stock, Entergy may also enter into forward sale agreements for the sale of its common stock. The
aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement
may not exceed an aggregate gross sales price of $1 billion. In 2021, Entergy utilized the at the market equity
distribution program and sold nearly $500 million, approximately $300 million of which has not been settled and is
subject to adjustment pursuant to the forward sale agreements. In addition to settlement of existing forward sales
agreements, Entergy Corporation currently expects to issue approximately $700 million of equity through 2024.
Entergy is considering various methods, including, among others, at the market distributions, block trades, and
preferred equity issuances. See Note 7 to the financial statements for discussion of the forward sales agreements
and common stock issuances and sales under the equity distribution program.
Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida (Entergy Louisiana)
In August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant
damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant
damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a
result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of
the underlying transmission system required nearly a complete rebuild.
In October 2020, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking
adjustments in connection with the issuance of shorter-term mortgage bonds to provide interim financing for
restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy
Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy
Louisiana’s capital structure and cost rate of debt for ratemaking purposes, including the allowance for funds used
during construction, shorter-term debt up to $1.1 billion issued by Entergy Louisiana to fund costs associated with
Hurricane Laura, Hurricane Delta, and Hurricane Zeta costs on an interim basis. In November 2020 the LPSC
issued an order approving the joint motion, and Entergy Louisiana issued $1.1 billion of 0.62% Series mortgage
bonds due November 2023. Also in November 2020, Entergy Louisiana withdrew $257 million from its funded
storm reserves.
In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to
Louisiana. Ice accumulation sagged or downed trees, limbs and power lines, causing damage to Entergy
Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into
power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment,
causing additional outages. As discussed in the “Fuel and purchased power recovery” section of Note 2 to the
financial statements, Entergy Louisiana recovered the incremental fuel costs associated with Winter Storm Uri over
a five-month period from April 2021 through August 2021.
In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane
Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a
supplemental filing updating the total restoration costs. Total restoration costs for the repair and/or replacement of
Entergy Louisiana’s electric facilities damaged by these storms are currently estimated to be approximately
$2.06 billion, including approximately $1.68 billion in capital costs and approximately $380 million in non-capital
costs. Including carrying costs through January 2022, Entergy Louisiana is seeking an LPSC determination that
$2.11 billion was prudently incurred and, therefore, is eligible for recovery from customers. Additionally, Entergy
Louisiana is requesting that the LPSC determine that re-establishment of a storm escrow account to the previously
authorized amount of $290 million is appropriate. In July 2021, Entergy Louisiana supplemented the application
36 with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy
Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as
supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. As previously discussed, in
August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent,
transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana supplemented
the application with a request to establish and securitize a $1 billion restricted storm escrow account for Hurricane
Ida related restoration costs, subject to a subsequent prudence review. In total, Entergy Louisiana requested
authorization for the issuance of system restoration bonds in one or more series in an aggregate principal amount of
$3.18 billion, which includes the costs of re-establishing and funding a storm damage escrow account, carrying
costs and unamortized debt costs on interim financing, and issuance costs. After filing of testimony by LPSC staff
and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests, the parties negotiated
and executed an uncontested stipulated settlement which was filed with the LPSC in February 2022. The settlement
agreement contains the following key terms: $2.1 billion of restoration costs from Hurricane Laura, Hurricane
Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and are eligible for recovery; carrying costs of
$51 million are recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should
be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana is authorized to finance
$3.186 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. The LPSC
voted to approve the settlement at its February 2022 meeting.
Hurricane Laura, Hurricane Delta, and Winter Storm Uri (Entergy Texas)
In August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to
Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service
area. The storms resulted in widespread power outages, significant damage primarily to distribution and
transmission infrastructure, and the loss of sales during the power outages. In April 2021, Entergy Texas filed an
application with the PUCT requesting a determination that approximately $250 million of system restoration costs
associated with Hurricane Laura, Hurricane Delta, and Winter Storm Uri, including approximately $200 million in
capital costs and approximately $50 million in non-capital costs, were reasonable and necessary to enable Entergy
Texas to restore electric service to its customers and Entergy Texas’s electric utility infrastructure. The filing also
included the projected balance of approximately $13 million of a regulatory asset containing previously approved
system restoration costs related to Hurricane Harvey. In September 2021 the parties filed an unopposed settlement
agreement, pursuant to which Entergy Texas removed from the amount to be securitized approximately $4.3 million
that will instead be charged to its storm reserve, $5 million related to no particular issue, of which Entergy Texas
would be permitted to seek recovery in a future proceeding, and approximately $300 thousand related to attestation
costs. In December 2021 the PUCT issued an order approving the unopposed settlement and determining system
restoration costs of $243 million related to Hurricane Laura, Hurricane Delta, and Winter Storm Uri and the
$13 million projected remaining balance of the Hurricane Harvey system restoration costs were eligible for
securitization. The order also determines that Entergy Texas can recover carrying costs on the system restoration
costs related to Hurricane Laura, Hurricane Delta, and Winter Storm Uri.
In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the
securitization of the system restoration costs that are the subject of the April 2021 application. In November 2021
the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with
Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to
facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order
consistent with the unopposed settlement.
37 Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the years ended
December 31, 2021, 2020, and 2019 were as follows:
Cash and cash equivalents at beginning of period
$1,759
2021
2020
(In Millions)
$426
2019
$481
Net cash provided by (used in):
Operating activities
Investing activities
Financing activities
Net increase (decrease) in cash and cash equivalents
2,301
(6,179)
2,562
(1,316)
2,690
(4,772)
3,415
1,333
2,817
(4,510)
1,638
(55)
Cash and cash equivalents at end of period
$443
$1,759
$426
2021 Compared to 2020
Operating Activities
Net cash flow provided by operating activities decreased by $389 million in 2021 primarily due to:
•
•
•
•
•
•
•
increased fuel costs, including those related to Winter Storm Uri. See Note 2 to the financial statements for
a discussion of fuel and purchased power cost recovery;
an increase of approximately $220 million in storm spending in 2021. See Note 2 to the financial
statements for discussion of recent storms;
income tax payments of $98 million in 2021 compared to income tax refunds of $31 million in 2020.
Entergy had net income tax payments in 2021 related to state income taxes and federal estimated taxes,
offset by federal income tax refunds received associated with the completion of the 2014-2015 IRS audit.
Entergy had income tax refunds in 2020 as a result of an overpayment on a prior year state income tax
return;
lower Entergy Wholesale Commodities revenues in 2021;
an increase of $65 million in severance and retention payments in 2021 as compared to 2020. See Note 13
to the financial statements for a discussion of the severance and retention payments related to Entergy
Wholesale Commodities. See “Entergy Wholesale Commodities Exit from the Merchant Power
Business” above for a discussion of management’s strategy to exit the Entergy Wholesale Commodities
merchant power business;
a decrease of $55 million in proceeds received from the DOE resulting from litigation regarding spent
nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for
discussion of the spent nuclear fuel litigation; and
an increase of $40 million in pension contributions in 2021 as compared to 2020. See “Critical
Accounting Estimates” below and Note 11 to the financial statements for a discussion of qualified pension
and other postretirement benefits funding.
The decrease was partially offset by higher collections from Utility customers and a decrease in spending of $52
million on nuclear refueling outages in 2021 as compared to prior period.
38
Investing Activities
Net cash flow used in investing activities increased by $1,407 million in 2021 primarily due to:
•
•
•
•
an increase of $1,278 million in distribution construction expenditures primarily due to higher capital
expenditures for storm restoration in 2021 and increased spending on the reliability and infrastructure of the
distribution system, partially offset by lower spending in 2021 on advanced metering infrastructure;
an increase of $366 million in transmission construction expenditures primarily due to higher capital
expenditures for storm restoration in 2021;
a decrease of $212 million in net receipts from storm reserve escrow accounts; and
the purchase of the Hardin County Peaking Facility by Entergy Texas in June 2021 for approximately $37
million and the purchase of the Searcy Solar facility by the Entergy Arkansas tax equity partnership in
December 2021 for approximately $132 million. See Note 14 to the financial statements for discussion of
the Hardin County Peaking Facility and the Searcy Solar facility purchases.
The increase was partially offset by:
•
•
•
•
•
•
the purchase of Washington Parish Energy Center by Entergy Louisiana in November 2020 for
approximately $222 million. See Note 14 to the financial statements for further discussion of the
Washington Parish Energy Center purchase;
a decrease of $208 million in non-nuclear generation construction expenditures primarily due to higher
spending in 2020 on the Montgomery County Power Station, Lake Charles Power Station, New Orleans
Power Station, and New Orleans Solar Station projects, partially offset by a higher scope of work performed
during outages in 2021 as compared to 2020;
a decrease of $102 million in decommissioning trust fund investment activity;
a decrease of $49 million in nuclear fuel purchases due to variations from year to year in the timing and
pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments
during the nuclear fuel cycle;
a decrease of $26 million in information technology construction expenditures primarily due to decreased
spending on various technology projects in 2021, including advanced metering infrastructure; and
$25 million in plant upgrades for the Choctaw Generating Station in March 2020.
Financing Activities
Net cash flow provided by financing activities decreased by $854 million in 2021 primarily due to:
•
•
•
long-term debt activity providing approximately $3,481 million of cash in 2021 compared to providing
approximately $4,467 million in 2020;
an increase of $107 million in net repayments of commercial paper in 2021 compared to 2020; and
a decrease of $37 million in proceeds received from treasury stock issuances in 2021 due to a larger amount
of previously repurchased Entergy Corporation common stock issued in 2020 to satisfy stock option
exercises.
The decrease was partially offset by:
•
•
net sales proceeds of $201 million from the issuance of common stock in 2021 under the at the market
equity distribution program. See Note 7 to the financial statements for discussion of the equity distribution
program;
capital contributions of $51 million received in 2021 from the noncontrolling tax equity investor in AR
Searcy Partnership, LLC and used by the partnership to acquire the Searcy Solar facility. See Note 14 to
the financial statements for discussion of the Searcy Solar facility purchase; and
39 •
an increase of $50 million primarily due to higher prepaid deposits related to contributions-in-aid-of-
construction generation interconnection agreements in 2021 as compared to 2020.
For the details of Entergy’s commercial paper program, see Note 4 to the financial statements. See Note 5
to the financial statements for details of long-term debt.
2020 Compared to 2019
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital
Resources - Cash Flow Activity” in Item 7 of Entergy’s Annual Report on Form 10-K for the year ended
December 31, 2020 filed with the SEC on February 26, 2021 for discussion of operating, investing, and financing
cash flow activities for 2020 compared to 2019.
Rate, Cost-recovery, and Other Regulation
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that the Utility operating companies charge for their services significantly influence Entergy’s
financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their
customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the LPSC, the
MPSC, the City Council, and the PUCT, are primarily responsible for approval of the rates charged to customers.
Following is a summary of the Utility operating companies’ authorized returns on common equity:
Company
Authorized Return on Common Equity
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
9.15% - 10.15%
9.0% - 10.0% Electric; 9.3% - 10.3% Gas
9.03% - 11.08%
8.85% - 9.85%
9.65%
The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery
proceedings are discussed in Note 2 to the financial statements.
Federal Regulation
The FERC regulates wholesale sales of electricity rates and interstate transmission of electricity, including
rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The current return on
equity and capital structure of System Energy are currently the subject of complaints filed by certain of the
operating companies’ retail regulators. The current return on equity under the Unit Power Sales Agreement is
10.94%. 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), the Utility operating companies engaged in the coordinated planning,
construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement,
which was a rate schedule approved by the FERC. Certain of the Utility operating companies’ retail regulators are
pursuing litigation involving the System Agreement at the FERC and in federal courts. See Note 2 to the financial
statements for discussion of the complaints filed with the FERC challenging System Energy’s return on equity and
capital structure, System Energy’s treatment of uncertain tax positions and the Grand Gulf sale leaseback
arrangement, rates charged under the Unit Power Sales Agreement, and the prudence of Grand Gulf’s operations
and 2012 extended power uprate.
40
Market and Credit Risk Sensitive Instruments
Market risk is the risk of changes in the value of commodity and financial instruments, or in future net
income or cash flows, in response to changing market conditions. Entergy holds commodity and financial
instruments that are exposed to the following significant 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 trust funds. See Note 11 to the financial statements for details regarding Entergy’s
pension and other postretirement benefit trust funds.
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 regarding Entergy’s decommissioning trust funds.
The interest rate risk associated with changes in interest rates as a result of Entergy’s outstanding
indebtedness. Entergy manages 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 the extent approved by their retail regulators, the Utility operating companies use commodity and
financial instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas
purchased for resale costs that are recovered from customers.
Entergy’s commodity and financial instruments are also exposed to credit risk. Credit risk is the risk of loss
from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is
also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales
agreements.
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in
MWh, to its customers. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” above
for a discussion of management’s strategy to shut down and sell all remaining plants in the Entergy Wholesale
Commodities merchant nuclear fleet. As of December 31, 2021, Palisades is the only remaining operating plant in
the Entergy Wholesale Commodities merchant nuclear fleet. Almost all of the Palisades output is sold under a
power purchase agreement that is scheduled to expire in 2022. Planned generation currently under contract from the
Palisades plant is 99% for 2022, all of which is sold under normal purchase/normal sale contracts. Total planned
generation for 2022 is 2.8 TWh.
41 Entergy Wholesale Commodities Portfolio
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants
contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the
agreements. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.
Cash and letters of credit are also acceptable forms of credit support. At December 31, 2021, based on power prices
at that time, Entergy had liquidity exposure of $29 million under the guarantees in place supporting Entergy
Wholesale Commodities transactions and $8 million of posted cash collateral. In the event of a decrease in Entergy
Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2021, Entergy
would have been required to provide approximately $30 million of additional cash or letters of credit under some of
the agreements. As of December 31, 2021, the liquidity exposure associated with Entergy Wholesale Commodities
assurance requirements, including return of previously posted collateral from counterparties, would increase by an
insignificant amount for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.
As of December 31, 2021, substantially all of the credit exposure associated with the planned energy output
under contract for the Palisades plant through 2022 is with counterparties or their guarantors that have public
investment grade credit ratings.
Nuclear Matters
Entergy’s Utility and Entergy Wholesale Commodities businesses include the ownership and operation of
nuclear generating plants 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 capital investments and operational needs, including the
financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant
systems to position Entergy’s nuclear fleet to meet its operational goals; the performance and capacity factors of
these nuclear plants; the risk of an adverse outcome to an expected challenge to the prudence of operations at Grand
Gulf; the implementation of plans to exit the Entergy Wholesale Commodities merchant nuclear power business in
2022; regulatory requirements and potential future regulatory changes, including changes affecting the regulations
governing nuclear plant ownership, operations, license amendments, and decommissioning; the availability of
interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the fees charged for
such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete
decommissioning of each site when required; and limitations on the amounts and types of insurance commercially
available for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident.
NRC Reactor Oversight Process
The NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess
the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC
evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s
inspection program and performance indicators reported by the licensee. The evaluations result in the placement of
each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or
Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and
“multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5.
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. Continued plant operation is not permitted for plants in Column 5. All of the nuclear
generating plants owned and operated by Entergy’s Utility and Entergy Wholesale Commodities businesses are
currently in Column 1.
42 In March 2021 the NRC placed Grand Gulf in Column 3 based on the incidence of five unplanned plant
scrams during calendar year 2020, some of which were related to upgrades made to the plant’s turbine control
system during the spring 2020 refueling outage. The NRC conducted a supplemental inspection of Grand Gulf in
accordance with its inspection procedures for nuclear plants in Column 3 and, in October 2021, notified Entergy
that all inspection objectives were met. The NRC issued its report in November 2021 and Grand Gulf was returned
to Column 1.
Critical Accounting Estimates
The preparation of Entergy’s financial statements in conformity with generally accepted accounting
principles requires management to apply appropriate accounting policies and to make estimates and judgments that
can have a significant effect on reported financial position, results of operations, and cash flows. Management has
identified the following accounting estimates as critical because they are based on assumptions and measurements
that involve a high degree of uncertainty, and the potential for future changes in these assumptions and
measurements could produce estimates that would have a material effect on the presentation of Entergy’s financial
position, results of operations, or cash flows.
Nuclear Decommissioning Costs
Entergy subsidiaries own nuclear generation facilities in both the Utility and Entergy Wholesale
Commodities operating segments. 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 conducts periodic decommissioning cost studies to estimate the
costs that will be incurred to decommission the facilities. The following key assumptions 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. The estimate may include assumptions regarding the possibility that
the plant may have an operating life shorter than the operating license expiration. Second, an assumption
must be made regarding whether all decommissioning activity will proceed immediately upon plant
retirement, or whether the plant will be placed in SAFSTOR status. SAFSTOR is decommissioning a
facility by placing it in a safe, stable condition that is maintained until it is subsequently decontaminated
and dismantled to levels that permit license termination, normally within 60 years from permanent cessation
of operations. A change of assumption regarding either the period of continued operation, the use of a
SAFSTOR period, or whether Entergy will continue to hold the plant 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 costs will escalate over present cost levels by factors ranging from approximately 2% to
3% annually. A 50-basis point change in this assumption could change the estimated present value of the
decommissioning liabilities by approximately 6% to 18%. The timing assumption influences the
significance of the effect of a change in the estimated inflation or cost escalation rate because the 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 legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. The
DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE
continues to delay meeting its obligation and Entergy’s nuclear 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 plant
site, which can require the construction and maintenance of dry cask storage sites or other facilities. The
costs of developing and 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).
43 •
•
Entergy’s decommissioning studies include cost estimates for spent fuel storage. These estimates could
change in the future, however, based on the expected timing of when the DOE begins to fulfill its obligation
to receive and store spent nuclear fuel. See Note 8 to the financial statements for further discussion of
Entergy’s spent nuclear fuel litigation.
Technology and Regulation - Over the past several years, more practical experience with the actual
decommissioning of nuclear facilities 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 in decommissioning, could be gained and
affect current cost estimates. In addition, if regulations regarding nuclear decommissioning were to change,
this could affect cost estimates.
Interest Rates - The estimated decommissioning costs that are the basis for the recorded decommissioning
liability are discounted to present value using a credit-adjusted risk-free rate. When the decommissioning
liability is revised, increases in cash flows are discounted using the current credit-adjusted risk-free rate.
Decreases in estimated cash flows are discounted using the credit-adjusted risk-free rate used previously in
estimating the decommissioning liability that is being revised. Therefore, to the extent that a revised cost
study results in an increase in estimated cash flows, a change in interest rates from the time of the previous
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 cost asset. Revisions of estimated decommissioning costs that increase the liability result in an increase
in the asset retirement cost asset, which is then depreciated over the asset’s remaining economic life. 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 Accounting
Entergy’s Utility operating companies and System Energy are subject to retail regulation by their respective
state and local regulators and to wholesale regulation by the FERC. Because these regulatory agencies set the rates
the Utility operating companies and System Energy are allowed to charge customers based on allowable costs,
including a reasonable return on equity, the Utility operating companies and System Energy apply accounting
standards that require 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 through regulated rates. Regulatory liabilities represent the excess
recovery of costs that have been deferred because it is probable such amounts will be returned to customers through
future regulated rates. See Note 2 to the financial statements for a discussion of rate and regulatory 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 assess whether the regulatory assets and regulatory liabilities continue to meet the criteria for
probable future recovery or settlement at each balance sheet date and when regulatory events occur. This
assessment includes consideration of recent rate orders, historical regulatory treatment for similar costs, and factors
such as changes in applicable regulatory and political environments. If the assessments made by the Utility
operating companies and System Energy are ultimately different than actual regulatory outcomes, it could
materially affect the results of operations, financial position, and cash flows of Entergy or the Registrant
Subsidiaries.
Impairment of Long-lived Assets
Entergy has significant investments in long-lived assets in both of its operating segments, and Entergy
evaluates these assets against the market economics and under the accounting rules for impairment when there are
indications that the carrying amount of an asset or asset group may not be recoverable. This evaluation involves a
significant degree of estimation and uncertainty. In the Entergy Wholesale Commodities business, Entergy’s
44 investments in merchant generation assets are subject to impairment if adverse market or regulatory conditions
arise, particularly if it leads to a decision or an expectation that Entergy will operate or own a plant for a shorter
period than previously expected; if there is a significant adverse change in the physical condition of a plant; or, if
capital investment in a plant significantly exceeds previously-expected amounts.
If an asset is considered held for use, and Entergy concludes that events and circumstances are present
indicating that an impairment analysis should be performed under the accounting standards, the sum of the expected
undiscounted future cash flows from the asset are compared to the asset’s carrying value. The carrying value of the
asset includes any capitalized asset retirement cost associated with the decommissioning liability; therefore, changes
in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset
subject to impairment for those assets for which a decommissioning liability is recorded. If the expected
undiscounted future cash flows exceed the carrying value, no impairment is recorded. If the expected undiscounted
future cash flows are less than the carrying value and the carrying value exceeds the fair value, Entergy is required
to record an impairment charge to write the asset down to its fair value. If an asset is considered held for sale, an
impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying 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 in the 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 such assets 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 regulatory changes 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 due to management decisions regarding operation of the plant, the regulatory process,
or operational or other factors, could have a significant effect on the expected future cash flows and result in
a significant effect on operations.
•
See Note 14 to the financial statements for a discussion of impairment conclusions related to the Entergy
Wholesale Commodities nuclear plants.
Taxation and Uncertain Tax Positions
Management exercises significant judgment in evaluating the potential tax effects of Entergy’s operations,
transactions, and other events. Entergy accounts for uncertain income tax positions using a recognition model under
a two-step approach with a more likely-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 and circumstances of the position, assuming the
position will be examined by a taxing authority having full knowledge of all relevant information. Significant
judgment is required to determine whether available information supports the assertion that the recognition
threshold has been met. Additionally, measurement of unrecognized tax benefits to be recorded in the consolidated
financial statements is based on the probability of different potential outcomes. Income tax expense and tax
positions recorded could be significantly affected by events such as additional transactions contemplated or
consummated by Entergy as well as audits by taxing authorities of the tax positions taken in transactions.
Management believes that the financial statement tax balances are accounted for and adjusted appropriately each
quarter as necessary in accordance with applicable authoritative guidance; however, the ultimate outcome of tax
matters could result in favorable or unfavorable effects on the consolidated financial statements. Entergy’s income
45 taxes, including unrecognized tax benefits, open audits, and other significant tax matters are discussed in Note 3 to
the financial statements.
Included in the IRS examination of Entergy’s 2015 tax returns is the tax effect of the October 2015
combination of two Entergy utility companies, Entergy Gulf States Louisiana and Entergy Louisiana. Entergy
Louisiana maintained a carryover tax basis in the assets received and the tax consequences provided for an increase
in tax basis as well. This resulted in recognition in 2015 of a $334 million permanent difference and income tax
benefit, net of the uncertain tax position recorded on the transaction. As discussed in Note 3 to the financial
statements, the IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 Revenue
Agent Report in November 2020. Entergy Louisiana reversed the provision for uncertain tax positions with respect
to the business combination. See additional discussion of the 2014 and 2015 IRS audit in Note 3 to the financial
statements.
In addition, as discussed in Note 3 to the financial statements, in 2015, System Energy and Entergy
Louisiana adopted a new method of accounting for income tax return purposes in which nuclear decommissioning
liabilities are treated as production costs of electricity includable in cost of goods sold. The new method resulted in
a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana in 2015. In
the third quarter 2020 the IRS issued Notices of Proposed Adjustment concerning this uncertain tax position
allowing System Energy to include $102 million of its decommissioning liability in cost of goods sold and Entergy
Louisiana to include $221 million of its decommissioning liability in cost of goods sold. The Notices of Proposed
Adjustment will not be appealed.
As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods
sold, System Energy and Entergy recorded a deferred tax liability of $26 million in 2020. System Energy also
recorded federal and state taxes payable of $402 million in 2020; on a consolidated basis, however, Entergy utilized
tax loss carryovers to offset the federal taxable income adjustment and accordingly did not record federal taxes
payable as a result of the outcome of this uncertain tax position. The state taxes due were paid in 2021.
As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of
goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million in 2020. Both Entergy
Louisiana and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not
record taxes payable as a result of the outcome of this uncertain tax position.
The partial disallowance of the uncertain tax position to include the decommissioning liability in cost of
goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state
taxes for Entergy which were recorded in 2020. Additionally, both System Energy and Entergy Louisiana, in 2020,
recorded a reduction to their balances of unrecognized tax benefits for federal and state taxes of $461 million and
$1.1 billion, respectively.
See Note 3 to the financial statements for discussion of the effects of the Tax Cuts and Jobs Act, the federal
income tax legislation enacted in December 2017.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans, including cash balance plans and final average
pay plans. Generally, plan participation is determined based on the employee’s most recent date of hire and
collective bargaining agreement where applicable. Additionally, Entergy currently provides other postretirement
health care and life insurance benefits for substantially all full-time employees whose most recent date of hire or
rehire is before July 1, 2014 and who reach retirement age and meet certain eligibility requirements while still
working for Entergy.
46 Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are
affected by numerous 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 and Entergy Wholesale Commodities segments.
Assumptions
Key actuarial assumptions utilized in determining qualified pension and other postretirement health care
and life insurance costs include discount rates, projected healthcare cost rates, expected long-term rate of return on
plan assets, rate of increase in future compensation 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. Every three-to-five years, a formal actuarial assumption experience study that compares
assumptions to the actual experience of the pension and other postretirement health care and life insurance plans is
conducted. The interest rate environment over the past few years and volatility in the financial equity markets have
affected Entergy’s funding and reported costs for these benefits.
Discount rates
In selecting an assumed discount rate to calculate benefit obligations, Entergy uses a yield curve based on
high-quality corporate debt with cash flows matching the expected plan benefit payments. In estimating the service
cost and interest cost components of net periodic benefit cost, Entergy discounts the expected cash flows by the
applicable spot rates.
Projected health care cost trend rates
Entergy’s health care cost trend is affected by both medical cost inflation, and with respect to capped costs
under the plan, the effects of general inflation. Entergy reviews actual recent cost trends and projected future trends
in establishing its health care cost trend rates.
Expected long-term rate of return on plan assets
In determining its expected long-term rate of return on plan assets used in the calculation of benefit plan
costs, Entergy reviews past performance, current and expected future asset allocations, and capital market
assumptions of its investment consultant and some of 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 target asset allocation adjust dynamically over time, based on the funded status of the plan, to
an ultimate allocation of 35% equity securities and 65% fixed income securities. The ultimate asset allocation is
expected to be attained when the plan is 100% funded. The target pension asset allocation for 2021 was 58% equity
and 42% fixed income securities. In 2022, Entergy expects to adjust its asset allocation strategy for pension assets,
which will target an overall shift to less fixed income securities and more equity securities.
In 2017, Entergy implemented a new asset allocation strategy for its non-taxable and taxable other
postretirement assets, based on the funded status of each sub-account within each trust. The new strategy no longer
focuses on targeting an overall asset allocation for each trust, but rather a target asset allocation for each sub-
account within each trust that adjusts dynamically based on the funded status. The 2021 weighted average target
postretirement asset allocation is 42% equity and 58% fixed income securities. See Note 11 to the financial
statements for discussion of the current asset allocations for Entergy’s pension and other postretirement assets.
47 Costs and Sensitivities
The estimated 2022 and actual 2021 qualified pension and other postretirement costs and related underlying
assumptions and sensitivities are shown below:
Costs
Qualified pension cost
Other postretirement income
Assumptions
Discount rates
Qualified pension
Service cost
Interest cost
Other postretirement
Service cost
Interest cost
Estimated
2022
2021
(In millions)
$183
($12.6)
2022
3.07%
2.49%
3.20%
2.31%
$471.8 (a)
($25.9)
2021
2.81%
2.08%
2.98%
1.86%
Expected long-term rates of return
Qualified pension assets
Other postretirement - non-taxable assets
Other postretirement - taxable assets - after tax rate
Weighted-average rate of increase in future
compensation
6.75%
6.75%
5.75% - 6.75% 6.00% - 6.75%
4.75%
5.00%
3.98% - 4.40% 3.98% - 4.40%
Assumed health care cost trend rates
Pre-65 retirees
Post-65 retirees
Ultimate rate
Year ultimate rate is reached and beyond
Pre-65 retirees
Post-65 retirees
5.65%
5.90%
4.75%
2032
2032
5.87%
6.31%
4.75%
2030
2028
(a)
In 2021 qualified pension cost included settlement costs of $205.9 million.
Actual asset returns have an effect on Entergy’s qualified pension and other postretirement costs. In 2021,
Entergy’s actual annual return on qualified pension assets was approximately 11% and for other postretirement
assets was approximately 8%, as compared with the 2021 expected long-term rates of return discussed above.
48 The following chart reflects the sensitivity of qualified pension cost and qualified pension projected benefit
obligation to changes in certain actuarial assumptions (dollars in millions):
Actuarial Assumption
Discount rate
Rate of return on plan assets
Rate of increase in compensation
Change in
Assumption
(0.25%)
(0.25%)
0.25%
Impact on 2022
Qualified Pension
Cost
Increase/(Decrease)
$13
$15
$9
Impact on 2021
Qualified Projected
Benefit Obligation
$236
$—
$41
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement
benefit obligation to changes in certain actuarial assumptions (dollars in millions):
Actuarial Assumption
Discount rate
Health care cost trend
Change in
Assumption
(0.25%)
0.25%
Impact on 2022
Postretirement
Benefit Cost
Increase/(Decrease)
$2
$2
Impact on 2021
Accumulated
Postretirement
Benefit Obligation
$37
$25
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that
reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results
are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the
projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the
average remaining service period of active employees or the average remaining life expectancy of plan participants
if almost all are inactive, as is the case for certain qualified pension plans in which some companies within the
Entergy Wholesale Commodities segment participate. Additionally, accounting standards allow for the deferral of
prior service costs/credits arising from plan amendments that attribute an increase or decrease in benefits to
employee service in prior periods. Prior service costs/credits are then amortized into expense over the average
future working life of active employees. Certain decisions, including workforce reductions, plan amendments, and
plant shutdowns may significantly reduce the expense amortization period and result in immediate recognition of
certain previously-deferred costs and gains/losses in the form of curtailment gains or losses. Similarly, payments
made to settle benefit obligations, including lump sum benefit payments, can also result in accelerated 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-term expected rate of return on assets by the market-related value (MRV) of plan assets. In
general, Entergy determines the MRV of its pension plan assets by calculating a value that uses a 20-quarter phase-
in of the difference between actual and expected returns and for its other postretirement benefit plan assets Entergy
uses fair value.
Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit
plans. See Note 11 to the financial statements for a further discussion of Entergy’s funded status.
49
Employer Contributions
Entergy contributed $356 million to its qualified pension plans in 2021. Entergy estimates pension
contributions will be approximately $200 million in 2022; although the 2022 required pension contributions will be
known with more certainty when the January 1, 2022 valuations are completed, which is expected by April 1, 2022.
Minimum required funding calculations as determined under Pension Protection Act guidance, as amended
by the American Rescue Plan Act of 2021, are performed annually as of January 1 of each year and are based on
measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over
the calculated fair market value of assets results in a funding shortfall that must be funded over a fifteen-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
funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets. The funding
liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury which is
generally subject to a corridor of the 25-year average of prior segment rates. Periodic changes in asset returns and
interest rates can affect funding shortfalls and future cash contributions.
Entergy contributed $32.8 million to its postretirement plans in 2021 and plans to contribute $42.8 million
in 2022.
Other Contingencies
As a company with multi-state utility operations, Entergy is subject to a number of federal and state laws
and regulations and other 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 and estimable in accordance with generally accepted
accounting principles.
Environmental
Entergy 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. Under these various laws and regulations, Entergy could incur substantial costs to
comply or address any impacts to the environment. Entergy conducts studies to determine the extent of any
required remediation and has recorded liabilities based upon its evaluation of the likelihood of loss and expected
dollar amount for each issue. Additional sites or issues could be identified which require environmental
remediation or corrective action for which Entergy could be liable. The amounts of environmental liabilities
recorded can be significantly affected by the following external events or conditions.
• Changes to existing federal, state, or local regulation by governmental authorities having jurisdiction over
air quality, water quality, 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 a potentially responsible party.
The resolution or progression of existing matters through the court system or resolution by the EPA or
relevant state or local authority.
•
•
50 Litigation
Entergy is regularly named as a defendant in a number of lawsuits involving employment, customers, and
injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it has been
named as defendant and assesses the likelihood of loss in each case as probable, reasonably possible, or remote and
records liabilities for cases that have a probable likelihood of loss and the loss can be estimated. Given the
environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is
named as a defendant, the ultimate outcome of the litigation to which Entergy is exposed has the potential to
materially 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.
51 ENTERGY CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT
Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial
statements and related financial information included in this document. To meet this responsibility, management
establishes and maintains a system of internal controls over financial reporting designed to provide reasonable
assurance regarding the preparation and fair presentation of financial statements in accordance with generally
accepted accounting principles. This system includes communication through written policies and procedures, an
employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility
and 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 annual basis. In making this assessment, management uses the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. The
2013 COSO Framework was utilized for management’s assessment. Management acknowledges, however, that all
internal control systems, no matter how well designed, have inherent limitations 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 report on the effectiveness of Entergy Corporation’s internal control over financial reporting as of
December 31, 2021.
In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets
with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal
controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors
annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and
results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief
internal auditor without management present, providing free access to the Audit Committee.
Based on management’s assessment of internal controls using the 2013 COSO criteria, management believes
that Entergy maintained effective internal control over financial reporting as of December 31, 2021. Management
further believes that this assessment, combined with the policies and procedures noted above, provides reasonable
assurance that Entergy’s financial statements are fairly and accurately presented in accordance with generally accepted
accounting principles.
LEO P. DENAULT
Chairman of the Board and Chief Executive Officer of
Entergy Corporation
ANDREW S. MARSH
Executive Vice President and Chief Financial Officer of
Entergy Corporation
52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Entergy Corporation and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the
“Corporation”) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive
income, cash flows, and changes in equity for each of the three years in the period ended December 31, 2021, 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 the Corporation as of December 31, 2021 and 2020,
and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2021, 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, 2021,
based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2022, expressed an
unqualified opinion on the Corporation’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express
an opinion on the Corporation’s financial statements based on our audits. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Corporation in accordance with the US
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 to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Rate and Regulatory Matters —Entergy Corporation and Subsidiaries—Refer to Note 2 to the financial
statements
Critical Audit Matter Description
The Corporation is subject to rate regulation by the Arkansas Public Service Commission, Louisiana Public Service
Commission, Mississippi Public Service Commission, City Council of New Orleans, Louisiana, and Public Utility
Commission of Texas (the “Commissions”), which have jurisdiction with respect to the rates of electric companies
in Arkansas, Louisiana, Mississippi, Texas, and the City of New Orleans, and to wholesale rate regulation by the
Federal Energy Regulatory Commission (“FERC”). Management has determined it meets the requirements under
accounting principles generally accepted in the United States of America to prepare its financial statements applying
53 the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate
regulation impacts multiple financial statement line items and disclosures, such as property, plant, and equipment;
regulatory assets and liabilities; income taxes; operating revenues; operation and maintenance expense; and
depreciation and amortization expense.
The Corporation’s rates are subject to regulatory rate-setting processes and annual earnings oversight. Because the
Commissions and the FERC set the rates, the Corporation is allowed to charge customers based on allowable costs,
including a reasonable return on equity, and the Corporation applies accounting standards that require the financial
statements to reflect the effects of rate regulation, including the recording of regulatory assets and liabilities. The
Corporation assesses whether the regulatory assets and regulatory liabilities continue to meet the criteria for
probable future recovery or settlement at each balance sheet date and when regulatory events occur. This assessment
includes consideration of recent rate orders, historical regulatory treatment for similar costs, and factors such as
changes in applicable regulatory and political environments. While the Corporation has indicated it expects to
recover costs from customers through regulated rates, there is a risk that the Commissions and the FERC will not
approve: (1) full recovery of the costs of providing utility service or (2) full recovery of amounts invested in the
utility business and a reasonable return on that investment.
We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by
management to support its assertions about impacted account balances and disclosures and the high degree of
subjectivity involved in assessing the impact of future regulatory orders on the financial statements. Management
judgments include assessing the (1) likelihood of recovery in future rates of incurred costs, including major storm
restoration costs, (2) likelihood of refunds to customers, and (3) ongoing complaints filed with the FERC against
System Energy Resources, Inc. (“SERI”). Auditing management’s judgments regarding the outcome of future
decisions by the Commissions and the FERC involved especially subjective judgment and specialized knowledge of
accounting for rate regulation and the rate-setting process.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertainty of future decisions by the Commissions and the FERC included the
following, among others:
• We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the
recovery in future rates of costs incurred as property, plant, and equipment and deferred as regulatory
assets; and (2) a refund or a future reduction in rates that should be reported as regulatory liabilities. We
also tested the effectiveness of management’s controls over the initial recognition of amounts as property,
plant, and equipment; regulatory assets or liabilities; and the monitoring and evaluation of regulatory
developments that may affect the likelihood of recovering costs in future rates or of a future reduction in
rates.
• We evaluated the Corporation’s disclosures related to the impacts of rate regulation, including the balances
recorded and regulatory developments.
• We read relevant regulatory orders issued by the Commissions and the FERC for the Corporation and other
public utilities, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors,
and other publicly available information to assess the likelihood of recovery in future rates or of a future
reduction in rates based on precedents of the Commissions’ and the FERC’s treatment of similar costs under
similar circumstances. We evaluated the external information and compared to management’s recorded
regulatory asset and liability balances for completeness.
•
For regulatory matters in process, we inspected the Corporation’s filings with the Commissions and the
FERC, including the annual formula rate plan filings, base rate case filings, major storm restoration cost
filings and open complaints filed with the FERC against SERI, including the Return on Equity, Capital
Structure, Grand Gulf Sale-Leaseback Renewal, Unit Power Sales Agreement and Prudence complaints,
and considered the filings with the Commissions and the FERC by intervenors that may impact the
Corporation’s future rates, for any evidence that might contradict management’s assertions.
• We obtained an analysis from management and support from the Corporation’s internal and external legal
counsel, as appropriate, regarding probability of recovery for regulatory assets or refund or future reduction
in rates for regulatory liabilities not yet addressed in a regulatory order, including major storm restoration
54 costs incurred and the complaints filed with the FERC against SERI, to assess management’s assertion that
amounts are probable of recovery or a future reduction in rates.
Uncertain Tax Positions—Entergy Wholesale Commodities—Refer to Note 3 to the financial statements
Critical Audit Matter Description
The Corporation accounts for uncertain income tax positions under a two-step approach with a more likely-than-not
recognition threshold and a measurement approach based on the largest amount of tax benefit that is greater than
fifty percent likely of being realized upon settlement. The Corporation has uncertain tax positions which require
management to make significant judgments and assumptions to determine whether available information supports
the assertion that the recognition threshold is met, particularly related to the technical merits and facts and
circumstances of each position, as well as the probability of different potential outcomes. These uncertain tax
positions could be significantly affected by events such as additional transactions contemplated or consummated by
the Corporation as well as audits by taxing authorities of the tax positions. The net unrecognized tax benefit of $712
million at December 31, 2021, includes uncertain tax positions related to Entergy Wholesale Commodities.
Given the subjectivity of estimating these uncertain tax positions, auditing the uncertain tax positions involved
especially subjective judgment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the uncertain tax positions included the following, among others:
• We tested the effectiveness of controls related to uncertain tax positions, including those over the
recognition and measurement of the income tax benefits.
• We evaluated the Corporation’s disclosures, and the balances recorded, related to uncertain tax positions.
• We evaluated the methods and assumptions used by management to estimate the uncertain tax positions by
testing the underlying data that served as the basis for the uncertain tax position.
• With the assistance of our income tax specialists, we tested the technical merits of the uncertain tax
positions and management’s key estimates and judgments made by:
• Assessing the technical merits of the uncertain tax positions by comparing to similar cases filed
with the Internal Revenue Service.
•
Evaluating the reasonableness and consistency of the probabilities applied to the uncertain tax
position by comparing to probabilities used on similar uncertain tax positions.
• Considering the impact of changes or settlements in the tax environment on management’s methods
and assumptions used to estimate the uncertain tax positions.
Nuclear Decommissioning Costs—Entergy Wholesale Commodities—Refer to Note 9 to the financial statements
Critical Audit Matter Description
The Corporation owns nuclear generation facilities in the Entergy Wholesale Commodities operating segment
where regulation requires the Corporation to decommission its nuclear power plants after each facility is taken out
of service. The Corporation periodically conducts decommissioning cost studies, which requires management to
make significant judgments and assumptions, specifically related to future dismantlement, site restoration, spent fuel
management, and license termination costs. The liability for Entergy Wholesale Commodities nuclear
decommissioning was $682 million at December 31, 2021.
Auditing management’s judgments regarding the nuclear decommissioning costs, including estimates for future
dismantlement, site restoration, spent fuel management, and license termination costs, involved especially
subjective judgment in evaluating the appropriateness of the estimates and assumptions.
55 How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the underlying costs for nuclear decommissioning included the following, among
others:
• We tested the effectiveness of the control over nuclear decommissioning where management evaluates
whether estimates and assumptions need to be updated for each of the nuclear power plants.
• We evaluated the Corporation’s disclosures related to the estimated nuclear decommissioning costs,
including the balances recorded.
• We evaluated management’s ability to accurately estimate the costs for nuclear decommissioning by
comparing the cost estimates to actual nuclear decommissioning costs of similar asset retirement obligations
at the Corporation.
• With the assistance of our environmental specialists, we completed a search of environmental regulations to
evaluate any regulatory changes that may affect the nuclear decommissioning cost estimates.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2022
We have served as the Corporation’s auditor since 2001.
56 Attestation Report of Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and Board of Directors of
Entergy Corporation and Subsidiaries
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Entergy Corporation and Subsidiaries (the
“Corporation”) as of December 31, 2021, based on criteria established in Internal Control —Integrated Framework
(2013) issued by the Committee of Sponsoring 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, 2021, based on criteria established in Internal Control – Integrated Framework (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, 2021 of
the Corporation and our report dated February 25, 2022 expressed an unqualified opinion on those consolidated
financial statements.
Basis for Opinion
The Corporation’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in Item 9A, Internal
Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Corporation 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain 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 weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2022
57 ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
OPERATING REVENUES
Electric
Natural gas
Competitive businesses
TOTAL
OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale
Purchased power
Nuclear refueling outage expenses
Other operation and maintenance
Asset write-offs, impairments, and related charges
Decommissioning
Taxes other than income taxes
Depreciation and amortization
Other regulatory charges (credits) - net
TOTAL
For the Years Ended December 31,
2021
2019
2020
(In Thousands, Except Share Data)
$10,873,995
170,610
698,291
11,742,896
$9,046,643
124,008
942,985
10,113,636
$9,429,978
153,954
1,294,741
10,878,673
2,458,096
1,271,677
172,636
2,968,621
263,625
306,411
660,290
1,684,286
111,628
9,897,270
1,564,371
904,268
184,157
3,002,626
26,623
381,861
652,840
1,613,086
14,609
8,344,441
2,029,638
1,192,860
204,927
3,272,381
290,027
400,802
643,745
1,480,016
(26,220)
9,488,176
OPERATING INCOME
1,845,626
1,769,195
1,390,497
OTHER INCOME
Allowance for equity funds used during construction
Interest and investment income
Miscellaneous - net
TOTAL
INTEREST EXPENSE
Interest expense
Allowance for borrowed funds used during construction
TOTAL
70,473
430,466
(201,778)
299,161
119,430
392,818
(210,633)
301,615
144,974
547,912
(252,539)
440,347
863,712
(29,018)
834,694
837,981
(52,318)
785,663
807,382
(64,957)
742,425
INCOME BEFORE INCOME TAXES
1,310,093
1,285,147
1,088,419
Income taxes
191,374
(121,506)
(169,825)
CONSOLIDATED NET INCOME
1,118,719
1,406,653
1,258,244
Preferred dividend requirements of subsidiaries and noncontrolling interest
227
18,319
17,018
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
$1,118,492
$1,388,334
$1,241,226
Earnings per average common share:
Basic
Diluted
$5.57
$5.54
$6.94
$6.90
$6.36
$6.30
Basic average number of common shares outstanding
Diluted average number of common shares outstanding
200,941,511
201,873,024
200,106,945
201,102,220
195,195,858
196,999,284
See Notes to Financial Statements.
58
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31,
2019
2020
2021
(In Thousands)
Net Income
$1,118,719
$1,406,653
$1,258,244
Other comprehensive income (loss)
Cash flow hedges net unrealized gain (loss)
(net of tax expense (benefit) of ($7,935), ($14,776), and $28,516)
Pension and other postretirement liabilities
(net of tax expense (benefit) of $55,161, $5,600, and ($6,539))
Net unrealized investment gain (loss)
(net of tax expense (benefit) of ($28,435), $17,586, and $14,023)
Other comprehensive income (loss)
(29,754)
(55,487)
115,026
195,929
22,496
(25,150)
(49,496)
116,679
30,704
(2,287)
27,183
117,059
Comprehensive Income
Preferred dividend requirements of subsidiaries and noncontrolling interest
Comprehensive Income Attributable to Entergy Corporation
1,235,398
227
$1,235,171
1,404,366
18,319
$1,386,047
1,375,303
17,018
$1,358,285
See Notes to Financial Statements.
59
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Consolidated net income
Adjustments to reconcile consolidated net income to net cash flow provided
by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel
amortization
Deferred income taxes, investment tax credits, and non-current taxes accrued
Asset write-offs, impairments, and related charges
Changes in working capital:
Receivables
Fuel inventory
Accounts payable
Taxes accrued
Interest accrued
Deferred fuel costs
Other working capital accounts
Changes in provisions for estimated losses
Changes in other regulatory assets
Changes in other regulatory liabilities
Changes in pension and other postretirement liabilities
Other
Net cash flow provided by operating activities
INVESTING ACTIVITIES
Construction/capital expenditures
Allowance for equity funds used during construction
Nuclear fuel purchases
Payment for purchase of plant or assets
Net proceeds from sale of assets
Insurance proceeds received for property damages
Changes in securitization account
Payments to storm reserve escrow account
Receipts from storm reserve escrow account
Decrease (increase) in other investments
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
Proceeds from nuclear decommissioning trust fund sales
Investment in nuclear decommissioning trust funds
Net cash flow used in investing activities
See Notes to Financial Statements.
For the Years Ended December 31,
2021
2020
2019
(In Thousands)
$1,118,719
$1,406,653
$1,258,244
2,242,944
248,719
263,599
2,257,750
(131,114)
26,379
2,182,313
193,950
226,678
(84,629)
18,359
269,797
(21,183)
(10,640)
(466,050)
(53,883)
(85,713)
(536,707)
43,631
(897,167)
250,917
2,300,713
(139,296)
(27,458)
137,457
207,556
7,662
(49,484)
(143,451)
(291,193)
(784,494)
238,669
50,379
(76,149)
(101,227)
(28,173)
(71,898)
(20,784)
937
172,146
(3,108)
19,914
(545,559)
(14,781)
187,124
(639,149)
2,816,627
2,689,866
119,430
(215,664)
(247,121)
70,473
(166,512)
(168,304)
17,421
—
13,669
(6,087,296) (4,694,076) (4,197,667)
144,862
(128,366)
(305,472)
28,932
7,040
3,298
(8,038)
—
297,588
83,105
30,319
(12,755)
2,343
2,369
72,711
49,236
5,553,629
4,121,351
3,107,812
(5,547,015) (3,203,057) (4,208,870)
(6,179,276) (4,772,306) (4,510,242)
—
—
5,099
(2,273)
(25)
60
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2019
2020
2021
(In Thousands)
FINANCING ACTIVITIES
Proceeds from the issuance of:
Long-term debt
Preferred stock of subsidiary
Treasury stock
Common stock
Retirement of long-term debt
Repurchase / redemptions of preferred stock
Changes in credit borrowings and commercial paper - net
Capital contributions from noncontrolling interest
Other
Dividends paid:
Common stock
Preferred stock
Net cash flow provided by financing activities
$8,308,427
—
5,977
200,776
$12,619,201
—
42,600
—
$9,304,396
33,188
93,862
607,650
(4,827,827) (8,152,378) (7,619,380)
(50,000)
4,389
—
(7,732)
(426,312)
51,202
43,221
—
(7,524)
(319,238)
—
—
(775,122)
(18,319)
(748,342)
(18,502)
2,562,023
3,415,817
(711,573)
(16,438)
1,638,362
Net increase (decrease) in cash and cash equivalents
(1,316,540) 1,333,377
(55,253)
Cash and cash equivalents at beginning of period
1,759,099
425,722
480,975
Cash and cash equivalents at end of period
$442,559
$1,759,099
$425,722
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized
Income taxes
$843,228
$98,377
See Notes to Financial Statements.
$803,923
($31,228)
$778,209
($40,435)
61
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
CURRENT ASSETS
Cash and cash equivalents:
Cash
Temporary cash investments
Total cash and cash equivalents
Accounts receivable:
Customer
Allowance for doubtful accounts
Other
Accrued unbilled revenues
Total accounts receivable
Deferred fuel costs
Fuel inventory - at average cost
Materials and supplies - at average cost
Deferred nuclear refueling outage costs
Prepayments and other
TOTAL
OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds
Non-utility property - at cost (less accumulated depreciation)
Other
TOTAL
PROPERTY, PLANT, AND EQUIPMENT
Electric
Natural gas
Construction work in progress
Nuclear fuel
TOTAL PROPERTY, PLANT, AND EQUIPMENT
Less - accumulated depreciation and amortization
PROPERTY, PLANT, AND EQUIPMENT - NET
DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:
Other regulatory assets (includes securitization property of $49,579 as of December 31,
2021 and $119,238 as of December 31, 2020)
Deferred fuel costs
Goodwill
Accumulated deferred income taxes
Other
TOTAL
TOTAL ASSETS
See Notes to Financial Statements.
December 31,
2021
2020
(In Thousands)
$44,944
397,615
442,559
786,866
(68,608)
231,843
420,255
1,370,356
324,394
154,575
1,041,515
133,422
156,774
3,623,595
$128,851
1,630,248
1,759,099
833,478
(117,794)
135,208
434,835
1,285,727
4,380
172,934
962,185
179,150
196,424
4,559,899
5,514,016
357,576
159,455
6,031,047
7,253,215
343,328
214,222
7,810,765
64,263,250
658,989
1,511,966
577,006
67,011,211
24,767,051
42,244,160
59,696,443
610,768
2,012,030
601,281
62,920,522
24,067,745
38,852,777
6,613,256
240,953
377,172
54,186
269,873
7,555,440
6,076,549
240,422
377,172
76,289
245,339
7,015,771
$59,454,242
$58,239,212
62
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Currently maturing long-term debt
Notes payable and commercial paper
Accounts payable
Customer deposits
Taxes accrued
Interest accrued
Deferred fuel costs
Pension and other postretirement liabilities
Current portion of unprotected excess accumulated deferred income taxes
Other
TOTAL
NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued
Accumulated deferred investment tax credits
Regulatory liability for income taxes-net
Other regulatory liabilities
Decommissioning and asset retirement cost liabilities
Accumulated provisions
Pension and other postretirement liabilities
Long-term debt (includes securitization bonds of $83,639 as of December 31, 2021 and
$174,635 as of December 31, 2020)
Other
TOTAL
Commitments and Contingencies
December 31,
2021
2020
(In Thousands)
$1,039,329
1,201,177
2,610,132
395,184
419,828
191,151
7,607
68,336
53,385
204,613
6,190,742
4,706,797
211,975
1,255,692
2,643,845
4,757,084
157,122
1,949,325
$1,164,015
1,627,489
2,739,437
401,512
441,011
201,791
153,113
61,815
63,683
206,640
7,060,506
4,361,772
212,494
1,521,757
2,323,851
6,469,452
242,835
2,853,013
24,841,572
815,284
41,338,696
21,205,761
807,219
39,998,154
Subsidiaries’ preferred stock without sinking fund
219,410
219,410
EQUITY
Preferred stock, no par value, authorized 1,000,000 shares in 2021 and 0 shares in 2020;
issued shares in 2021 and 2020 - none
Common stock, $0.01 par value, authorized 499,000,000 shares in 2021 and 500,000,000
shares in 2020; issued 271,965,510 shares in 2021 and 270,035,180 shares in 2020
Paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less - treasury stock, at cost (69,312,326 shares in 2021 and 69,790,346 shares in 2020)
Total common shareholders' equity
Subsidiaries’ preferred stock without sinking fund and noncontrolling interest
TOTAL
—
—
2,720
6,766,239
10,240,552
(332,528)
5,039,699
11,637,284
68,110
11,705,394
2,700
6,549,923
9,897,182
(449,207)
5,074,456
10,926,142
35,000
10,961,142
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 59,454,242 $ 58,239,212
See Notes to Financial Statements.
63
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2021, 2020, and 2019
Common Shareholders’ Equity
Subsidiaries’
Preferred
Stock and
Noncontrolling
Interest
Common
Stock
Treasury
Stock
Paid-in
Capital
Retained
Earnings
(In Thousands)
Accumulated
Other
Comprehensive
Income (Loss)
Total
$—
$2,616
($5,273,719) $5,951,431
$8,721,150
($557,173) $8,844,305
$—
17,018
—
$2,616
—
—
($5,273,719) $5,951,431
—
—
—
—
6,806
$8,727,956
1,241,226
—
—
—
—
—
35,000
84
—
—
—
—
—
—
607,566
(7)
119,569
5,446
—
—
—
—
—
—
—
(711,573)
—
(6,806)
—
($563,979) $8,844,305
1,258,244
117,059
—
117,059
—
—
—
—
—
607,650
(7)
125,015
(711,573)
35,000
(17,018)
$35,000
—
$2,700
—
—
($5,154,150) $6,564,436
—
$9,257,609
—
(17,018)
($446,920) $10,258,675
—
$35,000
18,319
—
—
$2,700
—
—
—
—
—
—
(18,319)
$35,000
227
—
—
$2,700
—
—
—
—
($5,154,150) $6,564,436
—
—
—
—
(419)
$9,257,190
1,388,334
—
—
(419)
($446,920) $10,258,256
1,406,653
(2,287)
—
(2,287)
79,694
(14,513)
—
—
—
(748,342)
—
—
65,181
(748,342)
—
—
($5,074,456) $6,549,923
—
—
—
—
—
$9,897,182
1,118,492
—
—
(18,319)
($449,207) $10,961,142
1,118,719
116,679
—
116,679
—
—
—
—
51,202
20
—
—
—
—
—
—
204,194
(3,438)
34,757
15,560
—
—
—
—
—
—
—
(775,122)
—
—
—
—
—
—
204,214
(3,438)
50,317
(775,122)
51,202
(18,319)
$68,110
—
$2,720
—
—
($5,039,699) $6,766,239
—
$10,240,552
—
(18,319)
($332,528) $11,705,394
Balance at December 31, 2018
Implementation of accounting
standards
Balance at January 1, 2019
Consolidated net income (a)
Other comprehensive income
Settlement of equity forwards
through common stock issuance
Common stock issuance costs
Common stock issuances related
to stock plans
Common stock dividends
declared
Subsidiaries' capital stock
redemptions
Preferred dividend requirements
of subsidiaries (a)
Balance at December 31, 2019
Implementation of accounting
standards
Balance at January 1, 2020
Consolidated net income (a)
Other comprehensive loss
Common stock issuances related
to stock plans
Common stock dividends
declared
Preferred dividend requirements
of subsidiaries (a)
Balance at December 31, 2020
Consolidated net income (a)
Other comprehensive income
Common stock issuances and
sales under the at the market
equity distribution program
Common stock issuance costs
Common stock issuances related
to stock plans
Common stock dividends
declared
Capital contributions from
noncontrolling interest
Preferred dividend requirements
of subsidiaries (a)
Balance at December 31, 2021
See Notes to Financial Statements.
(a) Consolidated net income and preferred dividend requirements of subsidiaries include $16 million for 2021, 2020, and 2019 of preferred
dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.
64
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its
subsidiaries. As required by generally accepted accounting principles in the United States of America, all
intercompany transactions have been eliminated in the consolidated financial statements. Entergy’s Registrant
Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and
System Energy) and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other
regulatory guidelines.
Use of Estimates in the Preparation of Financial Statements
In conformity with generally accepted accounting principles in the United States of America, the
preparation of Entergy Corporation’s consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of
contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in
the future to the extent that future estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
See Note 19 to the financial statements for a discussion of Entergy’s revenues and fuel costs.
Property, Plant, and Equipment
is stated at original cost
Property, plant, and equipment
less regulatory disallowances and
impairments. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service
lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or
removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor
replacement costs are charged to operating expenses. Certain combined-cycle gas turbine generating units are
maintained under long-term service agreements with third-party service providers. The costs under these
agreements are split between operating expenses and capital additions based upon the nature of the work performed.
Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portion of Grand Gulf that was sold and leased back in a prior period. For
financial reporting purposes, this sale and leaseback arrangement is reported as a financing transaction.
65 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Net property, plant, and equipment for Entergy (including property under lease and associated accumulated
amortization) by business segment and functional category, as of December 31, 2021 and 2020, is shown below:
2021
Entergy
Utility
Entergy
Wholesale
Commodities
Parent &
Other
(In Millions)
Production
Nuclear
Other
Transmission
Distribution
Other
Construction work in progress
Nuclear fuel
Property, plant, and equipment - net
$7,632
7,158
9,578
12,877
2,910
1,512
577
$42,244
$7,624
7,105
9,577
12,877
2,905
1,511
563
$42,162
$8
53
1
—
—
1
14
$77
$—
—
—
—
5
—
—
$5
2020
Entergy
Utility
Entergy
Wholesale
Commodities
Parent &
Other
(In Millions)
Production
Nuclear
Other
Transmission
Distribution
Other
Construction work in progress
Nuclear fuel
Property, plant, and equipment - net
$7,526
6,346
8,758
10,805
2,804
2,012
601
$38,853
$7,493
6,270
8,758
10,805
2,792
2,008
548
$38,674
$33
76
—
—
5
4
53
$171
$—
—
—
—
7
—
—
$7
Depreciation rates on average depreciable property for Entergy approximated 2.7% in 2021, 2.8% in 2020,
and 2.8% in 2019. Included in these rates are the depreciation rates on average depreciable Utility property of 2.7%
in 2021, 2.7% in 2020, and 2.6% in 2019, and the depreciation rates on average depreciable Entergy Wholesale
Commodities property of 7.5% in 2021, 12.7% in 2020, and 18.3% in 2019. The depreciation rates for Entergy
Wholesale Commodities reflect the significantly reduced remaining estimated operating lives associated with
management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’
merchant nuclear fleet. The decreases in the depreciation rates in 2021 and 2020 for Entergy Wholesale
Commodities are due to the shutdown of Indian Point 3 in April 2021 and the shutdown of Indian Point 2 in April
2020.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in
fuel expense in the income statements. Because the values of their long-lived assets were impaired, and their
remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants,
except for Palisades, charged nuclear fuel costs directly to expense when incurred because their undiscounted cash
flows were 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 $200 million as of December 31, 2021 and $191 million as of December 31, 2020.
66
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Construction expenditures included in accounts payable is $723 million as of December 31, 2021 and $745
million as of December 31, 2020.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All
parties are required to provide their own financing. The investments, fuel expenses, and other operation and
maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the
extent of their respective undivided ownership interests. As of December 31, 2021, the subsidiaries’ investment and
accumulated depreciation in each of these generating stations were as follows:
67 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Generating Stations
Utility business:
Entergy Arkansas -
Independence
Independence
White Bluff
Ouachita (b)
Union (c)
Unit 1
Common Facilities
Units 1 and 2
Common Facilities
Common Facilities
Entergy Louisiana -
Roy S. Nelson
Unit 6
Roy S. Nelson
Big Cajun 2
Big Cajun 2
Ouachita (b)
Acadia
Union (c)
Entergy Mississippi -
Independence
Entergy New Orleans -
Unit 6 Common
Facilities
Unit 3
Unit 3 Common
Facilities
Common Facilities
Common Facilities
Common Facilities
Units 1 and 2 and
Common Facilities
Total
Megawatt
Capability
(a)
Fuel
Type
Ownership
Investment
Accumulated
Depreciation
(In Millions)
Coal
Coal
Coal
Gas
Gas
Coal
Coal
Coal
Coal
Gas
Gas
Gas
822
1,639
31.50%
15.75%
57.00%
66.67%
25.00 %
521
40.25%
540
19.57%
24.15%
8.05%
33.33%
50.00%
50.00 %
$143
$43
$587
$173
$29
$294
$21
$151
$5
$91
$21
$59
$106
$31
$390
$156
$9
$212
$10
$131
$3
$78
$2
$10
Coal
1,246
25.00%
$286
$179
Common Facilities
Gas
25.00 %
$29
Unit 6
Unit 6 Common
Facilities
Unit 3
Unit 3 Common
Facilities
Coal
Coal
Coal
Coal
Gas
521
29.75%
14.47%
17.85%
5.95%
92.44%
540
909
$208
$7
$113
$4
$728
$8
$120
$3
$84
$1
$18
Union (c)
Entergy Texas -
Roy S. Nelson
Roy S. Nelson
Big Cajun 2
Big Cajun 2
Montgomery County Unit 1
System Energy -
Grand Gulf (d)
Entergy Wholesale
Commodities:
Independence
Independence
Roy S. Nelson
Roy S. Nelson
Unit 1
Unit 2
Common Facilities
Unit 6
Unit 6 Common
Facilities
Nuclear
1,404
90.00 %
$5,363
$3,317
Coal
Coal
Coal
Coal
424
521
14.37%
7.18%
10.90%
5.30%
$76
$20
$118
$3
$55
$14
$69
$1
(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual
operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to
utilize.
68
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b)
(c)
(d)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by
Entergy Louisiana. The investment and accumulated depreciation numbers above are only for the common
facilities and not for the generating units.
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas,
Union Units 3 and 4 are owned 100% by Entergy Louisiana. The investment and accumulated depreciation
numbers above are only for the specified common facilities and not for the generating units.
Includes a leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are
discussed in Note 5 to the financial statements.
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the
next outage because these refueling outage expenses are incurred to prepare the units to operate for the next
operating cycle without having to be taken off line. Because the values of their long-lived assets were impaired, and
their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants,
except for Palisades, charged nuclear refueling outage costs directly to expense when incurred because their
undiscounted cash flows were 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 funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance
and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax
return. In September 2019, Entergy Utility Holding Company, LLC and its regulated wholly-owned subsidiaries
including Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans,
LLC became eligible to join and joined the Entergy Corporation consolidated federal income tax group. These
changes do not affect the accrual or allocation of income taxes for the Registrant Subsidiaries. Each tax-paying
entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax
filing entities in accordance with Entergy’s intercompany income tax allocation agreements. Deferred income taxes
are recorded for temporary differences between the book and tax basis of assets and liabilities, and for 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 that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax 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 in Note 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 a reduction of income tax expense, for such credits associated with rate-regulated operations in
accordance with ratemaking treatment.
69 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculation included on the
consolidated statements of operations:
2021
For the Years Ended December 31,
2020
(In Millions, Except Per Share Data)
2019
$/share
$/share
$/share
Net income attributable to Entergy
Corporation
$1,118.5
$1,388.3
$1,241.2
Basic shares and earnings per
average common share
Average dilutive effect of:
Stock options
Other equity plans
Equity forwards
Diluted shares and earnings per
average common shares
200.9
$5.57
200.1
$6.94
195.2
$6.36
0.4
0.6
—
(0.01)
(0.02)
—
0.5
0.5
—
(0.02)
(0.02)
—
0.6
0.8
0.4
(0.02)
(0.03)
(0.01)
201.9
$5.54
201.1
$6.90
197.0
$6.30
The calculation of diluted earnings per share excluded 1,013,320 options outstanding at December 31, 2021,
523,999 options outstanding at December 31, 2020, and 173,290 options outstanding at December 31, 2019 because
they were antidilutive. In addition, as discussed further in Note 7 to the financial statements, at December 31, 2021,
1,158,917 shares under then outstanding forward sale agreements were not included in the calculation of diluted
earnings per share because their effect would have been antidilutive.
Stock-based Compensation Plans
Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key
employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-
based compensation plans. These plans are described more fully in Note 12 to the financial statements. The cost of
the stock-based compensation is charged to income over the vesting period. Awards under Entergy’s plans
generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur.
Entergy recognizes all income tax effects related to share-based payments through the income statement.
Accounting for the Effects of Regulation
Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet
three criteria specified in 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 criteria may also be applied to separable portions of a
utility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the
Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would
otherwise be charged to expense if the rate actions of its regulator make it probable that those costs will be
recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial
statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory
asset must be removed from the entity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in
its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance
sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a
70
Entergy Corporation and Subsidiaries
Notes to Financial Statements
regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could
require further write-offs of plant assets.
Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated
portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, or its steam business, unless
specific cost recovery is provided for in tariff rates. 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 plan allows 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 and
shareholders.
Regulatory Asset or Liability for Income Taxes
Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is
probable that the currently determinable future increase or decrease in regulatory income tax expense will be
recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory
asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects
of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and
equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and
equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to
the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a
change in the federal corporate income tax rate, which is discussed in Note 2 and 3 to the financial statements.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months
or less at date of purchase to be cash equivalents.
Securitization Recovery Trust Accounts
The funds that Entergy New Orleans and Entergy Texas hold in their securitization recovery 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
timeframe within which the Registrant Subsidiary expects to use the funds.
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable
balances. The allowance is calculated as the historical rate of customer write-offs multiplied by the current accounts
receivable balance, taking into account the length of time the receivable balances have been outstanding. Although
the rate of customer write-offs has historically experienced minimal variation, management monitors the current
condition of individual customer accounts to manage collections and ensure bad debt expense is recorded in a
timely manner. Utility operating company customer accounts receivable are written off consistent with approved
regulatory requirements. See Note 19 to the financial statements for further details on the allowance for doubtful
accounts.
Investments
Entergy records decommissioning trust funds on the balance sheet at their fair value. Unrealized gains and
losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings
as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to
71 Entergy Corporation and Subsidiaries
Notes to Financial Statements
recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust
funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment
securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun,
Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not
currently expected to be needed to decommission the plant. Decommissioning trust funds for the Entergy
Wholesale Commodities nuclear plants do not meet the criteria for regulatory accounting treatment. Accordingly,
unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized
gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other
comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market
value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other
comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and
therefore recorded in earnings. A portion of Entergy’s decommissioning trust funds were held in a wholly-owned
registered investment company, and unrealized gains and losses on both the equity and debt securities held in the
registered investment company were recognized in earnings. In December 2020, Entergy liquidated its interest in
the registered investment company. The assessment of whether an investment in an available-for-sale debt security
has suffered an other-than-temporary impairment is based on whether Entergy 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 is
considered 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). Effective January 1, 2020, with the adoption of ASU 2016-13, Entergy estimates
the expected credit losses for its available for sale securities based on the current credit rating and remaining life of
the securities. To the extent an expected credit loss is realized, the individual security comprising the loss is written
off against this allowance. Entergy’s trusts are managed by third parties who operate in accordance with
agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See
Note 16 to the financial statements for details on the decommissioning trust funds.
Equity Method Investments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s
ownership level results in significant influence, but not control, over the investee and its operations. Entergy
records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the
investment account. Any cash distributions are charged against the investment account. Entergy discontinues the
recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an
investee plus any advances made or commitments to provide additional financial support.
Partnership with Disproportionate Allocation of Earnings and Losses in Relation to an Investor’s Ownership
Interest
Entergy Arkansas, as managing member, controls a tax equity partnership with a third party tax equity
investor and consolidates the partnership for financial reporting purposes. The limited liability company agreement
with the tax equity investor stipulates a disproportionate allocation of tax attributes, earnings, and cash flows
between Entergy Arkansas and the tax equity investor with the tax equity investor being allocated a significant
portion of the tax attributes, earnings, and cash flows until it receives its target return, at which point the earnings
and cash flows will primarily be allocated to Entergy Arkansas. Entergy Arkansas has the option to purchase, at a
future date specified in the partnership agreement, the tax equity investor’s interests at the then-current fair market
value, plus an amount that results in the tax equity investor reaching its target return, if needed.
Because of this disproportionate allocation, Entergy Arkansas accounts for its earnings in the partnership
using the HLBV method of accounting. Under the HLBV method, the amounts of income and loss attributable to
both Entergy Arkansas and the tax equity investor reflect changes in the amount each would hypothetically receive
at the balance sheet date under the respective liquidation provisions of the limited liability company agreement,
assuming the net assets of the partnership were liquidated at book value, after consideration of contributions and
72 Entergy Corporation and Subsidiaries
Notes to Financial Statements
distributions, between Entergy Arkansas and the tax equity investor. Once the tax equity investor reaches its target
return in the hypothetical liquidation, the remaining proceeds are primarily allocated to Entergy Arkansas. This
allocation may result in fluctuations of income on a periodic basis that differ significantly from what would
otherwise be recognized if the earnings were allocated under the relative ownership percentages between Entergy
Arkansas and the tax equity investor. Entergy Arkansas has determined these differences are primarily due to
timing, and the APSC has approved that, for purposes of ratemaking, Entergy Arkansas reflect its interest in the
partnership using its relative ownership percentage and disregard the effects of the HLBV method of accounting.
Because of this, Entergy Arkansas recorded a regulatory liability of $18.1 million in 2021 for the difference
between the earnings allocated to it under the HLBV method of accounting and the earnings that would have been
allocated to it under its respective ownership percentage in the partnership.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be
recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions
including the normal purchase/normal sale criteria. The changes in the fair value of recognized derivatives are
recorded each period in current earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an
offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the
Registrant Subsidiaries.
Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the
ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase,
normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are
reported on a gross basis in the appropriate revenue and 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 are reported in other comprehensive income. To qualify for hedge accounting, the
relationship between the hedging instrument and the hedged item must be documented to include the risk
management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in
offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other
comprehensive income are reclassified to earnings in the periods when the underlying transactions actually
occur. Changes in the fair value of derivative instruments 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 accounting standards for derivative instruments because they do not provide for net settlement and the uranium
markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium
markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as
derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other
derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative
instruments and hedging activities.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical
prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the
estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize
in a current market exchange. Gains or losses realized on financial instruments other than those instruments held by
the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net
73 Entergy Corporation and Subsidiaries
Notes to Financial Statements
income. Entergy considers the carrying amounts of most financial instruments classified as current assets and
liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments. See Note
15 to the financial statements for further discussion of fair value.
Impairment of Long-lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or
changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of
recoverability is based on the undiscounted net cash flows expected to result from such operations and
assets. Projected net cash flows depend on the expected operating life of the assets, the future operating costs
associated with the assets, the efficiency and availability of the assets and generating units, and the future market
and price for energy and capacity over the remaining life of the assets. Because the values of the long-lived assets
were impaired, and the remaining estimated operating lives significantly reduced, the Entergy Wholesale
Commodities nuclear plants, except for Palisades, were charging additional expenditures for capital assets directly
to expense when incurred. See Note 14 to the financial statements for further discussions of the impairments of the
Entergy Wholesale Commodities nuclear plants.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed
by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the
construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was
only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through
August 2025.
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and
System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in
regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original
debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-
producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and
some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to
report them differently by a regulatory authority.
New Accounting Pronouncements
The accounting standard-setting process is ongoing and the FASB is currently working on several projects
that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have
a material effect on Entergy’s future net income, financial positions, or cash flows.
74 Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 2. RATE AND REGULATORY MATTERS
Regulatory Assets and Regulatory Liabilities
Regulatory assets represent probable future revenues associated with costs that Entergy expects to recover
from customers through the regulatory ratemaking process under which the Utility business operates. Regulatory
liabilities represent probable future reductions in revenues associated with amounts that Entergy expects to benefit
customers through the regulatory ratemaking process under which the Utility business operates. In addition to the
regulatory assets and liabilities that are specifically disclosed on the face of the balance sheets, the tables below
provide detail of “Other regulatory assets” and “Other regulatory liabilities” that are included on Entergy’s balance
sheet as of December 31, 2021 and 2020:
Other Regulatory Assets
Entergy
Pension & postretirement costs (Note 11 - Qualified Pension Plans, Other
Postretirement Benefits, and Non-Qualified Pension Plans) (a)
Removal costs (Note 9)
Storm damage costs, including hurricane costs - recovered through securitization
and retail rates (Note 2 - Hurricane Ida and Storm Cost Recovery Filings with
Retail Regulators and Note 5 - Securitization Bonds)
Asset retirement obligation - recovery dependent upon timing of decommissioning
of nuclear units or dismantlement of non-nuclear power plants (Note 9) (a)
Retired electric and gas meters - recovered through retail rates as determined by
retail regulators
Deferred COVID-19 costs - recovery period to be determined (Note 2 - Retail
Rate Proceedings) (b)
Opportunity Sales - recovery will be determined after final order in proceeding
(Note 2 - Entergy Arkansas Opportunity Sales Proceeding) (b)
Qualified Pension Settlement Cost Deferral - recovered over a 10-year period
through July 2031 (Note 11 - Qualified Pension Settlement Cost)
Unamortized loss on reacquired debt - recovered over term of debt
Retail rate deferrals - recovered through formula rates or rate riders as rates are
redetermined by retail regulators
Attorney General litigation costs - recovered over a six-year period through March
2026 (b)
Formula rate plan historical year rate adjustment (Note 2 - Retail Rate
Proceedings)
New nuclear generation development costs - recovery through formula rate plan
December 2014 through November 2022 (b)
Other
Entergy Total
(a)
(b)
Does not earn a return on investment, but is offset by related liabilities.
Does not earn a return on investment.
2021
2020
(In Millions)
$2,327.7
1,488.8
$3,027.5
893.8
993.6
379.2
935.5
1,018.9
179.4
133.1
131.8
113.2
74.7
66.1
20.5
19.0
192.1
105.7
131.8
16.9
79.2
66.0
25.3
—
6.8
123.1
$6,613.3
14.2
125.9
$6,076.5
75
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Hurricane Ida
In August 2021, Hurricane Ida caused extensive damage to the Entergy distribution and, to a lesser extent,
transmission systems across Louisiana resulting in widespread power outages. Total restoration costs for the repair
and/or replacement of the electrical system damaged by Hurricane Ida for Entergy Louisiana and Entergy New
Orleans are currently estimated to be approximately $2.7 billion. Also, Utility revenues in 2021 were adversely
affected by extended power outages resulting from the hurricane.
Entergy has recorded accounts payable for the estimated costs incurred that were necessary to return
customers to service. Entergy recorded corresponding regulatory assets of approximately $1.1 billion, including
$1 billion at Entergy Louisiana and $80 million at Entergy New Orleans, and construction work in progress of
approximately $1.6 billion, including $1.5 billion at Entergy Louisiana and $120 million at Entergy New Orleans.
Entergy recorded the regulatory assets in accordance with its accounting policies and based on the historic treatment
of such costs in its service area because management believes that recovery through some form of regulatory
mechanism is probable. There are well-established mechanisms and precedent for addressing these catastrophic
events and providing for recovery of prudently incurred storm costs in accordance with applicable regulatory and
legal principles. Because Entergy has not gone through the regulatory process regarding these storm costs, there is
an element of risk, and Entergy is unable to predict with certainty the degree of success it may have in its recovery
initiatives, the amount of restoration costs that it may ultimately recover, or the timing of such recovery.
Entergy is considering all available avenues to recover storm-related costs from Hurricane Ida, including
federal government assistance and securitization financing. In September 2021, Entergy Louisiana filed an
application at the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of
approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs
associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, as discussed
below in “Storm Cost Filings with Retail Regulators - Entergy Louisiana - Hurricane Laura, Hurricane Delta,
Hurricane Zeta, Winter Storm Uri, and Hurricane Ida,” Entergy Louisiana sought approval for the creation and
funding of a $1 billion restricted escrow account for Hurricane Ida restoration costs, subject to a subsequent
prudence review. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves.
Storm cost recovery or financing will be subject to review by applicable regulatory authorities. In February 2022,
Entergy New Orleans filed with the City Council a securitization application requesting that the City Council review
Entergy New Orleans’s storm reserve and increase the storm reserve funding level to $150 million, to be funded
through securitization.
76 Other Regulatory Liabilities
Entergy
Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)
Louisiana Act 55 financing savings obligation (Note 3) (b)
Retail rate over-recovery - refunded through formula rate or rate riders as rates are
redetermined annually
Vidalia purchased power agreement (Note 8) (b)
Grand Gulf sale-leaseback - (Note 5 - Grand Gulf Sale-Leaseback
Transactions)
Asset retirement obligation - return to customers dependent upon timing of
decommissioning (Note 9) (a)
Entergy Arkansas’s accumulated accelerated Grand Gulf amortization - will
be returned to customers when approved by the APSC and the FERC
Internal restructuring guaranteed tax credits
Deferred tax equity partnership earnings (Note 1)
Business combination guaranteed customer benefits - returned to customers
through retail rates and fuel rates December 2015 through November 2024
Advanced metering system (AMS) surcharge - return to customers dependent
upon AMS spend
Formula rate plan historical year rate adjustment (Note 2 - Retail Rate
Proceedings)
Other
Entergy Total
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2021
2020
(In Millions)
$1,993.3
127.4
$1,694.1
144.3
126.5
106.2
75.1
115.7
55.6
45.5
44.4
19.8
18.1
16.0
7.3
55.6
29.7
44.4
26.4
—
21.5
20.1
—
83.7
$2,643.8
43.5
53.5
$2,323.9
(a)
(b)
Offset by related asset.
As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the
federal corporate income tax 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 million, with corresponding increases to Other
regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act are discussed further
in Note 3 to the financial statements.
Regulatory activity regarding the Tax Cuts and Jobs Act
See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for
discussion of the effects of the December 2017 enactment of the Tax Cuts and Jobs Act (Tax Act), including its
effects on Entergy’s and the Registrant Subsidiaries’ regulatory asset/liability for income taxes.
Entergy Arkansas
Consistent with its previously stated intent to return unprotected excess accumulated deferred income taxes
to customers as expeditiously as possible, Entergy Arkansas initiated a tariff proceeding in February 2018 proposing
to establish a tax adjustment rider to 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 were
returned to customers over a 21-month period from April 2018 through December 2019. For all other customer
classes, unprotected excess accumulated deferred income taxes were returned to customers over a nine-month
period from April 2018 through December 2018. A true-up provision also was included in the rider, with any over-
77
Entergy Corporation and Subsidiaries
Notes to Financial Statements
or under-returned unprotected excess accumulated deferred income taxes credited or billed to customers during the
billing month of January 2020, with any residual amounts of over- or under-returned unprotected excess
accumulated deferred income taxes to be flowed through Entergy Arkansas’s energy cost recovery rider. In March
2018 the APSC approved the tax adjustment rider effective with 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 2019 calendar year. A hearing was held in May 2018 regarding the APSC’s inquiries into the effects of the
Tax Act, including Entergy Arkansas’s proposal to utilize its formula rate plan rider for its customers to realize the
remaining benefits of the Tax Act. Entergy Arkansas’s formula rate plan rider included a netting adjustment that
compared actual annual results to the allowed rate of return on common equity. In July 2018 the APSC issued an
order agreeing with Entergy Arkansas’s proposal to have the effects of the Tax Act on current income tax expense
flow through Entergy Arkansas’s formula rate plan rider and with Entergy Arkansas’s treatment of protected and
unprotected excess accumulated deferred income taxes. The APSC also directed Entergy Arkansas to submit in the
tax adjustment rider proceeding, discussed above, the adjustments to all other riders affected by the Tax Act and to
include an amendment for a true up mechanism where a rider affected by the Tax Act does not already contain a
true-up mechanism. Pursuant to a 2018 settlement agreement in Entergy Arkansas’s formula rate plan proceeding,
Entergy Arkansas also removed the 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. In February 2021, pursuant to its 2020 formula rate plan evaluation report settlement,
Entergy Arkansas flowed $5.6 million in credits to customers through the tax adjustment rider based on the outcome
of certain federal tax positions and a decrease in the state tax rate.
Entergy Louisiana
In an electric formula rate plan settlement approved by the LPSC in April 2018 the parties agreed that
Entergy Louisiana would return to customers one-half of its eligible unprotected excess deferred income taxes from
May 2018 through December 2018 and return to customers the other half from January 2019 through August 2022.
In addition, the settlement provided that in order to flow back to customers 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 the formula rate
plan were established in September 2018, and this regulatory liability was returned to customers over the September
2018 through August 2019 formula rate plan rate-effective period. The LPSC staff and intervenors in the settlement
reserved the right to obtain data from Entergy Louisiana to confirm the determination of excess accumulated
deferred income taxes resulting from the Tax Act and the analysis thereof as part of the formula rate plan review
proceeding for the 2017 test year filing which, as discussed below, Entergy Louisiana filed in June 2018.
Entergy New Orleans
After 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 to make a filing by mid-March 2018 regarding the Tax Act’s effects on Entergy
New Orleans’s operating income and rate base and potential mechanisms for customers to receive benefits of the
Tax Act. The City Council’s resolution also directed Entergy New Orleans to request that Entergy Services file
with the FERC for revisions of the Unit Power Sales Agreement and MSS-4 replacement tariffs to address 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 expense from what was then reflected in rates by approximately $8.2 million annually for electric
operations and by approximately $1.3 million annually for gas operations. In the filing, Entergy New Orleans
proposed to return to customers from June 2018 through August 2019 the benefits of the reduction in income tax
expense and its unprotected excess accumulated deferred income taxes through a combination of bill credits and
investments in energy efficiency programs, grid modernization, and Smart City projects. Entergy New Orleans
78 Entergy Corporation and Subsidiaries
Notes to Financial Statements
submitted supplemental information in April 2018 and May 2018. Shortly thereafter, Entergy New Orleans and the
City Council’s advisors reached an agreement in principle that provides for benefits that will be realized by Entergy
New 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 in principle was approved by the City Council in June 2018.
Entergy Texas
After enactment of the Tax Act the PUCT issued an order requiring most utilities, including Entergy Texas,
beginning January 25, 2018, to record a regulatory liability for the difference between revenues collected under
existing rates and revenues that would have been collected had existing rates been set using the new federal income
tax rates and also for the balance of excess accumulated deferred income taxes. Entergy Texas had previously
provided information to the PUCT staff and stated that it expected the PUCT to address the lower tax expense as
part of Entergy Texas’s rate case expected to be filed in May 2018.
In May 2018, Entergy Texas filed its 2018 base rate case with the PUCT. Entergy Texas’s proposed rates
and revenues reflected the inclusion of the federal income tax reductions due to the Tax Act. The PUCT issued an
order in December 2018 establishing that 1) $25 million be credited to customers through a rider to reflect the lower
federal income tax rate applicable to Entergy Texas from January 2018 through the date new rates were
implemented, 2) $242.5 million of protected excess accumulated deferred income taxes be returned to customers
through base rates under the average rate assumption method over the lives of the associated assets, and 3) $185.2
million of unprotected excess accumulated deferred income taxes be returned to customers through a rider. The
unprotected excess accumulated deferred income taxes rider includes carrying charges and is in effect over a period
of 12 months for larger customers and over a period of four years for other customers.
System Energy
In a filing made with the FERC in March 2018, System Energy proposed revisions to the Unit Power Sales
Agreement to reflect the effects of the Tax Act. In the filing System Energy proposed to return identified quantities
of unprotected excess accumulated deferred income taxes to its customers by the end of 2018. In May 2018 the
FERC accepted System Energy’s proposed tax revisions with an effective date of June 1, 2018, subject to refund
and the outcome of settlement and hearing procedures. Settlement discussions were terminated in April 2019, and a
hearing was held in March 2020. The retail regulators of the Utility operating companies that are parties to the Unit
Power Sales Agreement challenged the treatment and amount of excess accumulated deferred income tax liabilities
associated with uncertain tax positions related to nuclear decommissioning. In July 2020 the presiding ALJ in the
proceeding issued an initial decision finding that there is an additional $147 million in unprotected excess
accumulated deferred income taxes related to System Energy’s uncertain decommissioning tax deduction. The
initial decision determined that System Energy should have included the $147 million in its March 2018 filing.
System Energy had not included credits related to the effect of the Tax Act on the uncertain decommissioning tax
position because it was uncertain whether the IRS would allow the deduction. The initial decision rejected both
System Energy’s alternative argument that any crediting should occur over a ten-year period and the retail
regulators’ argument that any crediting should occur over a two-year period. Instead, the initial decision concluded
that System Energy should credit the additional unprotected excess accumulated deferred income taxes in a single
lump sum revenue requirement reduction following a FERC order addressing the initial decision.
The ALJ initial decision is an interim step in the FERC litigation process. In September 2020, System
Energy filed a brief on exceptions with the FERC, re-urging its positions and requesting the reversal of the ALJ’s
initial decision. In December 2020, the LPSC, APSC, MPSC, City Council, and FERC trial staff filed briefs
opposing exceptions. The FERC will review the case and issue an order in the proceeding, and the FERC may
accept, reject, or modify the ALJ’s initial decision in whole or in part. Credits, if any, that might be required will
only become due after the FERC issues its order reviewing the initial decision.
79 Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed below in “Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position
Rate Base Issue,” in September 2020 the IRS issued a Notice of Proposed Adjustment (NOPA) and Entergy
executed it. In September 2020, System Energy filed a motion to lodge the NOPA into the record in the FERC
proceeding. In October 2020 the LPSC, APSC, MPSC, City Council, and FERC trial staff filed oppositions to
System Energy’s motion. As a result of the NOPA, System Energy filed, in October 2020, a new Federal Power
Act section 205 filing at the FERC to credit the excess accumulated deferred income taxes resulting from the
decommissioning uncertain tax position. System Energy proposes to credit the entire amount of the excess
accumulated deferred income taxes arising from the successful portion of the decommissioning uncertain tax
position by issuing a one-time credit of $17.8 million. In November 2020, the LPSC, APSC, MPSC, and City
Council filed a protest to the filing, and System Energy responded.
In November 2020 the IRS issued the Revenue Agent’s Report (RAR) for the 2014-2015 tax years and in
December 2020 Entergy executed it. In December 2020, System Energy filed a motion to lodge the RAR into the
record in the FERC proceeding addressing the Tax Cuts and Jobs Act. In January 2021 the LPSC, APSC, MPSC,
and City Council filed a joint answer opposing System Energy’s motion, and the FERC trial staff also filed an
answer opposing System Energy’s motion.
As a result of the RAR, in December 2020, System Energy also filed an amendment to its Federal Power
Act section 205 filing to credit excess accumulated deferred income taxes arising from the successful portion of the
decommissioning uncertain tax position. The amendment proposed the inclusion of the RAR as support for the
filing. In December 2020, the LPSC, APSC, and City Council filed a protest in response to the amendment,
reiterating objections to the filing to credit excess accumulated deferred income taxes arising from the successful
portion of the decommissioning uncertain tax position. In February 2021 the FERC issued an order accepting
System Energy’s Federal Power Act section 205 filing subject to refund, setting it for hearing, and holding the
hearing in abeyance.
In November 2020, System Energy filed a motion to vacate the ALJ’s decision, arguing that it had been
overtaken by changed circumstances because of the IRS’s determination resulting from the NOPA and RAR. In
January 2021 the LPSC, APSC, MPSC, and City Council filed a joint answer opposing System Energy’s motion,
and the FERC trial staff also filed an answer opposing System Energy’s motion. Additional responsive pleadings
were filed in February and March 2021. There is no formal deadline for FERC to rule on the motion.
Fuel and purchased power cost recovery
The Utility operating companies are allowed to recover fuel and purchased power costs through fuel
mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference
between revenues collected and the current fuel and purchased power costs is generally recorded as “Deferred fuel
costs” on the Utility operating companies’ financial statements. The table below shows the amount of deferred fuel
costs as of December 31, 2021 and 2020 that Entergy expects to recover (or return to customers) through fuel
mechanisms, subject to subsequent regulatory review.
Entergy Arkansas (a)
Entergy Louisiana (b)
Entergy Mississippi
Entergy New Orleans (b)
Entergy Texas
2021
2020
(In Millions)
$177.6
$213.5
$121.9
($3.5)
$48.3
$15.2
$170.4
($14.7)
$6.2
($85.4)
(a)
Includes $68.8 million in 2021 and $68.2 million in 2020 of fuel and purchased power costs whose recovery
periods are indeterminate but are expected to be recovered over a period greater than twelve months.
80
(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 are indeterminate but are expected to be recovered over a period greater than
twelve months.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Energy Cost Recovery Rider
Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy
costs in monthly customer bills. The rider utilizes the prior calendar-year energy costs and projected energy sales
for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is
redetermined annually and includes a true-up adjustment reflecting the over- or under-recovery, including carrying
charges, of the energy costs for the prior calendar year. The energy cost recovery rider tariff also allows an interim
rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.
In January 2014, Entergy Arkansas filed a motion with the APSC relating to its upcoming energy cost rate
redetermination filing that was made in March 2014. In that motion, Entergy Arkansas requested that the APSC
authorize Entergy Arkansas to exclude from the redetermination of its 2014 energy cost rate $65.9 million of
incremental fuel and replacement energy costs incurred in 2013 as a result of the ANO stator incident. Entergy
Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in its deferred fuel balance,
with recovery to be reviewed in a later period after more information was available regarding various claims
associated with the ANO stator incident. In February 2014 the APSC approved Entergy Arkansas’s request to retain
that amount in its deferred fuel balance. In July 2017, Entergy Arkansas filed for a change in rates pursuant to its
formula rate plan rider. In that proceeding, the APSC approved a settlement agreement agreed upon by the parties,
including a provision that requires Entergy Arkansas to initiate a regulatory 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 previously noted, subject to certain timelines and conditions set forth in
the settlement agreement. In October 2021 the APSC approved Entergy Arkansas’s second request to extend the
deadline for initiating a regulatory proceeding for the purpose of recovering funds related to the stator incident for
twelve additional months, or until December 1, 2022. See the “ANO Damage, Outage, and NRC Reviews”
section in Note 8 to the financial statements 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 recovery rider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh.
The APSC staff filed testimony in March 2017 recommending that the redetermined rate be implemented with the
first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went
into effect on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested
additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate
redetermination.
In March 2018, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the
energy cost recovery rider, which reflected an increase in the rate from $0.01547 per kWh to $0.01882 per kWh.
The Arkansas Attorney General filed a response to Entergy Arkansas’s annual redetermination filing requesting that
the APSC suspend the proposed tariff to investigate the amount of the redetermination or, alternatively, to allow
recovery subject to refund. Among the reasons the Attorney General cited for suspension were questions pertaining
to how Entergy Arkansas forecasted sales and potential implications of the Tax Cuts and Jobs Act. Entergy
Arkansas replied to the Attorney General’s filing and stated that, to the extent there are questions pertaining to its
load forecasting or the operation of the energy cost recovery rider, those issues exceed the scope of the instant rate
redetermination. Entergy Arkansas also stated that potential effects of the Tax Cuts and Jobs Act are appropriately
considered in the APSC’s separate proceeding regarding potential implications of the tax law. The APSC general
staff filed a reply to the Attorney General’s filing and agreed that Entergy Arkansas’s filing complied with the terms
81 Entergy Corporation and Subsidiaries
Notes to Financial Statements
of the energy cost recovery rider. The redetermined rate became effective with the first billing cycle of April 2018.
Subsequently in April 2018 the APSC issued an order declining to suspend Entergy Arkansas’s energy cost
recovery rider rate 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 Entergy Arkansas’s March 2018 rate redetermination and asserting that $45.7
million of the increase should be collected subject to refund pending further investigation. Entergy Arkansas filed
to dismiss the Attorney General’s supplemental response, the APSC general staff filed a motion to strike the
Attorney General’s filing, and the Attorney General filed a supplemental response disputing Entergy Arkansas and
the APSC staff’s filing. Applicable APSC rules and processes authorize its general staff to initiate periodic audits
of Entergy Arkansas’s energy cost recovery rider. In late-2018 the APSC general staff notified Entergy 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.
In March 2019, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the
energy cost recovery rider, which reflected a decrease from $0.01882 per kWh to $0.01462 per kWh and became
effective with the first billing cycle in April 2019. In March 2019 the Arkansas Attorney General filed a response to
Entergy Arkansas’s annual adjustment and included with its filing a motion for investigation of alleged overcharges
to customers in connection with the FERC’s October 2018 order in the opportunity sales proceeding. Entergy
Arkansas filed its response to the Attorney General’s motion in April 2019 in which Entergy Arkansas stated its
intent to initiate a proceeding to address recovery issues related to the October 2018 FERC order. In May 2019,
Entergy Arkansas initiated the opportunity sales recovery proceeding, discussed below, and requested that the
APSC establish that proceeding as the single designated proceeding in which interested parties may assert claims
related to the appropriate retail rate treatment of the FERC October 2018 order and related FERC orders in the
opportunity sales proceeding. In June 2019 the APSC granted Entergy Arkansas’s request and also denied the
Attorney General’s motion in the energy cost recovery proceeding seeking an investigation into Entergy Arkansas’s
annual energy cost recovery rider adjustment and referred the evaluation of such matters to the opportunity sales
recovery proceeding.
In March 2020, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the
energy cost recovery rider, which reflected a decrease from $0.01462 per kWh to $0.01052 per kWh. The
redetermined rate became effective with the first billing cycle in April 2020 through the normal operation of the
tariff.
In March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the
energy cost recovery rider, which reflected a decrease from $0.01052 per kWh to $0.00959 per kWh. The
redetermined rate calculation also included an adjustment to account for a portion of the increased fuel costs
resulting from the February 2021 winter storms. The redetermined rate became effective with the first billing cycle
in April 2021 through the normal operation of the tariff.
Entergy Louisiana
Entergy Louisiana recovers electric fuel and purchased power costs for the billing month based upon the
level of such costs incurred two months prior to the billing month. Entergy Louisiana’s purchased gas adjustments
include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of
fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
In July 2014 the LPSC authorized its staff to initiate an audit of the fuel adjustment clause filings by
Entergy Gulf States Louisiana, whose business was combined with Entergy Louisiana in 2015. The audit includes a
review of the reasonableness of charges flowed through Entergy Gulf States Louisiana’s fuel adjustment clause for
the period from 2010 through 2013. In January 2019 the LPSC staff consultant issued its audit report. In its report,
the LPSC staff consultant recommended that Entergy Louisiana refund approximately $900,000, plus interest, to
customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana
recorded a provision in the first quarter 2019 for the potential outcome of the audit. In August 2019, Entergy
82 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Louisiana filed direct testimony challenging the basis for the LPSC staff’s recommended disallowance and
providing an alternative calculation of replacement power costs should it be determined that a disallowance is
appropriate. Entergy Louisiana’s calculation would require no refund to customers.
In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause
filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel
adjustment clause for the period from 2010 through 2013. In January 2019 the LPSC staff issued its audit report
recommending that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the
imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana recorded a provision in the
first quarter 2019 for the potential outcome of the audit. In August 2019, Entergy Louisiana filed direct testimony
challenging the basis for the LPSC staff’s recommended disallowance and providing an alternative calculation of
replacement power costs should it be determined that a disallowance is appropriate. Entergy Louisiana’s calculation
would require a refund to customers of approximately $4.3 million, plus interest, as compared to the LPSC staff’s
recommendation of $7.3 million, plus interest. Responsive testimony was filed by the LPSC staff and intervenors in
September 2019; all parties either agreed with or did not oppose Entergy Louisiana’s alternative calculation of
replacement power costs.
In November 2019 the pending LPSC proceedings for the 2010-2013 Entergy Louisiana and Entergy Gulf
States Louisiana audits were consolidated to facilitate a settlement of both fuel audits. In December 2019 an
unopposed settlement was reached that requires a refund to legacy Entergy Louisiana customers of approximately
$2.3 million, including interest, and no refund to legacy Entergy Gulf States Louisiana customers. The LPSC
approved the settlement in January 2020. A one-time refund was made in February 2020.
In March 2020 the LPSC staff provided notice of an audit of Entergy Louisiana’s fuel adjustment clause
filings. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel
adjustment clause for the period from 2016 through 2019. In September 2021 the LPSC submitted its audit report
and found that all costs recovered through the fuel adjustment clause were reasonable and eligible for recovery
through the fuel adjustment clause. Intervenors are conducting discovery regarding the LPSC staff’s report.
In February 2021, Entergy Louisiana incurred extraordinary fuel costs associated with the February 2021
winter storms. To mitigate the effect of these costs on customer bills, in March 2021 Entergy Louisiana requested
and the LPSC approved the deferral and recovery of $166 million in incremental fuel costs over five months
beginning in April 2021. The incremental fuel costs remain subject to review for reasonableness and eligibility for
recovery through the fuel adjustment clause mechanism. The final amount of incremental fuel costs is subject to
change through the resettlement process. At its April 2021 meeting, the LPSC authorized its staff to review the
prudence of the February 2021 fuel costs incurred by all LPSC-jurisdictional utilities. At its June 2021 meeting, the
LPSC approved the hiring of consultants to assist its staff in this review. Discovery is ongoing.
In March 2021 the LPSC staff provided notice of an audit of Entergy Louisiana’s purchased gas adjustment
clause filings covering the period January 2018 through December 2020. The audit includes a review of the
reasonableness of charges flowed through Entergy Louisiana’s purchased gas adjustment clause for that period.
Discovery is ongoing, and no audit report has been filed.
Entergy Mississippi
Entergy 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 the MPSC.
In November 2018, Entergy Mississippi filed its annual redetermination of the annual factor to be applied
under the energy cost recovery rider. The calculation of the annual factor included an under-recovery of
83 Entergy Corporation and Subsidiaries
Notes to Financial Statements
approximately $57 million as of September 30, 2018. In January 2019 the MPSC approved the proposed energy
cost factor effective for February 2019 bills.
In November 2019, Entergy Mississippi filed its annual redetermination of the annual factor to be applied
under the energy cost recovery rider. The calculation included $39.6 million of prior over-recovery flowing back to
customers beginning February 2020. Entergy Mississippi’s balance in its deferred fuel account did not decrease as
expected after implementation of the new factor. In an effort to assist customers during the COVID-19 pandemic,
in May 2020, Entergy Mississippi requested an interim adjustment to the energy cost recovery rider to credit
approximately $50 million from the over-recovered balance in the deferred fuel account to customers over four
consecutive billing months. The MPSC approved this interim adjustment in May 2020 effective for June through
September 2020 bills.
In November 2020, Entergy Mississippi filed its annual redetermination of the annual factor to be applied
under the energy cost recovery rider. The calculation of the annual factor included an over-recovery of
approximately $24.4 million as of September 30, 2020. In January 2021 the MPSC approved the proposed energy
cost factor effective for February 2021 bills.
In November 2021, Entergy Mississippi filed its annual redetermination of the annual factor to be applied
under the energy cost recovery rider. The calculation of the annual factor included an under-recovery of
approximately $80.6 million as of September 30, 2021. In December 2021, at the request of the MPSC, Entergy
Mississippi submitted a proposal to mitigate the impact of rising fuel costs on customer bills during 2022. Entergy
Mississippi proposed that the deferred fuel balance as of December 31, 2021, which was $121.9 million, be
amortized over three years, and that the MPSC authorize Entergy Mississippi to apply its weighted-average cost of
capital as the carrying cost for the unamortized fuel balance. In January 2022 the MPSC approved the amortization
of $100 million of the deferred fuel balance over two years and authorized Entergy Mississippi to apply its
weighted-average cost of capital as the carrying cost for the unamortized fuel balance. The MPSC approved the
proposed energy cost factor effective for February 2022 bills.
Entergy New Orleans
Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more
than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising
from the monthly reconciliation of actual fuel and 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 billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause,
including carrying charges.
Entergy Texas
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs,
including interest, not recovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and
September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy
Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before
the PUCT. A fuel reconciliation is required to be filed at least once every three years and outside of a base rate case
filing.
In September 2019, Entergy Texas filed an application to reconcile its fuel and purchased power costs for
the period from April 2016 through March 2019. During the reconciliation period, Entergy Texas incurred
approximately $1.6 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain
revenues credited to such expenses and other adjustments. Entergy Texas estimated an under-recovery balance of
84 Entergy Corporation and Subsidiaries
Notes to Financial Statements
approximately $25.8 million, including interest, which Entergy Texas requested authority to carry over as the
beginning balance for the subsequent reconciliation period beginning April 2019. In March 2020 an intervenor filed
testimony proposing that the PUCT disallow: (1) $2 million in replacement power costs associated with generation
outages during the reconciliation period; and (2) $24.4 million associated with the operation of the Spindletop
natural gas storage facility during the reconciliation period. In April 2020, Entergy Texas filed rebuttal testimony
refuting all points raised by the intervenor. In June 2020 the parties filed a stipulation and settlement agreement,
which included a $1.2 million disallowance not associated with any particular issue raised by any party. The PUCT
approved the settlement in August 2020.
In July 2020, Entergy Texas filed an application with the PUCT to implement an interim fuel refund of
$25.5 million, including interest. Entergy Texas proposed that the interim fuel refund be implemented beginning
with the first August 2020 billing cycle over a three-month period for smaller customers and in a lump sum amount
in the billing month of August 2020 for transmission-level customers. The interim fuel refund was approved in July
2020, and Entergy Texas began refunds in August 2020.
In February 2021, Entergy Texas filed an application to implement a fuel refund for a cumulative over-
recovery of approximately $75 million that is primarily attributable to settlements received by Entergy Texas from
MISO related to Hurricane Laura. Entergy Texas planned to issue the refund over the period of March through
August 2021. On February 22, 2021, Entergy Texas filed a motion to abate its fuel refund proceeding to assess how
the February 2021 winter storm impacted Entergy Texas’s fuel over-recovery position. In March 2021, Entergy
Texas withdrew its application to implement the fuel refund. Entergy Texas is continuing to evaluate its fuel
balance and will file a subsequent refund or surcharge application consistent with the requirements of the PUCT’s
rules.
Retail Rate Proceedings
Filings with the APSC (Entergy Arkansas)
Retail Rates
2019 Formula Rate Plan Filing
In July 2019, Entergy Arkansas filed with the APSC its 2019 formula rate plan filing to set its formula rate
for the 2020 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year
2020 and a netting adjustment for the historical year 2018. The total proposed formula rate plan rider revenue
change designed to produce a target rate of return on common equity of 9.75% is $15.3 million, which is based
upon a deficiency of approximately $61.9 million for the 2020 projected year, netted with a credit of approximately
$46.6 million in the 2018 historical year netting adjustment. During 2018 Entergy Arkansas experienced higher-
than expected sales volume, and actual costs were lower than forecasted. These changes, coupled with a reduced
income tax rate resulting from the Tax Cuts and Jobs Act, resulted in the credit for the historical year netting
adjustment. In the fourth quarter 2018, Entergy Arkansas recorded a provision of $35.1 million that reflected the
estimate of the historical year netting adjustment that was expected to be included in the 2019 filing. In 2019,
Entergy Arkansas recorded additional provisions totaling $11.5 million to reflect the updated estimate of the
historical year netting adjustment included in the 2019 filing. In October 2019 other parties in the proceeding filed
their errors and objections requesting certain adjustments to Entergy Arkansas’s filing that would reduce or
eliminate Entergy Arkansas’s proposed revenue change. Entergy Arkansas filed its response addressing the
requested adjustments in October 2019. In its response, Entergy Arkansas accepted certain of the adjustments
recommended by the General Staff of the APSC that would reduce the proposed formula rate plan rider revenue
change to $14 million. Entergy Arkansas disputed the remaining adjustments proposed by the parties. In October
2019, Entergy Arkansas filed a unanimous settlement agreement with the other parties in the proceeding seeking
APSC approval of a revised total formula rate plan rider revenue change of $10.1 million. In its July 2019 formula
rate plan filing, Entergy Arkansas proposed to recover an $11.2 million regulatory asset, amortized over five years,
85 Entergy Corporation and Subsidiaries
Notes to Financial Statements
associated with specific costs related to the potential construction of scrubbers at the White Bluff plant. Although
Entergy Arkansas does not concede that the regulatory asset lacks merit, for purposes of reaching a settlement on
the total formula rate plan rider amount, Entergy Arkansas agreed not to include the White Bluff scrubber regulatory
asset cost in the 2019 formula rate plan filing or future filings. Entergy Arkansas recorded a write-off in 2019 of the
$11.2 million White Bluff scrubber regulatory asset. In December 2019 the APSC approved the settlement as being
in the public interest and approved Entergy Arkansas’s compliance tariff effective with the first billing cycle of
January 2020.
2020 Formula Rate Plan Filing
In July 2020, Entergy Arkansas filed with the APSC its 2020 formula rate plan filing to set its formula rate
for the 2021 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year
2021, as amended through subsequent filings in the proceeding, and a netting adjustment for the historical year
2019. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2021 projected
year is 8.22% resulting in a revenue deficiency of $64.3 million. The earned rate of return on common equity for
the 2019 historical year was 9.07% resulting in a $23.9 million netting adjustment. The total proposed revenue
change for the 2021 projected year and 2019 historical year netting adjustment was $88.2 million. By operation of
the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual
revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeded the constraint, the
resulting increase was limited to $74.3 million. As part of the formula rate plan tariff the calculation for the revenue
constraint was updated based on actual revenues which had the effect of reducing the initially-proposed
$74.3 million revenue requirement increase to $72.6 million. In October 2020, Entergy Arkansas filed with the
APSC a unanimous settlement agreement reached with the other parties that resolved all but one issue. As a result
of the settlement agreement, Entergy Arkansas’s requested revenue increase was $68.4 million, including a
$44.5 million increase for the projected 2021 year and a $23.9 million netting adjustment. The remaining issue
litigated concerned the methodology used to calculate the netting adjustment within the formula rate plan. In
December 2020 the APSC issued an order rejecting the netting adjustment method used by Entergy Arkansas.
Applying the approach ordered by the APSC changed the netting adjustment for the 2019 historical year from a
$23.9 million deficiency to $43.5 million excess. Overall, the decision reduced Entergy Arkansas’s revenue
adjustment for 2021 to $1 million. In December 2020, Entergy Arkansas filed a petition for rehearing of the
APSC’s decision in the 2020 formula rate plan proceeding regarding the 2019 netting adjustment, and in January
2021 the APSC granted further consideration of Entergy Arkansas’s petition. Based on the progress of the
proceeding at that point, in December 2020, Entergy Arkansas recorded a regulatory liability of $43.5 million to
reflect the netting adjustment for 2019, as included in the APSC’s December 2020 order, which would be returned
to customers in 2021. Entergy Arkansas also requested an extension of the formula rate plan rider for a second five-
year term. In March 2021 the Arkansas Governor signed HB1662 into law (Act 404). Act 404 clarified aspects of
the original formula rate plan legislation enacted in 2015, including with respect to the extension of a formula rate
plan, the methodology for the netting adjustment, and debt and equity levels; it also reaffirmed the customer
protections of the original formula rate plan legislation, including the cap on annual formula rate plan rate changes.
Pursuant to Act 404, Entergy Arkansas’s formula rate plan rider was extended for a second five-year term. Entergy
Arkansas filed a compliance tariff in its formula rate plan docket in April 2021 to effectuate the netting provisions
of Act 404, which reflected a net change in required formula rate plan rider revenue of $39.8 million, effective with
the first billing cycle of May 2021. In April 2021 the APSC issued an order approving the compliance tariff and
recognizing the formula rate plan extension. Also in April 2021, Entergy Arkansas filed for approval of
modifications to the formula rate plan tariff incorporating the provisions in Act 404, and the APSC approved the
tariff modifications in April 2021. Given the APSC general staff’s support for the expedited approval of these
filings by the APSC, Entergy Arkansas supported an amendment to Act 404 to achieve a reduced return on equity
from 9.75% to 9.65% to apply for years applicable to the extension term; that amendment was signed by the
Arkansas Governor in April 2021 and is now Act 894. Based on the APSC’s order issued in April 2021, in the first
quarter 2021, Entergy Arkansas reversed the remaining regulatory liability for the netting adjustment for 2019. In
June 2021, Entergy Arkansas filed another compliance tariff in its formula rate plan proceeding to effectuate the
additional provisions of Act 894, and the APSC approved the second compliance tariff filing in July 2021.
86 Entergy Corporation and Subsidiaries
Notes to Financial Statements
2021 Formula Rate Plan Filing
In July 2021, Entergy Arkansas filed with the APSC its 2021 formula rate plan filing to set its formula rate
for the 2022 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year
2022 and a netting adjustment for the historical year 2020. The filing showed that Entergy Arkansas’s earned rate
of return on common equity for the 2022 projected year is 7.65% resulting in a revenue deficiency of $89.2 million.
The earned rate of return on common equity for the 2020 historical year was 7.92% resulting in a $19.4 million
netting adjustment. The total proposed revenue change for the 2022 projected year and 2020 historical year netting
adjustment is $108.7 million. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue
requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue
requirement in this filing exceeded the constraint, the resulting increase is limited to $72.4 million. In October
2021, Entergy Arkansas filed with the APSC a settlement agreement reached with other parties resolving all issues
in the proceeding. As a result of the settlement agreement, the total proposed revenue change is $82.2 million,
including a $62.8 million increase for the projected 2022 year and a $19.4 million netting adjustment. Because
Entergy Arkansas’s revenue requirement exceeded the constraint, the resulting increase is limited to $72.1 million.
In December 2021 the APSC approved the settlement as being in the public interest and approved Entergy
Arkansas’s compliance tariff effective with the first billing cycle of January 2022.
COVID-19 Orders
In April 2020, in light of the COVID-19 pandemic, the APSC issued an order requiring utilities, to the
extent they had not already done so, to suspend service disconnections during the remaining pendency of the
Arkansas Governor’s emergency declaration or until the APSC rescinds the directive. The order also authorized
utilities to establish a regulatory asset to record costs resulting from the suspension of service disconnections,
directed that in future proceedings the APSC will consider whether the request for recovery of these regulatory
assets is reasonable and necessary, and required utilities to track and report the costs and any savings directly
attributable to suspension of disconnects. In May 2020 the APSC approved Entergy Arkansas expanding deferred
payment agreements to assist customers during the COVID-19 pandemic. Quarterly reporting began in August
2020 and the APSC ordered additional reporting in October 2020 regarding utilities’ transitional plans for ending
the moratorium on service disconnects. In March 2021 the APSC issued an order confirming the lifting of the
moratorium on service disconnects effective in May 2021. In August 2021 the APSC general staff filed a report
recommending that utilities with a formula rate plan discontinue capturing any additional direct costs and savings as
a regulatory asset and seek cost recovery through the formula rate plan. The APSC general staff further
recommended that uncollectible amounts should be determined as of the end of its write-off period, approximately
December 2021, and recovered in the next formula rate plan filing over one year. In November 2021 the APSC
found the APSC general staff’s recommendation to be premature and asked utilities to report on the continued need
for a regulatory asset. Entergy Arkansas reported a continued need for a regulatory asset due to a variety of factors
including the unusually long terms of the customer delayed payment agreements. As of December 31, 2021,
Entergy Arkansas had a regulatory asset of $32.6 million for costs associated with the COVID-19 pandemic.
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
2017 Formula Rate Plan Filing
In June 2018, Entergy Louisiana filed its formula rate plan evaluation report for its 2017 calendar year
operations. The 2017 test year evaluation report produced an earned return on equity of 8.16%, due in large part to
revenue-neutral realignments to other recovery mechanisms. Without these realignments, the evaluation report
produces an earned return on equity of 9.88% and a resulting base rider formula rate plan revenue increase of
$4.8 million. Excluding the Tax Cuts and Jobs Act credits provided for by the tax reform adjustment mechanisms,
87 Entergy Corporation and Subsidiaries
Notes to Financial Statements
total formula rate plan revenues were further increased by a total of $98 million as a result of the evaluation report
due to adjustments to the additional capacity and MISO cost recovery mechanisms of the formula rate plan, and
implementation of the transmission recovery mechanism. In August 2018, Entergy Louisiana filed a supplemental
formula rate plan evaluation report to reflect changes from the 2016 test year formula rate plan proceedings, a
decrease to the transmission recovery mechanism to reflect lower actual capital additions, and a decrease to
evaluation period expenses to reflect the terms of a new power sales agreement. Based on the August 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 and review by the LPSC staff and intervenors. In accordance with the terms of the formula rate plan, in
September 2018 the LPSC staff and intervenors submitted their responses to Entergy Louisiana’s original formula
rate plan evaluation report and supplemental compliance updates. The LPSC staff asserted objections/reservations
regarding (1) Entergy Louisiana’s proposed rate adjustments associated with the return of excess accumulated
deferred income taxes pursuant to the Tax Cuts and Jobs Act and the treatment of accumulated deferred income
taxes related to reductions of rate base; (2) Entergy Louisiana’s reservation regarding treatment of a regulatory asset
related to certain special orders by the LPSC; and (3) test year expenses billed from Entergy Services to Entergy
Louisiana. Intervenors also objected to Entergy Louisiana’s treatment of the regulatory asset related to certain
special orders by the LPSC. In August 2021 the LPSC staff issued a letter updating its objections/reservations for
the 2017 test year formula rate plan evaluation report. In its letter, the LPSC staff reiterated its original objections/
reservations pertaining to Entergy Louisiana’s proposed rate adjustments associated with the return of excess
accumulated deferred income taxes pursuant to the Tax Cuts and Jobs Act and the treatment of accumulated
deferred income taxes related to reductions of rate base, specifically how the accumulated deferred income taxes
associated with uncertain tax positions have been accounted for, and test year expenses billed from Entergy Services
to Entergy Louisiana. The LPSC staff further reserved its rights for future proceedings and to dispute future
proposed adjustments to the 2017 test year formula rate plan evaluation report. The LPSC staff withdrew all other
objections/reservations. A procedural schedule has not yet been established to resolve these issues.
Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy
Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination, if approved,
would be accomplished on a revenue-neutral basis intended not to affect the rates of other customer classes.
Commercial operation at J. Wayne Leonard Power Station (formerly St. Charles Power Station)
commenced in May 2019. In May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation
report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne
Leonard Power Station. The resulting interim adjustment to rates became effective with the first billing cycle of
June 2019. In June 2020, Entergy Louisiana submitted information to the LPSC to review the prudence of Entergy
Louisiana’s management of the project. In August 2020 discovery commenced and a procedural schedule was
established with a hearing in July 2021. In February 2021 the LPSC staff filed testimony that substantially all the
costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for recovery from
customers. The LPSC staff further recommended that the LPSC consider monitoring the remaining $3.1 million that
was estimated to be incurred for completion of the project in the event the final costs exceed the estimated amounts.
In July 2021 the LPSC approved a settlement between the LPSC staff and Entergy Louisiana finding that
substantially all the costs to construct J. Wayne Leonard Power Station were prudently incurred and eligible for
recovery from customers.
2018 Formula Rate Plan Filing
In May 2019, Entergy Louisiana filed its formula rate plan evaluation report for its 2018 calendar year
operations. The 2018 test year evaluation report produced an earned return on common equity of 10.61% leading to
a base rider formula rate plan revenue decrease of $8.9 million. While base rider formula rate plan revenue will
decrease as a result of this filing, overall formula rate plan revenues will increase by approximately $118.7 million.
This outcome is primarily driven by a reduction to the credits previously flowed through the tax reform adjustment
mechanism and an increase in the transmission recovery mechanism, partially offset by reductions in the additional
88 Entergy Corporation and Subsidiaries
Notes to Financial Statements
capacity mechanism revenue requirements and extraordinary cost items. The filing is subject to review by the
LPSC. Resulting rates were implemented in September 2019, subject to refund.
Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy
Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination, if approved,
would be accomplished on a revenue-neutral basis intended not to affect the rates of other customer classes.
Entergy Louisiana contemplates that any combination of residential rates resulting from this request would be
implemented with the results of the 2019 test year formula rate plan filing.
Several parties intervened in the proceeding and the LPSC staff filed its report of objections/reservations in
accordance with the applicable provisions of the formula rate plan. In its report the LPSC staff re-urged
reservations with respect to the outstanding issues from the 2017 test year formula rate plan filing and disputed the
inclusion of certain affiliate costs for test years 2017 and 2018. The LPSC staff objected to Entergy Louisiana’s
proposal to combine residential rates but proposed the setting of a status conference to establish a procedural
schedule to more fully address the issue. The LPSC staff also reserved its right to object to the treatment of the sale
of Willow Glen reflected in the evaluation report and to the August 2019 compliance update, which was made
primarily to update the capital additions reflected in the formula rate plan’s transmission recovery mechanism,
based on limited time to review it. Additionally, since the completion of certain transmission projects, the LPSC
staff issued supplemental data requests addressing the prudence of Entergy Louisiana’s expenditures in connection
with those projects. Entergy Louisiana responded to all such requests. In August 2021 the LPSC staff issued a
letter updating its objections/reservations for the 2018 test year formula rate plan evaluation report. In its letter, the
LPSC staff reiterated its original objection/reservation pertaining to test year expenses billed from Entergy Services
to Entergy Louisiana and outstanding issues from the 2017 test year formula rate plan evaluation report. The LPSC
staff withdrew all other objections/reservations.
Commercial operation at Lake Charles Power Station commenced in March 2020. In March 2020, Entergy
Louisiana filed an update to its 2018 formula rate plan evaluation report to include the estimated first-year revenue
requirement of $108 million associated with the Lake Charles Power Station. The resulting interim adjustment to
rates became effective with the first billing cycle of April 2020.
In an effort to narrow the remaining issues in formula rate plan test years 2017 and 2018, Entergy Louisiana
provided notice to the parties in October 2020 that it was withdrawing its request to combine residential rates.
Entergy Louisiana noted that the withdrawal is without prejudice to Entergy Louisiana’s right to seek to combine
residential rates in a future proceeding.
2019 Formula Rate Plan Filing
In May 2020, Entergy Louisiana filed with the LPSC its formula rate plan evaluation report for its 2019
calendar year operations. The 2019 test year evaluation report produced an earned return on common equity of
9.66%. As such, no change to base rider formula rate plan revenue is required. Although base rider formula rate
plan revenue did not change as a result of this filing, overall formula rate plan revenues increased by approximately
$103 million. This outcome is driven by the removal of prior year credits associated with the sale of the Willow
Glen Power Station and an increase in the transmission recovery mechanism. Also contributing to the overall
change was an increase in legacy formula rate plan revenue requirements driven by legacy Entergy Louisiana
capacity cost true-ups and higher annualized legacy Entergy Gulf States Louisiana revenues due to higher billing
determinants, offset by reductions in MISO cost recovery mechanism and tax reform adjustment mechanism
revenue requirements. In August 2020 the LPSC staff submitted a list of items for which it needs additional
information to confirm the accuracy and compliance of the 2019 test year evaluation report. The LPSC staff
objected to a proposed revenue neutral adjustment regarding a certain rider as being beyond the scope of permitted
formula rate plan adjustments. Rates reflected in the May 2020 filing, with the exception of a revenue neutral rider
adjustment, and as updated in an August 2020 filing, were implemented in September 2020, subject to refund.
Entergy Louisiana is in the process of providing additional information and details on the May 2020 filing as
89 Entergy Corporation and Subsidiaries
Notes to Financial Statements
requested by the LPSC staff. In August 2021 the LPSC staff issued a letter updating its objections/reservations for
the 2019 test year formula rate plan filing. In its letter, the LPSC staff disputes Entergy Louisiana’s exclusion of
approximately $251 thousand of interest income allocated from Entergy Operations and Entergy Services to Entergy
Louisiana to the extent that there are other adjustments that would move Entergy Louisiana out of the formula rate
plan deadband. The LPSC staff reserved the right to further contest the issue in future proceedings. The LPSC staff
further reserved outstanding issues from the 2017 and 2018 formula rate plan evaluation reports and withdrew all
other remaining objections/reservations.
In November 2020, Entergy Louisiana accepted ownership of the Washington Parish Energy Center and
filed an update to its 2019 formula rate plan evaluation report to include the estimated first-year revenue
requirement of $35 million associated with the Washington Parish Energy Center. The resulting interim adjustment
to rates became effective with the first billing cycle of December 2020. In January 2021, Entergy Louisiana filed an
update to its 2019 formula rate plan evaluation report to include the implementation of a scheduled step-up in its
nuclear decommissioning revenue requirement and a true-up for under-collections of nuclear decommissioning
expenses. The total rate adjustment would increase formula rate plan revenues by approximately $1.2 million. The
resulting interim adjustment to rates became effective with the first billing cycle of February 2021.
Request for Extension and Modification of Formula Rate Plan
In May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate
plan. In its application, Entergy Louisiana sought to maintain a 9.8% return on equity, with a bandwidth of 60 basis
points above and below the midpoint, with a first-year midpoint reset. The parties reached a settlement in April
2021 regarding Entergy Louisiana’s proposed FRP extension. In May 2021 the LPSC approved the uncontested
settlement. Key terms of the settlement include: a three year term (test years 2020, 2021, and 2022) covering a rate-
effective period of September 2021 through August 2024; a 9.50% return on equity, with a smaller, 50 basis point
deadband above and below (9.0%-10.0%); elimination of sharing if earnings are outside the deadband; a $63 million
rate increase for test year 2020 (exclusive of riders); continuation of existing riders (transmission, additional
capacity, etc.); addition of a distribution recovery mechanism permitting $225 million per year of distribution
investment above a baseline level to be recovered dollar for dollar; modification of the tax mechanism to allow
timely rate changes in the event the federal corporate income tax rate is changed from 21%; a cumulative rate
increase limit of $70 million (exclusive of riders) for test years 2021 and 2022; and deferral of up to $7 million per
year in 2021 and 2022 of expenditures on vegetation management for outside of right of way hazard trees.
2020 Formula Rate Plan Filing
In June 2021, Entergy Louisiana filed its formula rate plan evaluation report for its 2020 calendar year
operations. The 2020 test year evaluation report produced an earned return on common equity of 8.45%, with a
base formula rate plan revenue increase of $63 million. Certain reductions in formula rate plan revenue driven by
lower sales volumes, reductions in capacity cost and net MISO cost, and higher credits resulting from the Tax Cuts
and Jobs Act offset the base formula rate plan revenue increase, leading to a net increase in formula rate plan
revenue of $50.7 million. The report also included multiple new adjustments to account for, among other things, the
calculation of distribution recovery mechanism revenues. The effects of the changes to total formula rate plan
revenue are different for each legacy company, primarily due to differences in the legacy companies’ capacity cost
changes, including the effect of true-ups. Legacy Entergy Louisiana formula rate plan revenues will increase by
$27 million and legacy Entergy Gulf States Louisiana formula rate plan revenues will increase by $23.7 million.
Subject to refund and LPSC review, the resulting changes became effective for bills rendered during the first billing
cycle of September 2021. Discovery commenced in the proceeding. In August 2021, Entergy Louisiana submitted
an update to its evaluation report to account for various changes. Relative to the June 2021 filing, the total formula
rate plan revenue increased by $14.2 million to an updated total of $64.9 million. Legacy Entergy Louisiana
formula rate plan revenues will increase by $32.8 million and legacy Entergy Gulf States Louisiana formula rate
plan revenues will increase by $32.1 million. The results of the 2020 test year evaluation report bandwidth
calculation were unchanged as there was no change in the earned return on common equity of 8.45%. In September
90 Entergy Corporation and Subsidiaries
Notes to Financial Statements
2021 the LPSC staff filed a letter with a general statement of objections/reservations because it had not completed
its review, and indicated it would update the letter once its review was complete. Should the parties be unable to
resolve any objections, those issues will be set for hearing, with recovery of the associated costs subject to refund.
Investigation of Costs Billed by Entergy Services
In November 2018 the LPSC issued a notice of proceeding initiating an investigation into costs incurred by
Entergy Services that are included in the retail rates of Entergy Louisiana. As stated in the notice of proceeding, the
LPSC observed an increase in capital construction-related costs incurred by Entergy Services. Discovery was
issued and included efforts to seek highly detailed information on a broad range of matters unrelated to the scope of
the audit. There has been no further activity in the investigation since May 2019.
COVID-19 Orders
In April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses
incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with
the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of
losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees
and disconnects for non-pay was extended until the first billing cycle after July 16, 2020. In January 2021, Entergy
Louisiana resumed disconnections for customers in all customer classes with past-due balances that had not made
payment arrangements. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so,
identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review
and approval. As of December 31, 2021, Entergy Louisiana had a regulatory asset of $56.3 million for costs
associated with the COVID-19 pandemic.
Filings with the MPSC (Entergy Mississippi)
Retail Rates
Formula Rate Plan Revisions
In October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a
mechanism in the formula rate plan, the interim capacity rate adjustment mechanism, to recover the non-fuel related
costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs
of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity
acquisitions, such as the Sunflower Solar Facility, that are approved by the MPSC. In December 2019 the MPSC
approved Entergy Mississippi’s proposed revisions to its formula rate plan to provide for an interim capacity rate
adjustment mechanism to recover the $59 million first-year annual revenue requirement associated with the non-fuel
ownership costs of the Choctaw Generating Station, which Entergy Mississippi began billing in January 2020. The
MPSC must approve recovery through the interim capacity rate adjustment for each new resource. In addition, the
MPSC approved revisions to the formula rate plan which allows Entergy Mississippi to begin billing rate
adjustments effective April 1 of the filing year on a temporary basis subject to refund or credit to customers, subject
to final MPSC order. The MPSC also authorized Entergy Mississippi to remove vegetation management costs from
the formula rate plan and recover these costs through the establishment of a vegetation management rider. Effective
with the April 2020 billing cycle, Entergy Mississippi implemented a rider to recover $22 million in vegetation
management costs.
2019 Formula Rate Plan Filing
In March 2019, Entergy Mississippi submitted its formula rate plan 2019 test year filing and 2018 look-
back filing showing Entergy Mississippi’s earned return for the historical 2018 calendar year to be above the
formula rate plan bandwidth and projected earned return for the 2019 calendar year to be below the formula rate
91 Entergy Corporation and Subsidiaries
Notes to Financial Statements
plan bandwidth. The 2019 test year filing shows a $36.8 million rate increase is necessary to reset Entergy
Mississippi’s earned return on common equity to the specified point of adjustment of 6.94% return on rate base,
within the formula rate plan bandwidth. The 2018 look-back filing compares actual 2018 results to the approved
benchmark return on rate base and shows a $10.1 million interim decrease in formula rate plan revenues is
necessary. In the fourth quarter 2018, Entergy Mississippi recorded a provision of $9.3 million that reflected the
estimate of the difference between the 2018 expected earned rate of return on rate base and an established
performance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth
mechanism. In the first quarter 2019, Entergy Mississippi recorded a $0.8 million increase in the provision to
reflect the amount shown in the look-back filing. In June 2019, Entergy Mississippi and the Mississippi Public
Utilities Staff entered into a joint stipulation that confirmed that the 2019 test year filing showed that a $32.8 million
rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of
adjustment of 6.93% return on rate base, within the formula rate plan bandwidth. Additionally, pursuant to the joint
stipulation, Entergy Mississippi’s 2018 look-back filing reflected an earned return on rate base of 7.81% in calendar
year 2018 which is above the look-back benchmark return on rate base of 7.13%, resulting in an $11 million
decrease in formula rate plan revenues on an interim basis through May 2020. In the second quarter 2019, Entergy
Mississippi recorded an additional $0.9 million increase in the provision to reflect the $11 million shown in the
look-back filing. In June 2019 the MPSC approved the joint stipulation with rates effective for the first billing cycle
of July 2019.
2020 Formula Rate Plan Filing
In March 2020, Entergy Mississippi submitted its formula rate plan 2020 test year filing and 2019 look-
back filing showing Entergy Mississippi’s earned return for the historical 2019 calendar year to be below the
formula rate plan bandwidth and projected earned return for the 2020 calendar year to be below the formula rate
plan bandwidth. The 2020 test year filing shows a $24.6 million rate increase is necessary to reset Entergy
Mississippi’s earned return on common equity to the specified point of adjustment of 6.51% return on rate base,
within the formula rate plan bandwidth. The 2019 look-back filing compares actual 2019 results to the approved
benchmark return on rate base and reflects the need for a $7.3 million interim increase in formula rate plan
revenues. In accordance with the MPSC-approved revisions to the formula rate plan, Entergy Mississippi
implemented a $24.3 million interim rate increase, reflecting a cap equal to 2% of 2019 retail revenues, effective
with the April 2020 billing cycle, subject to refund. In June 2020, Entergy Mississippi and the Mississippi Public
Utilities Staff entered into a joint stipulation that confirmed that the 2020 test year filing showed that a $23.8 million
rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of
adjustment of 6.51% return on rate base, within the formula rate plan bandwidth. Pursuant to the joint stipulation,
Entergy Mississippi’s 2019 look-back filing reflected an earned return on rate base of 6.75% in calendar year 2019,
which is within the look-back bandwidth. As a result, there is no change in formula rate plan revenues in the 2019
look-back filing. In June 2020 the MPSC approved the joint stipulation with rates effective for the first billing cycle
of July 2020. In the June 2020 order the MPSC directed Entergy Mississippi to submit revisions to its formula rate
plan to realign recovery of costs from its energy efficiency cost recovery rider to its formula rate plan. In November
2020 the MPSC approved Entergy Mississippi’s revisions to its formula rate plan providing for the realignment of
energy efficiency costs to its formula rate plan, the deferral of energy efficiency expenditures into a regulatory asset,
and the elimination of its energy efficiency cost recovery rider effective with the January 2022 billing cycle.
2021 Formula Rate Plan Filing
In March 2021, Entergy Mississippi submitted its formula rate plan 2021 test year filing and 2020 look-
back filing showing Entergy Mississippi’s earned return for the historical 2020 calendar year to be below the
formula rate plan bandwidth and projected earned return for the 2021 calendar year to be below the formula rate
plan bandwidth. The 2021 test year filing shows a $95.4 million rate increase is necessary to reset Entergy
Mississippi’s earned return on common equity to the specified point of adjustment of 6.69% return on rate base,
within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of
retail revenues, which equates to a revenue change of $44.3 million. The 2021 evaluation report also includes
92 Entergy Corporation and Subsidiaries
Notes to Financial Statements
$3.9 million in demand side management costs for which the MPSC approved realignment of recovery from the
energy efficiency rider to the formula rate plan. These costs are not subject to the 4% cap and result in a total
change in formula rate plan revenues of $48.2 million. The 2020 look-back filing compares actual 2020 results to
the approved benchmark return on rate base and reflects the need for a $16.8 million interim increase in formula rate
plan revenues. In addition, the 2020 look-back filing includes an interim capacity adjustment true-up for the
Choctaw Generating Station, which increases the look-back interim rate adjustment by $1.7 million. These interim
rate adjustments total $18.5 million. In accordance with the provisions of the formula rate plan, Entergy Mississippi
implemented a $22.1 million interim rate increase, reflecting a cap equal to 2% of 2020 retail revenues, effective
with the April 2021 billing cycle, subject to refund, pending a final MPSC order. The $3.9 million of demand side
management costs and the Choctaw Generating Station true-up of $1.7 million, which are not subject to the 2% cap
of 2020 retail revenues, were included in the April 2021 rate adjustments.
In June 2021, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation
that confirmed the 2021 test year filing that resulted in a total rate increase of $48.2 million. Pursuant to the joint
stipulation, Entergy Mississippi’s 2020 look-back filing reflected an earned return on rate base of 6.12% in calendar
year 2020, which is below the look-back bandwidth, resulting in a $17.5 million increase in formula rate plan
revenues on an interim basis through June 2022. This includes $1.7 million related to the Choctaw Generating
Station and $3.7 million of COVID-19 non-bad debt expenses. See “COVID-19 Orders” below for additional
discussion of provisions of the joint stipulation related to COVID-19 expenses. In June 2021 the MPSC approved
the joint stipulation with rates effective for the first billing cycle of July 2021. In June 2021, Entergy Mississippi
recorded regulatory credits of $19.9 million to reflect the effects of the joint stipulation.
2022 Formula Rate Plan Filing
Entergy Mississippi’s formula rate plan includes a look-back evaluation report filing in March 2022 that
will compare actual 2021 results to the performance-adjusted allowed return on rate base. In fourth quarter 2021,
Entergy Mississippi recorded a regulatory asset of $19 million in connection with the look-back feature of the
formula rate plan to reflect that the 2021 earned return was below the formula bandwidth.
COVID-19 Orders
In March 2020 the MPSC issued an order suspending disconnections for a period of sixty days. The MPSC
extended the order on disconnections through May 26, 2020. In April 2020 the MPSC issued an order authorizing
utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery
through rates of the prudently incurred incremental costs and expenses. In December 2020, Entergy Mississippi
resumed disconnections for commercial, industrial, and governmental customers with past-due balances that have
not made payment arrangements. In January 2021, Entergy Mississippi resumed disconnecting service for
residential customers with past-due balances that had not made payment arrangements. Pursuant to the June 2021
MPSC order approving Entergy Mississippi’s 2021 formula rate plan filing, Entergy Mississippi stopped deferring
COVID-19 non-bad debt expenses effective December 31, 2020 and included those expenses in the look-back filing
for the 2021 formula rate plan test year. In the order, the MPSC also adopted Entergy Mississippi’s quantification
and methodology for calculating COVID-19 incremental bad debt expenses and authorized Entergy Mississippi to
continue deferring these bad debt expenses through December 2021. As of December 31, 2021, Entergy
Mississippi had a regulatory asset of $15 million for costs associated with the COVID-19 pandemic.
93 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)
Retail Rates
2018 Base Rate Case
In September 2018, Entergy New Orleans filed an electric and gas base rate case with the City Council.
The filing requested a 10.5% return on equity for electric operations with opportunity to earn a 10.75% return on
equity through a performance adder provision of the electric formula rate plan in subsequent years under a formula
rate plan and requested a 10.75% return on equity for gas operations. The filing’s major provisions included: (1) a
new electric rate structure, which realigns the revenue requirement associated with capacity and long-term service
agreement expense from certain existing riders to base revenue, provides for the recovery of the cost of advanced
metering infrastructure, and partially blends rates for Entergy New Orleans’s customers residing in Algiers with
customers residing in the remainder of Orleans Parish through a three-year phase-in; (2) contemporaneous cost
recovery riders for investments in energy 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 October 2019 the City Council’s Utility Committee approved a resolution for a change in electric and gas
rates for consideration by the full City Council that included a 9.35% return on common equity, an equity ratio of
the lesser of 50% or Entergy New Orleans’s actual equity ratio, and a total reduction in revenues that Entergy New
Orleans initially estimated to be approximately $39 million ($36 million electric; $3 million gas). At its November
7, 2019 meeting, the full City Council approved the resolution that had previously been approved by the City
Council’s Utility Committee. Based on the approved resolution, in the fourth quarter 2019 Entergy New Orleans
recorded an accrual of $10 million that reflects the estimate of the revenue billed in 2019 to be refunded to
customers in 2020 based on an August 2019 effective date for the rate decrease. Entergy New Orleans also
recorded a total of $12 million in regulatory assets for rate case costs and information technology costs associated
with integrating Algiers customers with Entergy New Orleans’s legacy system and records. Entergy New Orleans
will also be allowed to recover $10 million of retired general plant costs over a 20-year period.
The resolution directed Entergy New Orleans to submit a compliance filing within 30 days of the date of the
resolution to facilitate the eventual implementation of rates, including all necessary calculations and conforming
rate schedules and riders. The electric formula rate plan rider includes, among other things, (1) a provision for
forward-looking adjustments to include known and measurable changes realized up to 12 months after the
evaluation period; (2) a decoupling mechanism; and (3) recognition that Entergy New Orleans is authorized to make
an in-service adjustment to the formula rate plan to include the non-fuel cost of the New Orleans Power Station in
rates, unless the two pending appeals in the New Orleans Power Station proceeding have not concluded. Under this
circumstance, Entergy New Orleans shall be permitted to defer the New Orleans Power Station non-fuel costs,
including the cost of capital, until Entergy New Orleans commences non-fuel cost recovery. After taking into
account the requirements for submission of the compliance filing, the total annual revenue requirement reduction
required by the resolution was refined to approximately $45 million ($42 million electric, including $29 million in
rider reductions; $3 million gas). In January 2020 the City Council’s advisors found that the rates calculated by
Entergy New Orleans and reflected in the December 2019 compliance filing should be implemented, except with
respect to the City Council-approved energy efficiency cost recovery rider, which rider calculation should take into
account events to be determined by the City Council in the future. On February 17, 2020, Entergy New Orleans
filed with the City Council an agreement in principle between Entergy New Orleans and the City Council’s
advisors. On February 20, 2020, the City Council voted to approve the proposed agreement in principle and issued
a resolution modifying the required treatment of certain accumulated deferred income taxes. As a result of the
agreement in principle, the total annual revenue requirement reduction will be approximately $45 million
($42 million electric, including $29 million in rider reductions; and $3 million gas). Entergy New Orleans fully
implemented the new rates in April 2020.
94 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Commercial operation of the New Orleans Power Station commenced in May 2020. In accordance with the
City Council resolution issued in the 2018 base rate case proceeding, Entergy New Orleans had been deferring the
New Orleans Power Station non-fuel costs pending the conclusion of the appellate proceedings. In October 2020
the Louisiana Supreme Court denied all writ applications relating to the New Orleans Power Station. With those
denials, Entergy New Orleans began recovering New Orleans Power Station costs in rates in November 2020.
Entergy New Orleans is recovering the costs over a five-year period that began in November 2020. In December
2020 the Alliance for Affordable Energy and Sierra Club filed a joint motion with the City Council to institute a
prudence review to investigate the costs of the New Orleans Power Station. On January 28, 2021, the City Council
passed a resolution giving parties 30 days to respond to the motion. In March 2021, Entergy New Orleans filed a
response to that motion stating that a prudence review is unnecessary given the New Orleans Power Station was
constructed on budget and ahead of schedule. As of December 31, 2021 the regulatory asset for the deferral of New
Orleans Power Station non-fuel costs was $4 million.
2020 Formula Rate Plan Filing
Entergy New Orleans’s first annual filing under the three-year formula rate plan approved by the City
Council in November 2019 was originally due to be filed in April 2020. The authorized return on equity under the
approved three-year formula rate plan is 9.35% for both electric and gas operations. The City Council approved
several extensions of the deadline to allow additional time to assess the effects of the COVID-19 pandemic on the
New Orleans community, Entergy New Orleans customers, and Entergy New Orleans itself. In October 2020 the
City Council approved an agreement in principle filed by Entergy New Orleans that results in Entergy New Orleans
foregoing its 2020 formula rate plan filing and shifting the three-year formula rate plan to filings in 2021, 2022, and
2023. Key provisions of the agreement in principle include: changing the lower of actual equity ratio or 50% equity
ratio approved in the rate case to a hypothetical capital structure of 51% equity and 49% debt for the duration of the
three-year formula rate plan; changing the 2% depreciation rate for the New Orleans Power Station approved in the
rate case to 3%; retention of over-recovery of $2.2 million in rider revenues; recovery of $1.4 million of certain rate
case expenses outside of the earnings band; recovery of the New Orleans Solar Station costs upon commercial
operation; and Entergy New Orleans’s dismissal of its 2018 rate case appeal.
2021 Formula Rate Plan Filing
In July 2021, Entergy New Orleans submitted to the City Council its formula rate plan 2020 test year filing.
The 2020 test year evaluation report produced an earned return on equity of 6.26% compared to the authorized
return on equity of 9.35%. Entergy New Orleans sought approval of a $64 million rate increase based on the
formula set by the City Council in the 2018 rate case. The formula resulted in an increase in authorized electric
revenues of $40 million and an increase in authorized gas revenues of $18.8 million. Entergy New Orleans also
sought to commence collecting $5.2 million in electric revenues and $0.3 million in gas revenues that were
previously approved by the City Council for collection through the formula rate plan. The filing was subject to
review by the City Council and other parties over a 75-day review period, followed by a 25-day period to resolve
any disputes among the parties. In October 2021 the City Council’s advisors filed a 75-day report recommending a
reduction of $10 million for electric revenues and a reduction of $4.5 million for gas revenues, along with one-time
credits funded by certain electric regulatory liabilities currently held by Entergy New Orleans for customers. On
October 26, 2021, Entergy New Orleans provided notice to the City Council that it intends to implement rates
effective with the first billing cycle of November 2021, with such rates reflecting an amount agreed-upon by
Entergy New Orleans including adjustments filed in the City Council’s 75-day report, per the approved process for
formula rate plan implementation. The total formula rate plan increase implemented was $49.5 million, with an
increase of $34.9 million in electric revenues and $14.6 million in gas revenues. Also, credits of $17.4 million
funded by certain regulatory liabilities currently held by Entergy New Orleans for customers will be issued over a
five-month period from November 2021 through March 2022. Resulting rates went into effect with the first billing
cycle of November 2021 pursuant to the formula rate plan tariff.
95 Entergy Corporation and Subsidiaries
Notes to Financial Statements
COVID-19 Orders
In March 2020, Entergy New Orleans voluntarily suspended customer disconnections for non-payment of
utility bills through May 2020. Subsequently, the City Council ordered that the moratorium be extended to August
1, 2020. In May 2020 the City Council issued an accounting order authorizing Entergy New Orleans to establish a
regulatory asset for incremental COVID-19-related expenses. In January 2021, Entergy New Orleans resumed
disconnecting service to commercial and small business customers with past-due balances that had not made
payment arrangements. In February 2021 the City Council adopted a resolution suspending residential customer
disconnections for non-payment of utility bills and suspending the assessment and accumulation of late fees on
residential customers with past-due balances through May 15, 2021, which was not extended by the City Council.
As of December 31, 2021, Entergy New Orleans had a regulatory asset of $17.4 million for costs associated with the
COVID-19 pandemic.
In June 2020 the City Council established the City Council Cares Program and directed Entergy New
Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC
proceeding and approximately $15 million of non-securitized storm reserves to fund this program, which was
intended to provide temporary bill relief to customers who become unemployed during the COVID-19 pandemic.
The program was effective July 1, 2020, and offered qualifying residential customers bill credits of $100 per month
for up to four months, for a maximum of $400 in residential customer bill credits. Credits of $4.3 million were
applied to customer bills under the City Council Cares Program.
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
2018 Base Rate Case
In May 2018, Entergy Texas filed a base rate case with the PUCT seeking an increase in base rates and rider
rates of approximately $166 million, of which $48 million was associated with moving costs then being collected
through riders into base rates such that the total incremental revenue requirement increase was 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 of April 1, 2013 through December 31,
2017, as well as a post-test year adjustment to include capital additions placed in service by June 30, 2018.
In October 2018 the parties filed an unopposed settlement resolving all issues in the proceeding and a
motion for interim rates effective for usage on and after October 17, 2018. The unopposed settlement reflected the
following terms: a base rate increase of $53.2 million (net of costs realigned from riders and including updated
depreciation rates), a $25 million refund to reflect the lower federal income tax rate applicable to Entergy Texas
from January 25, 2018 through the date new rates were implemented, $6 million of capitalized skylining tree hazard
costs will not be recovered from customers, $242.5 million of protected excess accumulated deferred income taxes,
which includes a tax gross-up, will be returned to customers through base rates under the average rate assumption
method over the lives of the associated assets, and $185.2 million of unprotected excess accumulated deferred
income taxes, which includes a tax gross-up, will be returned to customers through a rider. The unprotected excess
accumulated deferred income taxes rider will include carrying charges and will be in effect over a period of 12
months for large customers and over a period of four years for other customers. The settlement also provided for
the deferral of $24.5 million of costs associated with the remaining book value of the Neches and Sabine 2 plants,
previously taken out of service, to be recovered over a ten-year period and the deferral of $20.5 million of costs
associated with Hurricane Harvey to be recovered over a 12-year period, each beginning in October 2018. The
settlement provided final resolution of all issues in the matter, including those related to the Tax Cuts and Jobs Act.
In October 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.
96 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Distribution Cost Recovery Factor (DCRF) Rider
In March 2019, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The new DCRF
rider was designed to collect approximately $3.2 million annually from Entergy Texas’s retail customers based on
its capital invested in distribution between January 1, 2018 and December 31, 2018. In September 2019 the PUCT
issued an order approving rates, which had been effective on an interim basis since June 2019, at the level proposed
in Entergy Texas’s application.
In March 2020, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The amended rider
was designed to collect from Entergy Texas’s retail customers approximately $23.6 million annually, or
$20.4 million in incremental annual DCRF revenue beyond Entergy Texas’s then-effective DCRF rider, based on its
capital invested in distribution between January 1, 2019 and December 31, 2019. In May and June 2020 intervenors
filed testimony recommending reductions in Entergy Texas’s annual revenue requirement of approximately
$0.3 million and $4.1 million. The parties briefed the contested issues in this matter and a proposal for decision was
issued in September 2020 recommending a $4.1 million revenue reduction related to non-advanced metering system
meters included in the DCRF calculation. The parties filed exceptions to the proposal for decision and replies to
those exceptions in September 2020. In October 2020 the PUCT issued a final order approving a $16.3 million
incremental annual DCRF revenue increase.
In October 2020, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The amended
rider was designed to collect from Entergy Texas’s retail customers approximately $26.3 million annually, or
$6.8 million in incremental annual revenues beyond Entergy Texas’s then-effective DCRF rider based on its capital
invested in distribution between January 1, 2020 and August 31, 2020. In February 2021 the ALJ with the State
Office of Administrative Hearings approved Entergy Texas's agreed motion for interim rates, which went into effect
in March 2021. In March 2021 the parties filed an unopposed settlement recommending that Entergy Texas be
allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding. In May
2021 the PUCT issued an order approving the settlement.
In August 2021, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider
is designed to collect from Entergy Texas’s retail customers approximately $40.2 million annually, or $13.9 million
in incremental annual revenues beyond Entergy Texas’s currently effective DCRF rider based on its capital invested
in distribution between September 1, 2020 and June 30, 2021. In September 2021 the PUCT referred the
proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing
scheduled in December 2021. In December 2021 the parties filed an unopposed settlement recommending that
Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the
proceeding, including a motion for interim rates to take effect for usage on and after January 24, 2022. Also, in
December 2021, the ALJ with the State Office of Administrative Hearings issued an order granting the motion for
interim rates, which went into effect in January 2022, admitting evidence, and remanding the proceeding to the
PUCT to consider the settlement.
Transmission Cost Recovery Factor (TCRF) Rider
In December 2018, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The new TCRF
rider was designed to collect approximately $2.7 million annually from Entergy Texas’s retail customers based on
its capital invested in transmission between January 1, 2018 and September 30, 2018. In April 2019 parties filed
testimony proposing a load growth adjustment, which would fully offset Entergy Texas’s proposed TCRF revenue
requirement. In July 2019 the PUCT granted Entergy Texas’s application as filed to begin recovery of the requested
$2.7 million annual revenue requirement, rejecting opposing parties’ proposed adjustment; however, the PUCT
found that the question of prudence of the actual investment costs should be determined in Entergy Texas’s next rate
case similar to the procedure used for the costs recovered through the DCRF rider. In October 2019 the PUCT
issued an order on a motion for rehearing, clarifying and affirming its prior order granting Entergy Texas’s
97 Entergy Corporation and Subsidiaries
Notes to Financial Statements
application as filed. Also in October 2019 a second motion for rehearing was filed, and Entergy Texas filed a
response in opposition to the motion. The second motion for rehearing was overruled by operation of law. In
December 2019, Texas Industrial Energy Consumers filed an appeal to the PUCT order in district court alleging that
the PUCT erred in declining to apply a load growth adjustment.
In August 2019, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The amended
TCRF rider was designed to collect approximately $19.4 million annually from Entergy Texas’s retail customers
based on its capital invested in transmission between January 1, 2018 and June 30, 2019, which is $16.7 million in
incremental annual revenue above the $2.7 million approved in the prior pending TCRF proceeding. In January
2020 the PUCT issued an order approving an unopposed settlement providing for recovery of the requested revenue
requirement. Entergy Texas implemented the amended rider beginning with bills covering usage on and after
January 23, 2020.
In October 2020, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The amended
rider was designed to collect from Entergy Texas’s retail customers approximately $51 million annually, or
$31.6 million in incremental annual revenues beyond Entergy Texas’s then-effective TCRF rider based on its capital
invested in transmission between July 1, 2019 and August 31, 2020. In March 2021 the parties filed an unopposed
settlement recommending that Entergy Texas be allowed to collect its full requested TCRF revenue requirement
with interim rates effective March 2021 and resolving all issues in the proceeding. In March 2021 the ALJ granted
the motion for interim rates, admitted evidence, and remanded the case to the PUCT for consideration of a final
order at a future open meeting. In June 2021 the PUCT issued an order approving the settlement.
In October 2021, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed
rider is designed to collect from Entergy Texas’s retail customers approximately $66.1 million annually, or
$15.1 million in incremental annual revenues beyond Energy Texas’s currently effective TCRF rider based on its
capital invested in transmission between September 1, 2020 and July 31, 2021 and changes in approved
transmission charges. In January 2022 the PUCT referred the proceeding to the State Office of Administrative
Hearings. In February 2022 the parties filed an unopposed settlement recommending that Entergy Texas be allowed
to collect its full requested TCRF revenue requirement with interim rates effective March 2022. In February 2022
the ALJ granted the motion for interim rates, admitted evidence, and remanded the case to the PUCT for
consideration of a final order at a future open meeting.
Generation Cost Recovery Rider
In October 2020, Entergy Texas filed an application to establish a generation cost recovery rider with an
initial annual revenue requirement of approximately $91 million to begin recovering a return of and on its
generation capital investment in the Montgomery County Power Station through August 31, 2020. In December
2020, Entergy Texas filed an unopposed settlement supporting a generation cost recovery rider with an annual
revenue requirement of approximately $86 million. The settlement revenue requirement was based on a
depreciation rate intended to fully depreciate Montgomery County Power Station over 38 years and the removal of
certain costs from Entergy Texas’s request. Under the settlement, Entergy Texas retained the right to propose a
different depreciation rate and seek recovery of a majority of the costs removed from its request in its next base rate
proceeding. On January 14, 2021, the PUCT approved the generation cost recovery rider settlement rates on an
interim basis and abated the proceeding. In March 2021, Entergy Texas filed to update its generation cost recovery
rider to include investment in Montgomery County Power Station after August 31, 2020. In April 2021 the ALJ
issued an order unabating the proceeding and in May 2021 the ALJ issued an order finding Entergy Texas’s
application and notice of the application to be sufficient. In May 2021, Entergy Texas filed an amendment to the
application to reflect the PUCT’s approval of the sale of a 7.56% partial interest in the Montgomery County Power
Station to East Texas Electric Cooperative, Inc., which closed in June 2021. In June 2021 the PUCT referred the
proceeding to the State Office of Administrative Hearings. In July 2021 the ALJ with the State Office of
Administrative Hearings adopted a procedural schedule setting a hearing on the merits for September 2021. In July
2021 the parties filed a motion to abate the procedural schedule noting they had reached an agreement in principle
98 Entergy Corporation and Subsidiaries
Notes to Financial Statements
and to allow the parties time to finalize a settlement agreement, which motion was granted by the ALJ. In October
2021, Entergy Texas filed on behalf of the parties an unopposed settlement agreement that would adjust its
generation cost recovery rider to recover an annual revenue requirement of approximately $88.3 million related to
Entergy Texas’s investment in the Montgomery County Power Station through January 1, 2021, with Entergy Texas
able to seek recovery of the remainder of its investment in its next base rate case. Also in October 2021 the ALJ
granted a motion to admit evidence and remand the proceeding to the PUCT. In January 2022 the PUCT issued an
order approving the unopposed settlement.
In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to
reflect its acquisition of the Hardin County Peaking Facility, which closed in June 2021. Because Hardin was to be
acquired in the future, the initial generation cost recovery rider rates proposed in the application represented no
change from the generation cost recovery rider rates established in Entergy Texas’ previous generation cost
recovery rider proceeding. In July 2021 the PUCT issued an order approving the application. In August 2021,
Entergy Texas filed an update application to recover its actual investment in the acquisition of the Hardin County
Peaking Facility. In September 2021 the PUCT referred the proceeding to the State Office of Administrative
Hearings. A procedural schedule was established with a hearing scheduled in April 2022. In January 2022, Entergy
Texas filed an update to its application to align the requested revenue requirement with the terms of the generation
cost recovery rider settlement approved by the PUCT in January 2022. See Note 14 to the financial statements for
further discussion of the Hardin County Peaking Facility purchase.
COVID-19 Orders
In March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from
the effects of the COVID-19 pandemic. In future proceedings the PUCT will consider whether each utility's request
for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any
amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for
nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to
residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the
PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. In January 2021,
Entergy Texas resumed disconnections for customers with past-due balances that have not made payment
arrangements. As of December 31, 2021, Entergy Texas had a regulatory asset of $11.7 million for costs associated
with the COVID-19 pandemic.
Entergy Arkansas Opportunity Sales Proceeding
In June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy
Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that
allocated the energy generated by Entergy System resources; (b) imprudently denied the Entergy System and its
ultimate consumers the benefits of low-cost Entergy System generating capacity; and (c) violated the provision of
the System Agreement that prohibited sales to third parties by individual companies absent an offer of a right-of-
first-refusal to other Utility operating companies. The LPSC’s complaint challenged sales made beginning in 2002
and requested refunds. In July 2009 the Utility operating companies filed a response to the complaint arguing
among other things that the System Agreement contemplates that the Utility operating companies may make sales to
third parties for their own account, subject to the requirement that those sales be included in the load (or load shape)
for the applicable Utility operating company. The FERC subsequently 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 for Entergy Arkansas to make the sales to third parties but concluded that the sales should be
accounted for in the same manner as joint account sales. The ALJ concluded that “shareholders” should make
refunds of the damages to the Utility operating companies, along with interest. Entergy disagreed with several
aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision.
99 Entergy Corporation and Subsidiaries
Notes to Financial Statements
The FERC issued a decision in June 2012 and held that, while the System Agreement is ambiguous, it does
provide authority for individual Utility operating companies to make opportunity sales for their own account and
Entergy Arkansas made and priced these sales in good faith. The FERC found, however, that the System
Agreement does not provide authority for an individual Utility operating company to allocate the energy associated
with such opportunity sales as part of its load but provides a different allocation authority. The FERC further found
that the after-the-fact accounting methodology used to allocate the energy used to supply the sales was inconsistent
with the System Agreement. The FERC in its decision established further hearing procedures to quantify the effect
of repricing the opportunity sales in accordance with the FERC’s June 2012 decision. The hearing was held in May
2013 and the ALJ issued an initial decision in August 2013. The LPSC, the APSC, the City Council, and FERC
staff filed briefs on exceptions and/or briefs opposing exceptions. Entergy filed a brief on exceptions requesting
that the FERC reverse the initial decision and a brief opposing 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 initial decision. The first order denied Entergy’s request for rehearing and affirmed the FERC’s earlier
rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as
a result, Entergy Arkansas must make payments to 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, the rulings in the ALJ’s
August 2013 initial decision regarding the methodology that should be used to calculate the payments Entergy
Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run
of intra-system bills should be performed but required that methodology be modified so that the sales have the same
priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any
payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that
adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into
account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and
excess bandwidth payments should be taken into account but ordered further proceedings before an ALJ to address
whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments
to the calculation methodology.
In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that
payments made by Entergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain
contracts. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order
addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the
FERC’s April 2016 order. In September 2017 the FERC issued an order denying the request for rehearing on the
issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due
to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana. In
November 2017 the FERC issued an order denying all of the 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 Entergy Services’
request to hold the appeal in abeyance pending final resolution of the related proceeding before the FERC. In
January 2018 the APSC and the LPSC filed separate petitions for review in the D.C. Circuit, and the D.C. Circuit
consolidated the appeals with Entergy Services’ appeal.
The hearing required by the FERC’s April 2016 order was held in May 2017. In July 2017 the ALJ issued
an initial decision addressing whether a cap on any reduction due to bandwidth payments was necessary and
whether to implement the other adjustments to the calculation methodology. In August 2017 the Utility operating
companies, the LPSC, the APSC, and FERC staff filed individual briefs 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.
100 Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 other Utility operating companies, and a deferred fuel regulatory asset of
$75 million. Following its assessment of the course of the proceedings, including the FERC’s denial of rehearing in
November 2017 described above, in the fourth quarter 2017, Entergy Arkansas 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’s decision to cap the reduction in Entergy Arkansas’s payment to account for the increased
bandwidth payments that Entergy Arkansas made to the other operating companies. The FERC also reversed the
ALJ’s decision that Grand Gulf sales from January through September 2000 should be included in the calculation of
Entergy Arkansas’s payment. The FERC affirmed on other grounds the ALJ’s rejection of the LPSC’s claim that
certain joint account sales should be accounted for as part of the calculation of Entergy Arkansas’s payment. In
November 2018 the LPSC requested rehearing of the FERC’s October 2018 decision. In December 2019 the FERC
denied the LPSC’s request for rehearing. In January 2020 the LPSC appealed the December 2019 decision to the
D.C. Circuit.
In December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order. The
compliance filing provided a final calculation of Entergy Arkansas’s payments to the other Utility operating
companies, including interest. No protests were filed in response to the December 2018 compliance filing. The
December 2018 compliance filing is pending FERC action. Refunds and interest in the following amounts were
paid by Entergy Arkansas to the other operating companies in December 2018:
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
Total refunds including interest
Payment/(Receipt)
(In Millions)
Interest
$67
($29)
($18)
($4)
($16)
Principal
$68
($30)
($18)
($3)
($17)
Total
$135
($59)
($36)
($7)
($33)
Entergy Arkansas previously recognized a regulatory asset with a balance of $116 million as of December 31, 2018
for a portion of the payments due as a result of this proceeding.
As described above, the FERC’s opportunity sales orders have been appealed to the D.C. Circuit. In
February 2020 all of the appeals were consolidated and in April 2020 the D.C. Circuit established a briefing
schedule. Briefing was completed in September 2020 and oral argument was heard in December 2020. In July
2021 the D.C. Circuit issued a decision denying all of the petitions for review filed in response to the FERC’s
opportunity sales orders.
In February 2019 the LPSC filed a new complaint relating to two issues that were raised in the opportunity
sales proceeding, but that, in its October 2018 order, the FERC held were outside the scope of the proceeding. In
March 2019, Entergy Services filed an answer and motion to dismiss the new complaint. In November 2019 the
FERC issued an order denying the LPSC’s complaint. The order concluded that the settlement agreement approved
by the FERC in December 2015 terminating the System Agreement barred the LPSC’s new complaint. In
December 2019 the LPSC requested rehearing of the FERC’s November 2019 order, and in July 2020 the FERC
issued an order dismissing the LPSC’s request for rehearing. In September 2020 the LPSC appealed to the D.C.
Circuit the FERC’s orders dismissing the new opportunity sales complaint. In November 2020 the D.C. Circuit
issued an order establishing that briefing will occur in January 2021 through April 2021. Oral argument was held in
101
Entergy Corporation and Subsidiaries
Notes to Financial Statements
September 2021. In December 2021 the D.C. Circuit denied the LPSC’s Petition for Review of the new opportunity
sales complaint. The opportunity sales cases are complete at FERC and at the D.C. Circuit and no additional refund
amounts are owed by Entergy Arkansas.
In May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting
approval of a special rider tariff to recover the costs of these payments from its retail customers over a 24-month
period. The application requested that the APSC approve the rider to take effect within 30 days or, if suspended by
the APSC as allowed by commission rule, approve the rider to take effect in the first billing cycle of the first month
occurring 30 days after issuance of the APSC’s order approving the rider. In June 2019 the APSC suspended
Entergy Arkansas’s tariff and granted Entergy Arkansas’s motion asking the APSC to establish the proceeding as
the single designated proceeding in which interested parties may assert claims related to the appropriate retail rate
treatment of the FERC’s October 2018 order and related FERC orders in the opportunity sales proceeding. In
January 2020 the APSC adopted a procedural schedule with a hearing in April 2020. In January 2020 the Attorney
General and Arkansas Electric Energy Consumers, Inc. filed a joint motion seeking to dismiss Entergy Arkansas’s
application alleging that the APSC, in a prior proceeding, ruled on the issues addressed in the application and
determined that Entergy Arkansas’s requested relief violates the filed rate doctrine and the prohibition against
retroactive ratemaking. Entergy Arkansas responded to the joint motion in February 2020 rebutting these
arguments, including demonstrating that the claims in this proceeding differ substantially from those the APSC
addressed previously and that the payment resulting from a FERC tariff violation for which Entergy Arkansas seeks
retail cost recovery in this proceeding differs materially from the refunds resulting from a FERC tariff amendment
that the APSC previously rejected on filed rate doctrine and the retroactive ratemaking grounds. In addition, in
January 2020 the Attorney General and Arkansas Electric Energy Consumers, Inc. filed testimony opposing the
recovery by Entergy Arkansas of the opportunity sales payment but also claiming that certain components of the
payment should be segregated and refunded to customers. In March 2020, Entergy Arkansas filed rebuttal
testimony.
In July 2020 the APSC issued a decision finding that Entergy Arkansas’s application is not in the public
interest. The order also directed Entergy Arkansas to refund to its retail customers within 30 days of the order the
FERC-determined over-collection of $13.7 million, plus interest, associated with a recalculated bandwidth remedy.
In addition to these primary findings, the order also denied the Attorney General’s request for Entergy Arkansas to
prepare a compliance filing detailing all of the retail impacts from the opportunity sales and denied a request by the
Arkansas Electric Energy Consumers to recalculate all costs using the revised responsibility ratio. Entergy
Arkansas filed a motion for temporary stay of the 30-day requirement to allow Entergy Arkansas a reasonable
opportunity to seek rehearing of the APSC order, but in July 2020 the APSC denied Entergy Arkansas’s request for
a stay and directed Entergy Arkansas to refund to its retail customers the component of the total FERC-determined
opportunity sales payment that was associated with increased bandwidth remedy payments of $13.7 million, plus
interest. The refunds were issued in the August 2020 billing cycle. While the APSC denied Entergy Arkansas’s
stay request, Entergy Arkansas believes its actions were prudent and, therefore, the costs, including the
$13.7 million, plus interest, are recoverable. In July 2020, Entergy Arkansas requested rehearing of the APSC
order, which rehearing was denied by the APSC in August 2020. In September 2020, Entergy Arkansas filed a
complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying
Entergy Arkansas’s request to recover the costs of these payments. In October 2020 the APSC filed a motion to
dismiss Entergy Arkansas’s complaint, to which Entergy Arkansas responded. Also in December 2020, Entergy
Arkansas and the APSC held a pre-trial conference, and filed a report with the court in January 2021. The court
held a hearing in February 2021 regarding issues addressed in the pre-trial conference report, and in June 2021 the
court stayed all discovery until it rules on pending motions, after which the court will issue an amended schedule if
necessary.
102 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Complaints Against System Energy
System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related
costs associated with its 90% ownership/leasehold interest in Grand Gulf. System Energy sells its Grand Gulf
capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans
pursuant to the Unit Power Sales Agreement. System Energy and the Unit Power Sales Agreement are currently the
subject of several litigation proceedings at the FERC, including challenges with respect to System Energy’s
authorized return on equity and capital structure, renewal of its sale-leaseback arrangement, treatment of uncertain
tax positions, a broader investigation of rates under the Unit Power Sales Agreement, and a prudence complaint
challenging the extended power uprate completed at Grand Gulf in 2012 and the operation and management of
Grand Gulf, particularly in the 2016-2020 time period. The claims in these proceedings include claims for refunds
and claims for rate adjustments; the aggregate amount of refunds claimed in these proceedings substantially exceeds
the net book value of System Energy. Following are discussions of the proceedings.
Return on Equity and Capital Structure Complaints
In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The
complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to
which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of 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 became
final in July 2001.
The APSC and MPSC complaint alleges that the return on equity is unjust and unreasonable because capital
market and other considerations indicate that it is excessive. The complaint requests proceedings to investigate the
return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017
as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range
of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the
complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The
LPSC and the City Council intervened in the proceeding expressing support for the complaint. In September 2017
the FERC established a refund effective date of January 23, 2017 and directed the parties to engage in settlement
proceedings before an ALJ. The parties were unable to settle the return on equity issue and a FERC hearing judge
was assigned in July 2018. The 15-month refund period in connection 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 FERC to investigate System Energy’s capital structure. The APSC, MPSC,
and City Council intervened in the proceeding, filed an answer expressing support for the complaint, and asked the
FERC to consolidate this proceeding with the proceeding initiated by the complaint of the APSC and MPSC in
January 2017. System Energy answered the LPSC complaint in May 2018 and also filed a motion to dismiss the
complaint. In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System
Energy’s capital structure and setting for hearing the return on equity complaint, with a refund effective date of
April 27, 2018. The 15-month refund period in connection with the LPSC return on equity complaint expired on
July 26, 2019.
The portion of the LPSC’s complaint dealing with return on equity was subsequently consolidated with the
APSC and MPSC complaint for hearing. The parties addressed an order (issued in a separate FERC proceeding
involving New England transmission owners) that proposed modifying the FERC’s standard methodology for
determining return on equity. In September 2018, System Energy filed a request for rehearing and the LPSC filed a
request for rehearing or reconsideration of the FERC’s August 2018 order. The LPSC’s request referenced an
103 Entergy Corporation and Subsidiaries
Notes to Financial Statements
amended complaint that it filed on the same day raising the same capital structure claim the FERC had earlier
dismissed. The FERC initiated a new proceeding for the amended capital structure complaint, and System Energy
submitted a response in October 2018. In January 2019 the FERC set the amended complaint for settlement and
hearing proceedings. Settlement proceedings in the capital structure proceeding commenced in February 2019. As
noted below, in June 2019 settlement discussions were terminated and the amended capital structure complaint was
consolidated with the ongoing return on equity proceeding. The 15-month refund period in connection with the
capital structure complaint was from September 24, 2018 to December 23, 2019.
In January 2019 the LPSC and the APSC and MPSC filed direct testimony in the return on equity
proceeding. For the refund period January 23, 2017 through April 23, 2018, the LPSC argues for an authorized
return on equity for System Energy of 7.81% and the APSC and MPSC argue for an authorized return on equity for
System Energy of 8.24%. For the refund period April 27, 2018 through July 27, 2019, and for application on a
prospective basis, the LPSC argues for an authorized return on equity for System Energy of 7.97% and the APSC
and MPSC argue for an authorized return on equity for System Energy of 8.41%. In March 2019, System Energy
submitted answering testimony. For the first refund period, System Energy’s testimony argues for a return on
equity of 10.10% (median) or 10.70% (midpoint). For the second refund period, System Energy’s testimony shows
that the calculated returns on equity for the first period fall within the range of presumptively just and reasonable
returns on equity, and thus the second complaint should be dismissed (and the first period return on equity used
going forward). If the FERC nonetheless were to set a new return on equity for the second period (and going
forward), System Energy argues the return on equity should be either 10.32% (median) or 10.69% (midpoint).
In May 2019 the FERC trial staff filed its direct and answering testimony in the return on equity
proceeding. For the first refund period, the FERC trial staff calculates an authorized return on equity for System
Energy of 9.89% based on the application of FERC’s proposed methodology. The FERC trial staff’s direct and
answering testimony noted that an authorized return on equity of 9.89% for the first refund period was within the
range of presumptively just and reasonable returns on equity for the second refund period, as calculated using a
study period ending January 31, 2019 for the second refund period.
In June 2019, System Energy filed testimony responding to the testimony filed by the FERC trial staff.
Among other things, System Energy’s testimony rebutted arguments raised by the FERC trial staff and provided
updated calculations for the second refund period based on the study period ending May 31, 2019. For that refund
period, System Energy’s testimony shows that strict application of the return on equity methodology proposed by
the FERC staff indicates that the second complaint would not be dismissed, and the new return on equity would be
set at 9.65% (median) or 9.74% (midpoint). System Energy’s testimony argues that these results are insufficient in
light of benchmarks such as state returns on equity and treasury bond yields, and instead proposes that the
calculated returns on equity for the second period should be either 9.91% (median) or 10.3% (midpoint). System
Energy’s testimony also argues that, under application of its proposed modified methodology, the 10.10% return on
equity calculated for the first refund period would fall within the range of presumptively just and reasonable returns
on equity for the second refund period.
Also in June 2019, the FERC’s Chief ALJ issued an order terminating settlement discussions in the
amended complaint addressing System Energy’s capital structure. The ALJ consolidated the amended capital
structure complaint with the ongoing return on equity proceeding and set new procedural deadlines for the
consolidated hearing.
In August 2019 the LPSC and the APSC and MPSC filed rebuttal testimony in the return on equity
proceeding and direct and answering testimony relating to System Energy’s capital structure. The LPSC re-argues
for an authorized return on equity for System Energy of 7.81% for the first refund period and 7.97% for the second
refund period. The APSC and MPSC argue for an authorized return on equity for System Energy of 8.26% for the
first refund period and 8.32% for the second refund period. With respect to capital structure, the LPSC proposes
that the FERC establish a hypothetical capital structure for System Energy for ratemaking purposes. Specifically,
the LPSC proposes that System Energy’s common equity ratio be set to Entergy Corporation’s equity ratio of 37%
104 Entergy Corporation and Subsidiaries
Notes to Financial Statements
equity and 63% debt. In the alternative, the LPSC argues that the equity ratio should be no higher than 49%, the
composite equity ratio of System Energy and the other Entergy operating companies who purchase under the Unit
Power Sales Agreement. The APSC and MPSC recommend that 35.98% be set as the common equity ratio for
System Energy. As an alternative, the APSC and MPSC propose that System Energy’s common equity be set at
46.75% based on the median equity ratio of the proxy group for setting the return on equity.
In September 2019 the FERC trial staff filed its rebuttal testimony in the return on equity proceeding. For
the first refund period, the FERC trial staff calculates an authorized return on equity for System Energy of 9.40%
based on the application of the FERC’s proposed methodology and an updated proxy group. For the second refund
period, based on the study period ending May 31, 2019, the FERC trial staff rebuttal testimony argues for a return
on equity of 9.63%. In September 2019 the FERC trial staff also filed direct and answering testimony relating to
System Energy’s capital structure. The FERC trial staff argues that the average capital structure of the proxy group
used to develop System Energy’s return on equity should be used to establish the capital structure. Using this
approach, the FERC trial staff calculates the average capital structure for its proposed proxy group of 46.74%
common equity, and 53.26% debt.
In October 2019, System Energy filed answering testimony disputing the FERC trial staff’s, the LPSC’s,
and the APSC’s and MPSC’s arguments for the use of a hypothetical capital structure and arguing that the use of
System Energy’s actual capital structure is just and reasonable.
In November 2019, in a proceeding that did not involve System Energy, the FERC issued an order
addressing the methodology for determining the return on equity applicable to transmission owners in MISO.
Thereafter, the procedural schedule in the System Energy proceeding was amended to allow the participants to file
supplemental testimony addressing the order in the MISO transmission owner proceeding (Opinion No. 569).
In February 2020 the LPSC, the MPSC and APSC, and the FERC trial staff filed supplemental testimony
addressing Opinion No. 569 and how it would affect the return on equity evaluation for the two complaint periods
concerning System Energy. For the first refund period, based on their respective interpretations and applications of
the Opinion No. 569 methodology, the LPSC argues for an authorized return on equity for System Energy of 8.44%;
the MPSC and APSC argue for an authorized return on equity of 8.41%; and the FERC trial staff argues for an
authorized return on equity of 9.22%. For the second refund period and on a prospective basis, based on their
respective interpretations and applications of the Opinion No. 569 methodology, the LPSC argues for an authorized
return on equity for System Energy of 7.89%; the MPSC and APSC argue that an authorized return on equity of
8.01% may be appropriate; and the FERC trial staff argues for an authorized return on equity of 8.66%.
In April 2020, System Energy filed supplemental answering testimony addressing Opinion No. 569.
System Energy argues that the Opinion No. 569 methodology is conceptually and analytically defective for
purposes of establishing just and reasonable authorized return on equity determinations and proposes an alternative
approach. As its primary recommendation, System Energy continues to support the return on equity determinations
in its March 2019 testimony for the first refund period and its June 2019 testimony for the second refund period.
Under the Opinion No. 569 methodology, System Energy calculates a “presumptively just and reasonable range” for
the authorized return on equity for the first refund period of 8.57% to 9.52%, and for the second refund period of
8.28% to 9.11%. System Energy argues that these ranges are not just and reasonable results. Under its proposed
alternative methodology, System Energy calculates an authorized return on equity of 10.26% for the first refund
period, which also falls within the presumptively just and reasonable range calculated for the second refund period
and prospectively.
In May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June
2020 the procedural schedule in the System Energy proceeding was further revised in order to allow parties to
address the Opinion No. 569-A methodology. Pursuant to the revised schedule, in June 2020, the LPSC, MPSC and
APSC, and the FERC trial staff filed supplemental testimony addressing Opinion No. 569-A and how it would
affect the return on equity evaluation for the two complaint periods concerning System Energy. For the first refund
105 Entergy Corporation and Subsidiaries
Notes to Financial Statements
period, based on their respective interpretations and applications of the Opinion No. 569-A methodology, the LPSC
argues for an authorized return on equity for System Energy of 7.97%; the MPSC and APSC argue for an authorized
return on equity of 9.24%; and the FERC trial staff argues for an authorized return on equity of 9.49%. For the
second refund period and on a prospective basis, based on their respective interpretations and applications of the
Opinion No. 569-A methodology, the LPSC argues for an authorized return on equity for System Energy of 7.78%;
the MPSC and APSC argue that an authorized return on equity of 9.15% may be appropriate if the second complaint
is not dismissed; and the FERC trial staff argues for an authorized return on equity of 9.09% if the second complaint
is not dismissed.
Pursuant to the revised procedural schedule, in July 2020, System Energy filed supplemental testimony
addressing Opinion No. 569-A. System Energy argues that strict application of the Opinion No. 569-A
methodology produces results inconsistent with investor requirements and does not provide a sound basis on which
to evaluate System Energy’s authorized return on equity. As its primary recommendation, System Energy argues
for the use of a methodology that incorporates four separate financial models, including the constant growth form of
the discounted cash flow model and the empirical capital asset pricing model. Based on application of its
recommended methodology, System Energy argues for an authorized return on equity of 10.12% for the first refund
period, which also falls within the presumptively just and reasonable range calculated for the second refund period
and prospectively. Under the Opinion No. 569-A methodology, System Energy calculates an authorized return on
equity of 9.44% for the first refund period, which also falls within the presumptively just and reasonable range
calculated for the second refund period and prospectively.
The parties and FERC trial staff filed final rounds of testimony in August 2020. The hearing before a
FERC ALJ occurred in late-September through early-October 2020, post-hearing briefing took place in November
and December 2020.
In March 2021 the FERC ALJ issued an initial decision. With regard to System Energy’s authorized return
on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that
the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should
be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period
(January 2017-April 2018) based on the difference between the current return on equity and the replacement
authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on
equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With
regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is
excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the
proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that
System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on
the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld,
the estimated refund for this proceeding is approximately $60 million, which includes interest through December
31, 2021, and the estimated resulting annual rate reduction would be approximately $45 million. The estimated
refund will continue to accrue interest until a final FERC decision is issued. Based on the course of the proceeding
to date, System Energy has recorded a provision of $37 million, including interest, as of December 31, 2021.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations
made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on
exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure
issues. Also in April 2021 the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on
exceptions. Reply briefs opposing exceptions were filed in May 2021 by System Energy, the FERC trial staff, the
LPSC, APSC, MPSC, and the City Council. Refunds, if any, that might be required will only become due after the
FERC issues its order reviewing the initial decision.
106 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue
In May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System
Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided
interest in Grand Gulf Unit 1. The complaint alleges that System Energy violated the filed rate and the FERC’s
ratemaking and accounting requirements when it included in Unit Power Sales Agreement billings the cost of
capital additions associated with the sale-leaseback interest, and that System Energy is double-recovering costs by
including both the lease payments and the capital additions in Unit Power Sales Agreement billings. The complaint
also claims that System Energy was imprudent in entering into the sale-leaseback renewal because the Utility
operating companies that purchase Grand Gulf’s output from System Energy could have obtained cheaper capacity
and energy in the MISO markets. The complaint further alleges that System Energy violated various other reporting
and accounting requirements and should have sought prior FERC approval of the lease renewal. The complaint
seeks various forms of relief from the FERC. The complaint 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 capital additions in those years plus interest. The complaint also asks that the FERC disallow and
refund the lease costs of the sale-leaseback renewal 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 that System Energy’s treatment of the sale-leaseback renewal and capital additions violated the
terms of the filed rate or any other FERC ratemaking, accounting, or legal requirements or otherwise constituted
double recovery. The response also argued that the complaint is inconsistent with a FERC-approved settlement to
which the LPSC is a party and that explicitly authorizes System Energy to recover its lease payments. Finally, the
response argued that both the capital additions and the sale-leaseback renewal were prudent investments and the
LPSC complaint fails to justify any disallowance or refunds. The response also offered to submit formula rate
protocols for the Unit Power Sales Agreement similar to the procedures used for reviewing transmission rates under
the MISO tariff. In September 2018 the FERC issued an order setting the complaint for hearing and settlement
proceedings. The FERC established a refund effective date of May 18, 2018.
In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of
whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System
Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC and City Council filed direct testimony. The LPSC
testimony sought refunds that include the renewal lease payments (approximately $17.2 million per year since July
2015), rate base reductions for accumulated deferred income tax associated with uncertain tax positions, and the
cost of capital additions associated with the sale-leaseback interest, as well as interest on those amounts.
In June 2019 System Energy filed answering testimony arguing that the FERC should reject all claims for
refunds. Among other things, System Energy argued that claims for refunds of the costs of lease renewal payments
and capital additions should be rejected because those costs were recovered consistent with the Unit Power Sales
Agreement formula rate, System Energy was not over or double recovering any costs, and ratepayers will save costs
over the initial and renewal terms of the leases. System Energy argued that claims for refunds associated with
liabilities arising from uncertain tax positions should be rejected because the liabilities do not provide cost-free
capital, the repayment timing of the liabilities is uncertain, and the outcome of the underlying tax positions is
uncertain. System Energy’s testimony also challenged the refund calculations supplied by the other parties.
In August 2019 the FERC trial staff filed direct and answering testimony seeking refunds for rate base
reductions for liabilities associated with uncertain tax positions. The FERC trial staff also argued that System
Energy recovered $32 million more than it should have in depreciation expense for capital additions. In September
2019, System Energy filed cross-answering testimony disputing the FERC trial staff’s arguments for refunds, stating
that the FERC trial staff’s position regarding depreciation rates for capital additions is not unreasonable, but
107 Entergy Corporation and Subsidiaries
Notes to Financial Statements
explaining that any change in depreciation expense is only one element of a Unit Power Sales Agreement re-billing
calculation. Adjustments to depreciation expense in any re-billing under the Unit Power Sales Agreement formula
rate will also involve changes to accumulated depreciation, accumulated deferred income taxes, and other formula
elements as needed. In October 2019 the LPSC filed rebuttal testimony increasing the amount of refunds sought for
liabilities associated with uncertain tax positions. The LPSC seeks approximately $512 million plus interest, which
is approximately $216 million through December 31, 2021. The FERC trial staff also filed rebuttal testimony in
which it seeks refunds of a similar amount as the LPSC for the liabilities associated with uncertain tax positions.
The LPSC testimony also argued that adjustments to depreciation rates should affect rate base on a prospective basis
only.
A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial
decision. Among other things, the ALJ determined that refunds were due on three main issues. First, with regard to
the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium
through the lease renewal payments, and that System Energy’s recovery from customers through rates should be
limited to the cost of service based on the remaining net book value of the leased assets, which is approximately
$70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately
$17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be
offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a
value for the refund expected as a result of this remedy. In addition, System Energy would no longer recover the
lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions,
the ALJ determined that the liabilities are accumulated deferred income taxes and that System Energy’s rate base
should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this
issue through December 31, 2021, is approximately $422 million, plus interest, which is approximately
$128 million through December 31, 2021. The ALJ also found that System Energy should include liabilities
associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the
depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings
retroactively and prospectively, but that System Energy should not be permitted to recover interest on any
retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this
issue, System Energy estimates refunds of approximately $19 million, which includes interest through December
31, 2021.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations
made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these
are issues of first impression before the FERC. In June 2020, System Energy, the LPSC, and the FERC trial staff
filed briefs on exceptions, challenging several of the initial decision’s findings. System Energy’s brief on
exceptions challenged the initial decision’s limitations on recovery of the lease renewal payments, its proposed rate
base refund for the liabilities associated with uncertain tax positions, and its proposal to asymmetrically treat
interest on bill corrections for depreciation expense adjustments. The LPSC’s and the FERC trial staff’s briefs on
exceptions each challenged the initial decision’s allowance for recovery of the cost of service associated with the
lease renewal based on the remaining net book value of the leased assets, its calculation of the remaining net book
value of the leased assets, and the amount of the initial decision’s proposed rate base refund for the liabilities
associated with uncertain tax positions. The LPSC’s brief on exceptions also challenged the initial decision’s
proposal that depreciation expense adjustments include retroactive adjustments to rate base and its finding that
section 203 of the Federal Power Act did not apply to the lease renewal. The FERC trial staff’s brief on exceptions
also challenged the initial decision’s finding that the FERC need not institute a formal investigation into System
Energy’s tariff. In October 2020, System Energy, the LPSC, the MPSC, the APSC, and the City Council filed briefs
opposing exceptions. System Energy opposed the exceptions filed by the LPSC and the FERC trial staff. The
LPSC, MPSC, APSC, City Council, and the FERC trial staff opposed the exceptions filed by System Energy. Also
in October 2020 the MPSC, APSC, and the City Council filed briefs adopting the exceptions of the LPSC and the
FERC trial staff. The case is pending before the FERC, which will review the case and issue an order on the
proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Refunds, if
any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
108 Entergy Corporation and Subsidiaries
Notes to Financial Statements
In addition, in September 2020, the IRS issued a Notice of Proposed Adjustment (NOPA) and Entergy
executed it. The NOPA memorializes the IRS’s decision to adjust the 2015 consolidated federal income tax return
of Entergy Corporation and certain of its subsidiaries, including System Energy, with regard to the uncertain
decommissioning tax position. Pursuant to the audit resolution documented in the NOPA, the IRS allowed System
Energy’s inclusion of $102 million of future nuclear decommissioning costs in System Energy’s cost of goods sold
for the 2015 tax year, roughly 10% of the requested deduction, but disallowed the balance of the position. In
September 2020, System Energy filed a motion to lodge the NOPA into the record in the FERC proceeding. In
October 2020 the LPSC, the APSC, the MPSC, the City Council, and the FERC trial staff filed oppositions to
System Energy’s motion. As a result of the NOPA issued by the IRS in September 2020, System Energy filed, in
October 2020, a new Federal Power Act section 205 filing at FERC to establish an ongoing rate base credit for the
accumulated deferred income taxes resulting from the decommissioning uncertain tax position. On a prospective
basis beginning with the October 2020 bill, System Energy proposes to include the accumulated deferred income
taxes arising from the successful portion of the decommissioning uncertain tax position as a credit to rate base under
the Unit Power Sales Agreement. In November 2020 the LPSC, APSC, MPSC, and City Council filed a protest to
the filing, and System Energy responded.
In November 2020 the IRS issued a Revenue Agent’s Report (RAR) for the 2014/2015 tax year and in
December 2020 Entergy executed it. The RAR contained the same adjustment to the uncertain nuclear
decommissioning tax position as that which the IRS had announced in the NOPA. In December 2020, System
Energy filed a motion to lodge the RAR into the record in the FERC proceeding addressing the uncertain tax
position rate base issue. In January 2021 the LPSC, APSC, MPSC, and City Council filed a protest to the motion.
As a result of the RAR, in December 2020, System Energy filed amendments to its new Federal Power Act
section 205 filings to establish an ongoing rate base credit for the accumulated deferred income taxes resulting from
the decommissioning uncertain tax position and to credit excess accumulated deferred income taxes arising from the
successful portion of the decommissioning uncertain tax position. The amendments both propose the inclusion of
the RAR as support for the filings. In December 2020 the LPSC, APSC, and City Council filed a protest in
response to the amendments, reiterating their prior objections to the filings. In February 2021 the FERC issued an
order accepting System Energy’s Federal Power Act section 205 filings subject to refund, setting them for hearing,
and holding the hearing in abeyance.
In December 2020, System Energy filed a new Federal Power Act section 205 filing to provide a one-time,
historical credit of $25.2 million for the accumulated deferred income taxes that would have been created by the
decommissioning uncertain tax position if the IRS’s decision had been known in 2016. In January 2021 the LPSC,
APSC, MPSC, and City Council filed a protest to the filing. In February 2021 the FERC issued an order accepting
System Energy’s Federal Power Act section 205 filing subject to refund, setting it for hearing, and holding the
hearing in abeyance. The one-time credit was made during the first quarter 2021.
LPSC Authorization of Additional Complaints
In May 2020 the LPSC authorized its staff to file additional complaints at the FERC related to the rates
charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power
Sales Agreement. The LPSC directive notes that the initial decision issued by the presiding ALJ in the Grand Gulf
sale-leaseback complaint proceeding did not address, for procedural reasons, certain rate issues raised by the LPSC
and declined to order further investigation of rates charged by System Energy. The LPSC directive authorizes its
staff to file complaints at the FERC “necessary to address these rate issues, to request a full investigation into the
rates charged by System Energy for Grand Gulf power, and to seek rate refund, rate reduction, and such other
remedies as may be necessary and appropriate to protect Louisiana ratepayers.” The LPSC directive further stated
that the LPSC has seen “information suggesting that the Grand Gulf plant has been significantly underperforming
compared to other nuclear plants in the United States, has had several extended and unexplained outages, and has
been plagued with serious safety concerns.” The LPSC expressed concern that the costs paid by Entergy
109 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Louisiana's retail customers may have been detrimentally impacted, and authorized “the filing of a FERC complaint
to address these performance issues and to seek appropriate refund, rate reduction, and other remedies as may be
appropriate.”
Unit Power Sales Agreement Complaint
The first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in
September 2020. The complaint raises two sets of rate allegations: violations of the filed rate and a corresponding
request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable
and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales
Agreement prospectively. Several of the filed rate allegations overlap with the previous complaints. The filed rate
allegations not previously raised are that System Energy: failed to provide a rate base credit to customers for the
“time value” of sale-leaseback lease payments collected from customers in advance of the time those payments were
due to the owner-lessors; improperly included certain lease refinancing costs in rate base as prepayments;
improperly included nuclear decommissioning outage costs in rate base; failed to include categories of accumulated
deferred income taxes as a reduction to rate base; charged customers based on a higher equity ratio than would be
appropriate due to excessive retained earnings; and did not correctly reflect money pool investments and
imprudently invested cash into the money pool. The elements of the Unit Power Sales Agreement that the
complaint alleges are unjust and unreasonable include: incentive and executive compensation, lack of an equity re-
opener, lobbying, and private airplane travel. The complaint also requests a rate investigation into the Unit Power
Sales Agreement and System Energy’s billing practices pursuant to section 206 of the Federal Power Act, including
any issue relevant to the Unit Power Sales Agreement and its inputs. System Energy filed its answer opposing the
complaint in November 2020. In its answer, System Energy argued that all of the claims raised in the complaint
should be dismissed and agreed that bill adjustment with respect to two discrete issues were justified. System
Energy argued that dismissal is warranted because all claims fall into one or more of the following categories: the
claims have been raised and are being litigated in another proceeding; the claims do not present a prima facie case
and do not satisfy the threshold burden to establish a complaint proceeding; the claims are premised on a theory or
request relief that is incompatible with federal law or FERC policy; the claims request relief that is inconsistent with
the filed rate; the claims are barred or waived by the legal doctrine of laches; and/or the claims have been fully
addressed and do not warrant further litigation. In December 2020, System Energy filed a bill adjustment report
indicating that $3.4 million had been credited to customers in connection with the two discrete issues concerning the
inclusion of certain accumulated deferred income taxes balances in rates. In January 2021 the complainants filed a
response to System Energy’s November 2020 answer, and in February 2021, System Energy filed a response to the
complainant’s response.
In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of
September 21, 2020, establishing hearing procedures, and holding those procedures in abeyance pending FERC’s
review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above. System Energy
agreed that the hearing should be held in abeyance but sought rehearing of FERC’s decision as related to matters set
for hearing that were beyond the scope of FERC’s jurisdiction or authority. The complainants sought rehearing of
FERC’s decision to hold the hearing in abeyance and filed a motion to proceed, which motion System Energy
subsequently opposed. In June 2021, System Energy’s request for rehearing was denied by operation of law, and
System Energy filed an appeal of FERC’s orders in the Court of Appeals for the Fifth Circuit. The appeal was
initially stayed for a period of 90 days, but the stay expired. In November 2021 the Fifth Circuit dismissed the
appeal as premature.
In August 2021 the FERC issued an order addressing System Energy’s and the complainants’ rehearing
requests. The FERC dismissed part of the complaint seeking an equity re-opener, maintained the abeyance for
issues related to the proceeding addressing the sale-leaseback renewal and uncertain tax positions, lifted the
abeyance for issues unrelated to that proceeding, and clarified the scope of the hearing. A procedural schedule was
established, with the hearing scheduled for June 2022 and the ALJ’s initial decision scheduled for November 2022.
Discovery is ongoing.
110 Entergy Corporation and Subsidiaries
Notes to Financial Statements
In November 2021 the LPSC, APSC, and City Council filed direct testimony and requested the FERC to
order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement. The LPSC’s
refund claims include, among other things, allegations that: (1) System Energy should not have included certain
sale-leaseback transaction costs in prepayments; (2) System Energy should have credited rate base to reflect the
time value of money associated with the advance collection of lease payments; (3) System Energy incorrectly
included refueling outage costs that were recorded in account 174 in rate base; and (4) System Energy should have
excluded several accumulated deferred income tax balances in account 190 from rate base. The LPSC is also
seeking a retroactive adjustment to retained earnings and capital structure in conjunction with the implementation of
its proposed refunds. In addition, the LPSC seeks amendments to the Unit Power Sales Agreement going forward
to address below-the-line costs, incentive compensation, the working capital allowance, litigation expenses, and the
2019 termination of the capital funds agreement. The APSC argues that: (1) System Energy should have included
borrowings from the Entergy System money pool in its determination of short-term debt in its cost of capital; and
(2) System Energy should credit customers with System Energy’s allocation of earnings on money pool
investments. The City Council alleges that System Energy has maintained excess cash on hand in the money pool
and that retention of excess cash was imprudent. Based on this allegation, the City Council’s witness recommends a
refund of approximately $98.8 million for the period 2004-September 2021 or other alternative relief. The City
Council further recommends that the FERC impose a hypothetical equity ratio such as 48.15% equity to capital on a
prospective basis.
In January 2022, System Energy filed answering testimony arguing that the FERC should not order refunds
for prior periods or any prospective amendments to the Unit Power Sales Agreement. In response to the LPSC’s
refund claims, System Energy argues, among other things, that (1) the inclusion of sale-leaseback transaction costs
in prepayments was correct; (2) that the filed rate doctrine bars the request for a retroactive credit to rate base for the
time value of money associated with the advance collection of lease payments; (3) that an accounting
misclassification for deferred refueling outage costs has been corrected, caused no harm to customers, and requires
no refunds; and (4) that its accounting and ratemaking treatment of specified accumulated deferred income tax
balances in account 190 has been correct. System Energy further responds that no retroactive adjustment to retained
earnings or capital structure should be ordered because there is no general policy requiring such a remedy and there
was no showing that the retained earnings element of the capital structure was incorrectly implemented. Further,
System Energy presented evidence that all of the costs that are being challenged were long known to the retail
regulators and were approved by them for inclusion in retail rates, and the attempt to retroactively challenge these
costs, some of which have been included in rates for decades, is unjust and unreasonable. In response to the LPSC’s
proposed going-forward adjustments, System Energy presents evidence to show that none of the proposed
adjustments are needed. On the issue of below-the-line expenses, during discovery procedures System Energy
identified a historical allocation error in certain months and agreed to provide a bill credit to customers to correct
the error. In response to the APSC’s claims, System Energy argues that the Unit Power Sales Agreement does not
include System Energy’s borrowings from the Entergy System money pool or earnings on deposits to the Entergy
System money pool in the determination of the cost of capital; and accordingly, no refunds are appropriate on those
issues. In response to the City Council’s claims, System Energy argues that it has reasonably managed its cash and
that the City Council’s theory of cash management is defective because it fails to adequately consider the relevant
cash needs of System Energy and it makes faulty presumptions about the operation of the Entergy System money
pool. System Energy further points out that the issue of its capital structure is already subject to pending FERC
litigation.
Grand Gulf Prudence Complaint
The second of the additional complaints was filed at the FERC in March 2021 by the LPSC, the APSC, and
the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. The
second complaint contains two primary allegations. First, it alleges that, based on the plant’s capacity factor and
alleged safety performance, System Energy and the other respondents imprudently operated Grand Gulf during the
period 2016-2020, and it seeks refunds of at least $360 million in alleged replacement energy costs, in addition to
other costs, including those that can only be identified upon further investigation. Second, it alleges that the
111 Entergy Corporation and Subsidiaries
Notes to Financial Statements
performance and/or management of the 2012 extended power uprate of Grand Gulf was imprudent, and it seeks
refunds of all costs of the 2012 uprate that are determined to result from imprudent planning or management of the
project. In addition to the requested refunds, the complaint asks that the FERC modify the Unit Power Sales
Agreement to provide for full cost recovery only if certain performance indicators are met and to require pre-
authorization of capital improvement projects in excess of $125 million before related costs may be passed through
to customers in rates. In April 2021, System Energy and the other respondents filed their motion to dismiss and
answer to the complaint. System Energy requested that the FERC dismiss the claims within the complaint. With
respect to the claim concerning operations, System Energy argues that the complaint does not meet its legal burden
because, among other reasons, it fails to allege any specific imprudent conduct. With respect to the claim
concerning the uprate, System Energy argues that the complaint fails because, among other reasons, the
complainants’ own conduct prevents them from raising a serious doubt as to the prudence of the uprate. System
Energy also requests that the FERC dismiss other elements of the complaint, including the proposed modifications
to the Unit Power Sales Agreement, because they are not warranted. Additional responsive pleadings were filed by
the complainants and System Energy during the period from March through July 2021. The pleadings are pending
FERC action.
Storm Cost Recovery Filings with Retail Regulators
Entergy Louisiana
Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida
In August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant
damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant
damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a
result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of
the underlying transmission system required nearly a complete rebuild.
In October 2020, Entergy Louisiana filed an application at the LPSC seeking approval of certain ratemaking
adjustments in connection with the issuance of shorter-term mortgage bonds to provide interim financing for
restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy
Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy
Louisiana’s capital structure and cost rate of debt for ratemaking purposes, including the allowance for funds used
during construction, shorter-term debt up to $1.1 billion issued by Entergy Louisiana to fund costs associated with
Hurricane Laura, Hurricane Delta, and Hurricane Zeta costs on an interim basis. In November 2020 the LPSC
issued an order approving the joint motion, and Entergy Louisiana issued $1.1 billion of 0.62% Series mortgage
bonds due November 2023. Also in November 2020, Entergy Louisiana withdrew $257 million from its funded
storm reserves.
In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to
Louisiana. Ice accumulation sagged or downed trees, limbs and power lines, causing damage to Entergy
Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into
power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment,
causing additional outages. As discussed above in “Fuel and purchased power recovery,” Entergy Louisiana
recovered the incremental fuel costs associated with Winter Storm Uri over a five-month period from April 2021
through August 2021.
In April 2021, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane
Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a
supplemental filing updating the total restoration costs. Total restoration costs for the repair and/or replacement of
Entergy Louisiana’s electric facilities damaged by these storms are currently estimated to be approximately
$2.06 billion, including approximately $1.68 billion in capital costs and approximately $380 million in non-capital
112 Entergy Corporation and Subsidiaries
Notes to Financial Statements
costs. Including carrying costs through January 2022, Entergy Louisiana is seeking an LPSC determination that
$2.11 billion was prudently incurred and, therefore, is eligible for recovery from customers. Additionally, Entergy
Louisiana is requesting that the LPSC determine that re-establishment of a storm escrow account to the previously
authorized amount of $290 million is appropriate. In July 2021, Entergy Louisiana supplemented the application
with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy
Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as
supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. As previously discussed, in
August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent,
transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana supplemented
the application with a request to establish and securitize a $1 billion restricted storm escrow account for Hurricane
Ida related restoration costs, subject to a subsequent prudence review. In total, Entergy Louisiana requested
authorization for the issuance of system restoration bonds in one or more series in an aggregate principal amount of
$3.18 billion, which includes the costs of re-establishing and funding a storm damage escrow account, carrying
costs and unamortized debt costs on interim financing, and issuance costs. After filing of testimony by LPSC staff
and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests, the parties negotiated
and executed an uncontested stipulated settlement which was filed with the LPSC in February 2022. The settlement
agreement contains the following key terms: $2.1 billion of restoration costs from Hurricane Laura, Hurricane
Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and are eligible for recovery; carrying costs of
$51 million are recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should
be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana is authorized to finance
$3.186 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. The LPSC
voted to approve the settlement at its February 2022 meeting.
Hurricane Isaac
In August 2012, Hurricane Isaac caused extensive damage to Entergy Louisiana’s service area. In June
2014 the LPSC authorized Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system
restoration costs. Entergy Louisiana committed to pass on to customers a minimum of $30.8 million of customer
benefits through annual customer credits of approximately $6.2 million for five years. Approvals for the Act 55
financings were obtained from the Louisiana 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 $293 million directly to Entergy Louisiana. Entergy
Louisiana used the $293 million received from the LURC to acquire 2,935,152.69 Class C preferred, non-voting,
membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by
Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September
15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership
interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC
agreement. The terms of the membership interests include certain financial 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 the obligation of the LCDA and there is no recourse against Entergy or Entergy Louisiana in the event
of a bond default. To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the
LURC and remits the collections to the bond indenture trustee. Entergy and Entergy Louisiana do not report the
collections as revenue because Entergy Louisiana is merely acting as the billing and collection agent for the state.
In the first quarter 2020, Entergy and the IRS agreed upon and settled on the treatment of funds received by
Entergy Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net
reduction of income tax expense of approximately $32 million. As a result of the settlement, the position was
113 Entergy Corporation and Subsidiaries
Notes to Financial Statements
partially sustained and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million
primarily due to the reversal of liabilities for uncertain tax positions in excess of the agreed-upon settlement.
Entergy recorded an increase to income tax expense of $26 million primarily resulting from the reduction of the
deferred tax asset, associated with utilization of the net operating loss as a result of the settlement. This adjustment
recorded by Entergy also accounted for the tax rate change of the Tax Cuts and Jobs Act. As a result of the IRS
settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge and a
corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac Act 55
financing order.
Hurricane Gustav and Hurricane Ike
In 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 and April 2010, Entergy Louisiana and other parties to the
proceeding filed with the LPSC an uncontested stipulated settlement that included Entergy Louisiana’s proposal to
utilize Act 55 financing, which included a commitment to pass on to customers a minimum of $43.3 million of
customer benefits through a prospective annual rate reduction of $8.7 million for five years. In April 2010 the
LPSC approved the settlement and subsequently issued financing orders and a ratemaking order intended to
facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission
approved the Act 55 financing. The settlement agreement allowed for an adjustment to the credits 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 Jobs Act,
in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21%, the Louisiana Act
55 financing savings obligation regulatory liability related to Hurricane Gustav and Hurricane Ike was reduced by
$2.7 million, with a corresponding increase to Other regulatory credits on the income statement. The effects of the
Tax Cuts and Jobs 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 bond proceeds loaned by the LCDA to the LURC, the LURC deposited $290 million in a
restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $412.7 million directly
to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana
used $412.7 million to acquire 4,126,940.15 Class B preferred, non-voting, membership interest units of Entergy
Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual
distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership
interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of
Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the
membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject,
including the requirement to maintain a 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 the obligation of the LCDA, and there is no recourse against Entergy or Entergy Louisiana in the
event of a bond default. To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of
the LURC and remits the collections to the bond indenture trustee. Entergy and Entergy Louisiana do not report the
collections as revenue because Entergy Louisiana is merely acting as the billing and collection agent for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to Entergy
Louisiana’s service territory. In March 2008, Entergy Louisiana and the LURC filed at the LPSC an application
requesting that the LPSC grant a financing order authorizing the financing of Entergy Louisiana storm costs, storm
reserves, and issuance costs pursuant to Louisiana Act 55. Entergy Louisiana also filed an application requesting
LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a storm
cost offset rider. In April 2008 the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds
114 Entergy Corporation and Subsidiaries
Notes to Financial Statements
pursuant to the Act 55 financing, approved requests for the Act 55 financing. Also in April 2008, Entergy
Louisiana and the LPSC staff filed with the LPSC an uncontested stipulated settlement that included Entergy
Louisiana’s proposal under the Act 55 financing, which included a commitment to pass on to customers a minimum
of $40 million of customer benefits through a prospective annual rate reduction of $8 million for five years. The
LPSC subsequently approved the settlement and issued two financing orders and one ratemaking order intended to
facilitate implementation of the Act 55 financing. In May 2008 the Louisiana State Bond Commission granted final
approval of the Act 55 financing. The settlement agreement allowed for an adjustment to the credits 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 Jobs Act,
in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21%, the Louisiana Act
55 financing savings obligation regulatory liability related to Hurricanes Katrina and Rita was reduced by
$22.3 million, with a corresponding increase to Other regulatory credits on the income statement. The effects of the
Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.
In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the
$679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted
escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy
Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested
$545 million, including $17.8 million that was withdrawn from the restricted escrow 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 a 10%
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 a storm damage reserve for Entergy Louisiana and transferred $187.7 million
directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy
Louisiana invested $189.4 million, including $1.7 million that was withdrawn from 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 are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100
per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten
years under the terms of the LLC agreement. The terms of the membership interests include certain financial
covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth
of at least $1 billion.
The bonds were repaid in 2018. Entergy and Entergy Louisiana did not report the bonds issued by the
LPFA on their balance sheets because the bonds are the obligation of the LPFA, and there was no recourse against
Entergy or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Louisiana collected a
system restoration charge on behalf of the LURC and remitted the collections to the bond indenture trustee. Entergy
and Entergy Louisiana did not report the collections as revenue because Entergy Louisiana was merely acting as the
billing and collection agent for the state.
Entergy Mississippi
Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per
month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million, the collection
of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less
than $10 million. Entergy Mississippi’s storm damage provision balance has been less than $10 million since May
2019, and Entergy Mississippi has been billing the monthly storm damage provision since July 2019.
115 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans
Hurricane Zeta
In October 2020, Hurricane Zeta caused significant damage to Entergy New Orleans’s service area. The
storm resulted in widespread power outages, significant damage to distribution and transmission infrastructure, and
the loss of sales during the power outages. In March 2021, Entergy New Orleans withdrew $44 million from its
funded storm reserves. In May 2021, Entergy New Orleans filed an application with the City Council requesting
approval and certification that its system restoration costs associated with Hurricane Zeta of approximately
$36 million, including approximately $28 million in capital costs and approximately $8 million in non-capital costs,
were reasonable and necessary to enable Entergy New Orleans to restore electric service to its customers and
Entergy New Orleans’s electric utility infrastructure.
Entergy Texas
Hurricane Laura, Hurricane Delta, and Winter Storm Uri
In August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to
Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service
area. The storms resulted in widespread power outages, significant damage primarily to distribution and
transmission infrastructure, and the loss of sales during the power outages. In April 2021, Entergy Texas filed an
application with the PUCT requesting a determination that approximately $250 million of system restoration costs
associated with Hurricane Laura, Hurricane Delta, and Winter Storm Uri, including approximately $200 million in
capital costs and approximately $50 million in non-capital costs, were reasonable and necessary to enable Entergy
Texas to restore electric service to its customers and Entergy Texas’s electric utility infrastructure. The filing also
included the projected balance of approximately $13 million of a regulatory asset containing previously approved
system restoration costs related to Hurricane Harvey. In September 2021 the parties filed an unopposed settlement
agreement, pursuant to which Entergy Texas removed from the amount to be securitized approximately $4.3 million
that will instead be charged to its storm reserve, $5 million related to no particular issue, of which Entergy Texas
would be permitted to seek recovery in a future proceeding, and approximately $300 thousand related to attestation
costs. In December 2021 the PUCT issued an order approving the unopposed settlement and determining system
restoration costs of $243 million related to Hurricane Laura, Hurricane Delta, and Winter Storm Uri and the
$13 million projected remaining balance of the Hurricane Harvey system restoration costs were eligible for
securitization. The order also determines that Entergy Texas can recover carrying costs on the system restoration
costs related to Hurricane Laura, Hurricane Delta, and Winter Storm Uri.
In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the
securitization of the system restoration costs that are the subject of the April 2021 application. In November 2021
the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with
Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to
facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order
consistent with the unopposed settlement.
116 NOTE 3. INCOME TAXES
Income taxes for 2021, 2020, and 2019 for Entergy Corporation and Subsidiaries consist of the following:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Current:
Federal
State
Total
Deferred and non-current - net
Investment tax credit adjustments - net
Income taxes
2021
2020
(In Thousands)
2019
($5,003)
(8,995)
(13,998)
205,891
(519)
$191,374
$5,807
57,939
63,746
(190,635)
5,383
($121,506)
($14,416)
6,535
(7,881)
(155,956)
(5,988)
($169,825)
Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying
the statutory income tax rate to income before income taxes. The reasons for the differences for the years 2021,
2020, and 2019 are:
Net income attributable to Entergy Corporation
Preferred dividend requirements of subsidiaries
Consolidated net income
Income taxes
Income before income taxes
Computed at statutory rate (21%)
Increases (reductions) in tax resulting from:
State income taxes net of federal income tax effect
Regulatory differences - utility plant items
Equity component of AFUDC
Amortization of investment tax credits
Flow-through / permanent differences
Amortization of excess ADIT (a)
Arkansas and Louisiana Rate Changes (b)
IRS audit adjustment (d)
Entergy Wholesale Commodities restructuring (c)
Stock compensation (e)
Charitable contribution (c)
Net operating loss recognition
Provision for uncertain tax positions
Valuation allowance
Other - net
Total income taxes as reported
2021
$1,118,492
227
1,118,719
191,374
$1,310,093
$275,120
79,273
(57,556)
(14,799)
(7,695)
(5,585)
(66,478)
(27,108)
—
—
—
—
—
16,533
(2,600)
2,269
$191,374
2020
(In Thousands)
$1,388,334
18,319
1,406,653
(121,506)
$1,285,147
$269,881
60,087
(53,229)
(25,080)
(8,386)
11,099
(59,629)
—
(301,041)
(9,223)
(25,591)
—
—
15,208
—
4,398
($121,506)
2019
$1,241,226
17,018
1,258,244
(169,825)
$1,088,419
$228,568
61,791
(45,336)
(30,444)
(8,093)
(2,059)
(205,614)
—
—
(173,725)
—
(19,101)
(41,427)
7,332
59,345
(1,062)
($169,825)
Effective Income Tax Rate
14.6%
(9.5%)
(15.6%)
(a)
(b)
See “Other Tax Matters - Tax Cuts and Jobs Act” below for discussion of the amortization of excess
accumulated deferred income taxes (ADIT) in 2019, 2020, and 2021 and the tax legislation enactment in
2017.
See “Arkansas and Louisiana Corporate Income Tax Rate Changes” below for details.
117
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(c)
(d)
(e)
See “Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the
Entergy Wholesale Commodities restructuring in 2019, the ownership of Palisades restructuring in 2020,
and the charitable contribution in 2019.
See “Income Tax Audits - 2014-2015 IRS Audit” below for discussion of the resolution of the audit in
2020.
See “Other Tax Matters - Stock Compensation” below for discussion of excess tax deductions.
Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation
and Subsidiaries as of December 31, 2021 and 2020 are as follows:
2021
2020
(In Thousands)
Deferred tax liabilities:
Plant basis differences - net
Regulatory assets
Nuclear decommissioning trusts/receivables
Pension, net regulatory asset
Combined unitary state taxes
Unbilled/deferred revenues
Accumulated storm damage provision
Deferred fuel
Other
Total
Deferred tax assets:
Nuclear decommissioning liabilities
Regulatory liabilities
Pension and other post-employment benefits
Sale and leaseback
Compensation
Accumulated deferred investment tax credit
Provision for allowances and contingencies
Power purchase agreements
Unbilled/deferred revenues
Net operating loss carryforwards
Capital losses and miscellaneous tax credits
Valuation allowance
Other
Total
Non-current accrued taxes (including unrecognized tax benefits)
Accumulated deferred income taxes and taxes accrued
(930,244)
(656,185)
(322,788)
(7,255)
—
($6,136,563) ($4,795,422)
(429,996)
(1,188,235)
(327,445)
(7,723)
(9,152)
—
(7,667)
(549,355)
(7,314,995)
(207,243)
(85,310)
(341,450)
(8,687,038)
278,136
1,318,381
208,128
102,474
79,798
57,986
82,286
55,259
26,683
2,868,424
11,111
(325,239)
200,032
4,963,459
(929,032)
968,464
791,927
278,486
102,477
89,279
57,379
71,598
352,019
—
1,580,109
21,291
(328,581)
230,291
4,214,739
(1,185,227)
($4,652,611) ($4,285,483)
118
Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2021 are as
follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Carryover Description
Carryover Amount Year(s) of expiration
Federal net operating losses before
$6.2 billion
2023-2027
1/1/2018
Federal net operating losses - 1/1/2018
$21.1 billion
N/A
forward
State net operating losses
State net operating losses with no
expiration
$7.4 billion
$16.7 billion
Federal and state charitable contributions
Miscellaneous federal and state credits
$460.8 million
$73.1 million
2022-2041
N/A
2022-2026
2022-2041
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in
the financial statements is less than the amount of the tax effect of the federal and state net operating loss
carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Entergy evaluates the
available positive and negative evidence to estimate whether sufficient future taxable income of the appropriate
character will be generated to realize the benefits of existing deferred tax assets. When the evaluation indicates that
Entergy will not be able to realize the existing benefits, a valuation allowance is recorded to reduce deferred tax
assets to the realizable amount.
Because it is more likely than not that the benefits from certain state net operating losses and other deferred
tax assets will not be utilized, valuation allowances totaling $325 million as of December 31, 2021 and $329 million
as of December 31, 2020 have been provided on the deferred tax assets related to federal and state jurisdictions in
which Entergy does not currently expect to be able to utilize certain separate company tax return attributes,
preventing realization of such deferred tax assets. As a result of incurring costs related to Hurricane Ida restoration,
certain Utility operating companies are entitled to an accelerated tax deduction which generated a taxable loss in
various taxing jurisdictions. This accelerated deduction has impaired the realizability of a limited term carryover
tax attribute. Accordingly, the impairment contributed to the activity reflected for the valuation allowance disclosed
above.
Unrecognized tax benefits
Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax
benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return but does not meet
the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax
return, is required to be recorded. A reconciliation of Entergy’s beginning and ending amount of unrecognized tax
benefits is as follows:
119
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2021
Gross balance at January 1
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Settlements
Gross balance at December 31
Offsets to gross unrecognized tax benefits:
Loss and tax credit carryovers
Cash paid to taxing authorities
2019
2020
(In Thousands)
$7,383,154
669,207
98,591
(935,735)
(1,515,878)
5,699,339
$5,699,339
101,623
33,419
(74,413)
—
5,759,968
$7,181,482
731,276
151,628
(681,232)
—
7,383,154
(4,987,799) (4,710,214) (5,831,587)
(10,000)
(60,000)
(10,000)
Unrecognized tax benefits net of unused tax attributes, refund claims
and payments (a)
$712,169
$979,125
$1,541,567
(a)
Potential tax liability above what is payable on tax returns
The balances of unrecognized tax benefits include $2,256 million, $2,208 million, and $2,421 million as of
December 31, 2021, 2020, and 2019, respectively, which, if recognized, would lower the effective income tax
rates. Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of
$3,504 million, $3,491 million, and $4,962 million as of December 31, 2021, 2020, and 2019, respectively, if
disallowed, would not affect the annual 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, 2021, 2020, and 2019 accrued balance for the possible payment of interest is
approximately $52 million, $44 million, and $48 million, respectively. Interest (net-of-tax) of $8 million, ($4)
million, and $4 million was recorded in 2021, 2020, and 2019, respectively.
Income Tax Audits
Entergy and its subsidiaries file U.S. federal and various state income tax returns. IRS examinations are
complete for years before 2016. All state taxing authorities’ examinations are complete for years before 2014.
Entergy regularly defends its positions and works with the IRS to resolve audits. The resolution of audit issues
could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.
2014-2015 IRS Audit
The IRS completed its examination of the 2014 and 2015 tax years and issued its 2014-2015 RAR in
November 2020. Entergy agreed to all proposed adjustments contained in the RAR. Entergy and the Registrant
Subsidiaries recorded the effects of the adjustments associated with the audit in 2020.
In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana,
combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the
business combination required Entergy to recognize a gain for income tax purposes which resulted in an increase in
the tax basis of the assets for Entergy Louisiana. This resulted in recognition in 2015 of a $334 million permanent
difference and income tax benefit, net of the uncertain tax position recorded on the transaction.
Primarily related to resolution of the business combination issues, completion of the 2014-2015 IRS audit in
2020 resulted in a $230 million reduction to deferred income tax expense for Entergy. This reduction to deferred
income tax expense includes: Entergy Louisiana reversing its provision for uncertain tax position with respect to the
120
Entergy Corporation and Subsidiaries
Notes to Financial Statements
business combination, which resulted in a reduction to deferred income tax expense of $383 million; Entergy
Corporation recording an increase to deferred tax expense of $61 million and Entergy Wholesale Commodities
recording an increase to deferred tax expense of $105 million from the re-measurement of deferred tax assets
associated with the resolved uncertain tax position; and miscellaneous other individually insignificant benefits
totaling $13 million.
The completion of the 2014-2015 tax audit also resulted in a $31 million reduction to income tax expense
associated with Entergy Louisiana’s method of accounting related to the adoption of tangible property regulations.
As a result of the settlement of the tangible property regulation tax position, Entergy Louisiana was required to
record a $33 million ($24 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its
obligation to customers pursuant to a prior regulatory settlement.
Finally, upon completion of the 2014-2015 tax audit, Entergy New Orleans recorded a reduction to income
tax expense of $8 million associated with claims for mark-to-market deductions.
In the first quarter 2020, Entergy and the IRS agreed on the treatment of funds received by Entergy
Louisiana in conjunction with the Act 55 financing of Hurricane Isaac storm costs, which resulted in a net reduction
of income tax expense of approximately $32 million. As a result of the settlement, the position was partially
sustained, and Entergy Louisiana recorded a reduction of income tax expense of approximately $58 million
primarily due to the reversal of a provision for uncertain tax positions in excess of the agreed-upon settlement. As a
result of the IRS settlement, Entergy Louisiana recorded a $29 million ($21 million net-of-tax) regulatory charge
and a corresponding regulatory liability to reflect its obligation to customers pursuant to the LPSC Hurricane Isaac
Act 55 financing order.
Additional effects of the completion of the 2014-2015 IRS tax audit are discussed below within Tax
Accounting Methods.
Other Tax Matters
Tax Cuts and Jobs Act (TCJA)
The most significant effect of the TCJA for Entergy was the change in the federal corporate income tax rate
from 35% to 21%, effective January 1, 2018.
TCJA also limited the deduction for net business interest expense to 30 percent of adjusted taxable income,
which is similar to earnings before interest, taxes, depreciation, and amortization. The limitation does not apply to
interest expense that is properly allocable to a trade or business classified as a regulated public utility. This was
further modified by a temporary provision of the CARES Act resulting in an increase of the adjusted taxable income
limitation from 30% to 50% for tax years that begin in 2019 or 2020.
The IRS issued final regulations which are effective for Entergy beginning with the 2021 tax year. The
regulations provide that if 90% of a tax group’s consolidated assets consist of regulated utility property, the entire
consolidated tax group will be treated as a regulated public utility and all of the consolidated group’s interest
expense will be currently tax deductible. Entergy expects that this provision will continue to apply to Entergy’s
business operations making the application of this limitation to Entergy less likely. The provision has not resulted
in Entergy having to report any significant business interest expense limitations on its tax returns.
With respect to the federal corporate income tax rate change from 35% to 21% in 2017, Entergy and the
Registrant Subsidiaries recorded a regulatory liability associated with the decrease in the net accumulated deferred
income tax liability, which is often referred to as “excess ADIT,” a significant portion of which has been paid to
customers in 2019, 2020 and 2021 in the form of lower rates. Entergy’s December 31, 2021 and December 31,
2020 balance sheets reflect a regulatory liability of $1.3 billion and $1.6 billion, respectively, as a result of the re-
121 Entergy Corporation and Subsidiaries
Notes to Financial Statements
measurement of deferred tax assets and liabilities from the income tax rate change, amortization of excess ADIT,
and payments to customers during 2019, 2020 and 2021. Entergy’s regulatory liability for income taxes includes a
gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The
regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting
in excess ADIT, and b) the tax gross-up of excess ADIT.
Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization
requirements of the TCJA, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions,
referred to as “unprotected”. The TCJA provides that the normalization method of accounting for income taxes is
required for excess ADIT associated with public utility property. The TCJA provides for the use of the average rate
assumption method (ARAM) for the determination of the timing of the return of 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 Registrant Subsidiaries’ net regulatory liability for income taxes as of December 31, 2021 and December 31,
2020, includes protected excess ADIT as follows:
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
System Energy
2021
2020
(In Millions)
$463
$669
$237
$56
$208
$148
$490
$721
$248
$61
$215
$173
Payment of the unprotected excess accumulated deferred income taxes results in a reduction in the
regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant
effect on the effective tax rate for the period as compared to the statutory tax rate. The Registrant Subsidiaries’ net
regulatory liability for income taxes as of December 31, 2021 and December 31, 2020, includes unprotected excess
ADIT as follows:
Entergy Arkansas
Entergy Louisiana
Entergy New Orleans
Entergy Texas
System Energy
2021
2020
(In Millions)
$12
$148
$—
$26
$—
$11
$223
$3
$54
$16
122
The return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant
Subsidiaries’ regulatory liability for income taxes as follows for 2021 and 2020:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy
Entergy Arkansas
Entergy Louisiana
Entergy New Orleans
Entergy Texas
System Energy
2021
2020
(In Millions)
$88
$8
$33
$1
$28
$18
$74
$8
$31
$6
$29
$—
In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income
taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in
Note 1 to the financial statements.
Included in the effect of the computation of the changes in deferred tax assets and liabilities is the
recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final
economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS
that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect
to all such tax positions means that the difference between current estimates of such amounts likely to be realized
and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability
for income taxes in future periods.
Entergy anticipates that the effect of TCJA may continue to have ramifications that require adjustments in
the future as certain events occur. These events include: 1) IRS audit adjustments to or amendments of federal and
state income tax returns that include modifications to the computation of taxable income resulting from TCJA; and
2) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential
exists for these types of events to result in future tax expense adjustments because of the difference in the federal
corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In
turn, these events also could potentially affect the regulatory liability for income taxes.
Coronavirus Aid, Relief, and Economic Security Act
In response to the economic impacts of the COVID-19 pandemic, President Trump signed the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act) into law on March 27, 2020. The CARES Act provisions that
result in the most significant opportunities for tax relief to Entergy and the Registrant Subsidiaries are (i) permitting
a five-year carryback of 2018-2020 NOLs, (ii) removing the 80 percent limitation on NOLs carried to tax years
beginning before 2021, (iii) increasing the limitation on interest expense deductibility for 2019 and 2020, (iv)
accelerating available refunds for minimum tax credit carryforwards, modifying limitations on charitable
contributions during 2020, and (v) delaying the payment of employer payroll taxes. Entergy deferred approximately
$64 million of 2020 payroll tax payments, payable in equal installments over two years. The initial installment of
$32 million was paid in December 2021. The second installment will be paid in December 2022.
Entergy Wholesale Commodities Restructuring
In the fourth quarter 2019, two separate events occurred resulting in a reduction of tax expense of $174
million. In November 2019 an Entergy Wholesale Commodities subsidiary recognized a reduction in income tax
expense of $18 million in connection with the accounting method on power contracts associated with the Palisades
nuclear power station. Additionally, Entergy’s ownership of Indian Point 2 and Indian Point 3 was restructured.
The restructuring required Entergy to recognize Indian Point 2 and Indian Point 3 nuclear decommissioning
123
Entergy Corporation and Subsidiaries
Notes to Financial Statements
liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax
expense, net of unrecognized tax benefits, by $156 million. The accrual of the nuclear decommissioning liabilities
also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in the
tax basis of the assets. Recognition of the gain and the increase in the tax basis of the assets represents a tax
accounting temporary difference.
Immediately prior to the restructuring, through its ownership of Indian Point 2 and Indian Point 3, Entergy
donated property to Stony Brook University and recognized an associated tax deduction resulting in a decrease to
tax expense of $19 million.
In the fourth quarter 2020, Entergy’s ownership of Palisades was restructured. The restructuring required
Entergy to recognize Palisades’ nuclear decommissioning liability for income tax purposes resulting in a tax
accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by
$9.2 million. The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for
income tax purposes, a portion of which resulted in an increase in the tax basis of the assets. Recognition of the
gain and the increase in the tax basis of the assets represents a tax accounting temporary difference.
Tax Accounting Methods
In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for
income tax return purposes in which their nuclear decommissioning costs will be treated as production costs of
electricity includable in cost of goods sold. The new method resulted in a reduction of taxable income of $1.2
billion for System Energy and $2.2 billion for Energy Louisiana.
In conjunction with the 2014-2015 IRS audit discussed above, the IRS issued proposed adjustments
concerning the nuclear decommissioning tax position allowing System Energy to include $102 million of its
decommissioning liability in cost of goods sold, and Entergy Louisiana to include $221 million of its
decommissioning liability in cost of goods sold. Entergy, System Energy, and Entergy Louisiana agreed to the
proposed adjustments included in the RAR.
As a result of System Energy being allowed to include part of its decommissioning liability in cost of goods
sold, System Energy and Entergy recorded a deferred tax liability of $26 million. System Energy also recorded
federal and state taxes payable of $402 million. However, on a consolidated basis, Entergy utilized tax loss
carryovers to offset the federal taxable income adjustment and did not record federal taxes payable as a result of the
outcome of this uncertain tax position.
As a result of Entergy Louisiana being allowed to include part of its decommissioning liability in cost of
goods sold, Entergy Louisiana and Entergy recorded a deferred tax liability of $60 million. Both Entergy Louisiana
and Entergy utilized tax loss carryovers to offset the taxable income adjustment and accordingly did not record
taxes payable as a result of the outcome of this uncertain tax position.
The partial disallowance of this uncertain tax position to include the decommissioning liability in cost of
goods sold resulted in a $1.5 billion decrease in the balance of unrecognized tax benefits related to federal and state
taxes for Entergy. Additionally, both System Energy and Entergy Louisiana recorded a reduction to their balances
of unrecognized tax benefits for federal and state taxes of $461 million and $1.1 billion, respectively.
Entergy Arkansas adopted the same method of accounting for its nuclear decommissioning costs which
resulted in a $1.8 billion reduction in taxable income on its 2018 tax return.
In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric
power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia
hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a
124 Entergy Corporation and Subsidiaries
Notes to Financial Statements
$2.2 billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income
tax treatment for wholesale electric contracts which resulted in a $1.1 billion deductible temporary difference. In
2018, Entergy Arkansas and Entergy Mississippi accrued deductible temporary differences related to mark-to-
market tax accounting for wholesale electric contracts of $2.1 billion and $1.9 billion, respectively. Additionally, in
2020, Entergy Texas elected mark-to-market income tax treatment for wholesale electric power purchase and sale
agreements which resulted in a $2.5 billion deductible temporary difference.
Arkansas and Louisiana Corporate Income Tax Rate Changes
In April 2019 and December 2021 the State of Arkansas enacted corporate income tax law changes that
phased in rate reductions from the former rate of 6.5% to 6.2% in 2021, 5.9% in 2022, and 5.7% in 2023. As a
result of the 2019 rate reduction, Entergy Arkansas computed a regulatory liability for income taxes as of December
31, 2020 of approximately $21 million, which includes a tax gross-up related to the treatment of income taxes in the
retail and wholesale ratemaking formulas and has been included in the appropriate rate mechanisms. Entergy
Arkansas recorded an incremental regulatory liability of $11 million associated with the rate reduction enacted in
December 2021. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover
period from five to ten years.
Pursuant to legislation enacted in 2021 and approved by Louisiana citizens by amendment to the state
constitution, beginning January 1, 2022, federal income taxes paid will no longer be deductible for state income tax
purposes, and the top Louisiana corporate income tax rate will be reduced from 8% to 7.5%. As a result of this
change in Louisiana tax law, the Louisiana applicable tax rate increased by 0.85%. Accordingly, deferred tax assets
and liabilities were adjusted to reflect the new applicable federal and state rates. Legislation enacted in 2021 also
provides that Louisiana net operating losses generally have an indefinite carryover period.
Entergy recorded a net increase to its deferred tax asset of $27 million. Entergy Louisiana and Entergy
New Orleans recorded net increases to their deferred tax liabilities before consideration of the tax gross-up of
$77 million and $8 million, respectively, which were offset by regulatory assets for income taxes. Therefore, these
increases had no effect on tax expense. However, the increase of deferred tax assets associated with certain assets
reduced tax expense for Entergy Louisiana and Entergy New Orleans by $6 million and $2 million, respectively.
Consolidated Income Tax Return of Entergy Corporation
In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly-owned subsidiaries
including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to
and joined the Entergy Corporation consolidated federal income tax group. As a result of these four Utility
operating companies re-joining the Entergy Corporation consolidated tax return group, Entergy was able to
recognize a $41 million deferred tax asset associated with a previously unrecognized net operating loss carryover.
In September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock with a liquidation
value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated
federal income tax return of Entergy Corporation. These changes will not affect the accrual or allocation of income
taxes for the Registrant Subsidiaries. See Note 6 to the financial statements for discussion of the preferred stock
issuance.
Vermont Yankee
The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.
The deferred tax asset could not be fully realized by Entergy in the first quarter 2019; accordingly, Entergy accrued
a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 14 to the financial statements for
discussion of the Vermont Yankee transaction.
125 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Stock Compensation
In accordance with stock compensation accounting rules, Entergy recognized excess tax deductions as a
reduction of income tax expense in the first quarter 2020. Due to the vesting and exercise of certain Entergy stock-
based awards, Entergy recorded a permanent tax reduction of approximately $24.7 million.
NOTE 4.
BORROWINGS
REVOLVING CREDIT FACILITIES, LINES OF CREDIT, AND SHORT-TERM
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in
June 2026. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the
total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn
commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending
on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended
December 31, 2021 was 1.60% on the drawn portion of the facility. Following is a summary of the borrowings
outstanding and capacity available under the facility as of December 31, 2021.
Capacity
Borrowings
Letters of
Credit
Capacity
Available
$3,500
$165
$6
$3,329
(In Millions)
Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of
65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this
ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on
other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may
occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2
billion. As of December 31, 2021, Entergy Corporation had $1.201 billion of commercial paper outstanding. The
weighted-average interest rate for the year ended December 31, 2021 was 0.28%.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each
had credit facilities available as of December 31, 2021 as follows:
Company
Entergy Arkansas
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy Mississippi
Entergy Mississippi
Entergy New Orleans
Entergy Texas
Expiration
Date
April 2022
June 2026
June 2026
April 2022
April 2022
April 2022
June 2024
June 2026
Amount of
Facility
$25 million (b)
$150 million (c)
$350 million (c)
$10 million (d)
$35 million (d)
$37.5 million (d)
$25 million (c)
$150 million (c)
Interest
Rate
(a)
2.75%
1.23%
1.32%
1.60%
1.60%
1.60%
1.73%
1.60%
Amount Drawn
as of
December 31,
2021
—
—
$125 million
—
—
—
—
—
Letters of Credit
Outstanding as of
December 31, 2021
—
—
—
—
—
—
—
$1.3 million
(a)
The interest rate is the estimated interest rate as of December 31, 2021 that would have been applied to
outstanding borrowings under the facility.
126 Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b)
(c)
(d)
Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts
receivable at Entergy Arkansas’s option.
The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the
borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy
Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its
accounts receivable at Entergy Mississippi’s option.
The commitment fees on the credit facilities range from 0.075% to 0.375% of the undrawn commitment amount for
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas, and of the entire facility amount for
Entergy New Orleans. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt
ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this
covenant.
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy
Texas each entered into an uncommitted standby letter of credit facility 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, 2021:
Company
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
Amount of
Uncommitted
Facility
$25 million
$125 million
$65 million
$15 million
$80 million
Letter of
Credit Fee
0.78%
0.78%
0.78%
1.00%
0.875%
Letters of Credit
Issued as of
December 31, 2021
(a) (b)
$8.5 million
$15.0 million
$9.3 million
$1.0 million
$79.6 million
(a)
(b)
As of December 31, 2021, letters of credit posted with MISO covered financial transmission right exposure
of $0.2 million for Entergy Mississippi and $0.1 million for Entergy Texas. See Note 15 to the financial
statements for discussion of financial transmission rights.
As of December 31, 2021, in addition to the $9.3 million MISO letter of credit, Entergy Mississippi has
$1 million of non-MISO letters of credit outstanding under this facility.
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.
The current FERC-authorized short-term borrowing limits for Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are effective through October 2023. In
addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money
pool and from other internal short-term borrowing arrangements. The money pool and the other internal borrowing
arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on
external short-term borrowings. Borrowings from internal and external short-term borrowings combined may not
exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and
the outstanding short-term borrowings as of December 31, 2021 (aggregating both internal and external short-term
borrowings) for the Registrant Subsidiaries:
127 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
System Energy
Authorized
Borrowings
(In Millions)
$250
$450
$175
$150
$200
$200
$140
$—
$—
$—
$80
$—
Vermont Yankee Credit Facility (Entergy Corporation)
In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was
assumed by Entergy Assets Management Operations, LLC (formerly Vermont Yankee Asset Retirement, LLC),
Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The
credit facility has a borrowing capacity of $139 million and expires in December 2022. The commitment fee is
currently 0.20% of the undrawn commitment amount. As of December 31, 2021, $139 million in cash borrowings
were outstanding under the credit facility. The weighted average interest rate for the year ended December 31, 2021
was 1.67% on the drawn portion of the facility. See Note 14 to the financial statements for discussion of the
transfer of Entergy Nuclear Vermont Yankee to NorthStar.
Variable 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 interest entities (VIE). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company
VIEs have credit facilities and three of the four VIEs also issue commercial paper, details of which follow as of
December 31, 2021:
Company
Expiration Date
Amount
of
Facility
Weighted
Average Interest
Rate on
Borrowings (a)
(Dollars in Millions)
Amount
Outstanding as of
December 31, 2021
Entergy Arkansas VIE
Entergy Louisiana River Bend VIE
Entergy Louisiana Waterford VIE
System Energy VIE
June 2024
June 2024
June 2024
June 2024
$80
$105
$105
$120
1.17%
1.15%
1.16%
1.16%
$4.8
$42.7
$39.6
$36.1
(a)
Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel
company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The
nuclear fuel company variable interest entity for Entergy Louisiana River Bend does not issue commercial
paper, but borrows directly on its bank credit facility.
The commitment fees on the credit facilities are 0.100% of the undrawn commitment amount for the
Entergy Arkansas, Entergy Louisiana, and System Energy VIEs. Each credit facility requires the respective lessee
of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to
maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization. Each lessee is in compliance
with this covenant.
128
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entities had notes payable that are included in debt on the
respective balance sheets as of December 31, 2021 as follows:
Company
Description
Entergy Arkansas VIE
Entergy Arkansas VIE
Entergy Louisiana River Bend VIE
Entergy Louisiana Waterford VIE
System Energy VIE
3.17% Series M due December 2023
1.84% Series N due July 2026
2.51% Series V due June 2027
3.22% Series I due December 2023
2.05% Series K due September 2027
Amount
$40 million
$90 million
$70 million
$20 million
$90 million
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’
credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
Entergy Arkansas, Entergy Louisiana, and System Energy each has obtained financing authorization from
the FERC that extend through October 2023 for issuances by their nuclear fuel company variable interest entities.
129 Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. LONG - TERM DEBT
Long-term debt for Entergy Corporation and subsidiaries as of December 31, 2021 and 2020 consisted of:
Type of Debt and Maturity
Mortgage Bonds
2021-2025
2026-2030
2031-2041
2044-2066
Governmental Bonds (a)
2022-2044
Securitization Bonds
2022-2027
Variable Interest Entities Notes Payable
(Note 4)
2021-2027
Entergy Corporation Notes
due July 2022
due September 2025
due September 2026
due June 2028
due June 2030
due June 2031
due June 2050
Entergy New Orleans Unsecured Term Loan
due May 2022
Entergy New Orleans Unsecured Term Loan
due May 2023
5 Year Credit Facility (Note 4)
Entergy Louisiana Credit Facility (Note 4)
Vermont Yankee Credit Facility (Note 4)
Entergy Arkansas VIE Credit Facility (Note 4)
Entergy Louisiana River Bend VIE Credit
Facility (Note 4)
Entergy Louisiana Waterford VIE Credit
Facility (Note 4)
System Energy VIE Credit Facility (Note 4)
Long-term DOE Obligation (b)
Grand Gulf Sale-Leaseback Obligation
Unamortized Premium and Discount - Net
Unamortized Debt Issuance Costs
Other
Total Long-Term Debt
Less Amount Due Within One Year
Long-Term Debt Excluding Amount Due
Within One Year
Fair Value of Long-Term Debt
Weighted
Average
Interest
Rate
December
31, 2021
Interest Rate Ranges at
December 31,
Outstanding at
December 31,
2021
2020
2021
2020
(In Thousands)
2.70%
3.13%
3.31%
4.06%
0.62% - 5.59% 0.62% - 5.59% $5,228,000
3,965,000
1.50%- 4.44%
1.6% - 4.44%
3,612,000
1.75% - 4.52% 1.75% - 4.52%
6,980,000
2.65% - 5.5%
2.65% - 5.5%
$4,978,000
3,835,000
2,252,000
6,380,000
2.43%
2.0% - 2.5%
2.375% - 3.5%
332,680
377,680
3.31%
2.67% - 4.38% 2.04% - 5.93%
85,234
177,522
2.21%
1.84% - 3.22% 2.05% - 3.92%
310,000
450,000
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
—
n/a
4.00%
0.9%
2.95%
1.9%
2.80%
2.40%
3.75%
—
2.50%
1.60%
1.32%
1.67%
1.17%
1.15%
1.16%
1.16%
—
—
4.00%
0.9%
2.95%
—
2.80%
—
3.75%
3.00%
—
2.35%
—
2.46%
1.94%
1.95%
1.72%
1.63%
—
—
650,000
800,000
750,000
650,000
600,000
650,000
600,000
650,000
800,000
750,000
—
600,000
—
600,000
—
70,000
70,000
165,000
125,000
139,000
4,800
—
165,000
—
139,000
12,200
42,700
18,900
39,600
36,100
192,115
34,321
(8,273)
(177,904)
5,528
25,880,901
1,039,329
39,300
—
192,018
34,336
3,665
(160,420)
5,575
22,369,776
1,164,015
$24,841,572
$27,061,171
$21,205,761
$24,813,818
(a)
Consists of pollution control revenue bonds and environmental revenue bonds, some of which are secured
by collateral mortgage bonds.
130
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b)
Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have
contracts with the DOE for spent nuclear fuel disposal service. The contracts include a one-time fee for
generation prior to April 7, 1983. Entergy Arkansas 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.
The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt
outstanding as of December 31, 2021, for the next five years are as follows:
Amount
(In Thousands)
$1,040,631
$2,460,563
$2,299,475
$1,379,140
$2,595,720
2022
2023
2024
2025
2026
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and
System Energy have obtained long-term financing authorizations from the FERC that extend through October
2023. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends
through December 2023. Entergy Arkansas has also obtained first mortgage bond/secured financing authorization
from the APSC that extends through December 2022.
Entergy Louisiana Debt Issuance
In December 2021, Entergy Louisiana entered into a term loan credit agreement providing a $1.2 billion
unsecured term loan due June 2023. The term loan bears interest at a variable interest rate based on an adjusted
term Secured Overnight Financing Rate plus the applicable margin. Entergy Louisiana received the funds in January
2022 and used the proceeds for general corporate purposes, including storm restoration costs related to Hurricane
Ida.
Securitization Bonds
Entergy Arkansas Securitization Bonds
In June 2010 the APSC issued a financing order authorizing the issuance of bonds to recover Entergy
Arkansas’s January 2009 ice storm damage restoration costs, including carrying costs of $11.5 million and $4.6
million of up-front financing costs. In August 2010, Entergy Arkansas Restoration Funding, LLC, a company
wholly-owned and consolidated by Entergy Arkansas, issued $124.1 million of storm cost recovery bonds, with a
coupon of 2.30%. Although the principal amount was not due until August 2021, Entergy Arkansas Restoration
Funding made principal payments on the bonds in the amount of $7.3 million in 2020, after which the bonds were
fully repaid. Entergy Arkansas Restoration Funding, LLC was then legally dissolved in January 2021.
Entergy Louisiana Securitization Bonds – Little Gypsy
In August 2011 the LPSC issued a financing order authorizing the issuance of bonds to recover Entergy
Louisiana’s investment recovery costs associated with the canceled Little Gypsy repowering project. In September
2011, Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by
Entergy Louisiana, issued $207.2 million of senior secured investment recovery bonds. The bonds had an interest
rate of 2.04%. Although the principal amount was not due until September 2023, Entergy Louisiana Investment
Recovery Funding made principal payments on the bonds in the amount of $11 million in 2021, after which the
bonds were fully repaid.
131
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans Securitization Bonds - Hurricane Isaac
In May 2015 the City Council issued a financing order authorizing the issuance of securitization bonds to
recover Entergy New Orleans’s Hurricane Isaac storm restoration costs of $31.8 million, including carrying costs,
the costs of funding and replenishing the storm recovery reserve in the amount of $63.9 million, and approximately
$3 million of up-front financing costs associated with the securitization. In July 2015, Entergy New Orleans Storm
Recovery Funding I, L.L.C., a company wholly owned and consolidated by Entergy New Orleans, issued $98.7
million of storm cost recovery bonds. The bonds have a coupon of 2.67%. Although the principal amount is not
due until June 2027, Entergy New Orleans Storm Recovery Funding expects to make principal payments on the
bonds over the next three years in the amounts of $12.3 million for 2022, $12.5 million for 2023, and $6.2 million
for 2024, after which the bonds will be fully repaid. 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 of Entergy New Orleans do not have recourse to the assets or revenues of Entergy New Orleans Storm
Recovery Funding, including the storm recovery property, and the creditors of Entergy New Orleans Storm
Recovery Funding do not have recourse to the assets or revenues of Entergy New Orleans. Entergy New Orleans
has no payment obligations to Entergy New Orleans Storm Recovery Funding except to remit storm recovery
charge collections.
Entergy Texas Securitization Bonds - Hurricane Rita
In April 2007 the PUCT issued a financing order authorizing the issuance of securitization bonds to recover
$353 million of Entergy Texas’s Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset
by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I,
LLC, a company that is now wholly-owned and consolidated by Entergy Texas, issued $329.5 million of senior
secured transition bonds (securitization bonds). Although the principal amount was not due until June 2022,
Entergy Gulf States Reconstruction Funding made principal payments on the bonds in the amount of $17.5 million
in 2021, after which the bonds were fully repaid.
Entergy Texas Securitization Bonds - Hurricane Ike and Hurricane Gustav
In September 2009 the PUCT authorized the issuance of securitization bonds to recover $566.4 million of
Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs, plus carrying costs and transaction costs,
offset by insurance proceeds. In November 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas
Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior
secured transition bonds (securitization bonds). Although the principal amount is not due until November 2023,
Entergy Texas Restoration Funding expects to make principal payments on the bonds in the amount of $54.3
million for 2022, after which the bonds will be fully repaid.
With the proceeds, Entergy Texas Restoration Funding purchased from Entergy Texas the transition
property, which is the right to recover from customers through a transition charge amounts sufficient to service the
securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas
balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas
Restoration Funding, including the transition property, and the creditors of Entergy Texas Restoration Funding do
not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy
Texas Restoration Funding except to remit transition charge collections.
132 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Grand Gulf Sale-Leaseback Transactions
In 1988, in two separate but substantially identical transactions, System Energy sold and leased back
undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The initial term of the leases
expired in July 2015. System Energy renewed the leases for fair market value with renewal terms expiring in July
2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in
Grand Gulf or renew the leases at fair market value. In the event that System Energy does not renew or purchase
the interests, System Energy would surrender such interests and their 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. As such, it has recognized debt for the lease obligation and retained the portion of the plant subject to
the sale-leaseback on its balance sheet. For financial reporting purposes, System Energy has recognized interest
expense on the debt balance and depreciation on the applicable plant balance. The lease payments are recognized as
principal and interest payments on the debt balance. However, operating revenues include the recovery of the lease
payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent
with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset
the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation
and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net
balance for the regulatory asset at the end of the lease term. The amount was a net regulatory liability of $55.6
million as of December 31, 2021 and 2020.
As of December 31, 2021, System Energy, in connection with the Grand Gulf sale and leaseback
transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the
effect of the December 2013 renewal:
2022
2023
2024
2025
2026
Years thereafter
Total
Less: Amount representing interest
Present value of net minimum lease payments
Amount
(In Thousands)
$17,188
17,188
17,188
17,188
17,188
171,875
257,815
223,494
$34,321
133
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 6. PREFERRED EQUITY AND NONCONTROLLING INTEREST
In May 2021, Entergy’s certificate of incorporation was amended and restated to provide authority to issue
up to 1,000,000 shares of preferred stock, no par value per share, and to decrease from 500,000,000 to 499,000,000
the number of shares of common stock, par value of $0.01 per share, authorized for issuance. As of December 31,
2021, no preferred stock has been issued.
The number of shares and units authorized and outstanding and dollar value of preferred stock, preferred
membership interests, and noncontrolling interest for Entergy Corporation subsidiaries as of December 31, 2021 and
2020 are presented below.
Entergy Corporation
Utility:
Preferred Stock or Preferred
Membership Interests without
sinking fund and Noncontrolling
Entergy Utility Holding Company,
LLC, 7.5% Series (a)
Entergy Utility Holding Company,
LLC, 6.25% Series (b)
Entergy Utility Holding Company,
LLC, 6.75% Series (c)
Entergy Texas, 5.375% Series (d)
Entergy Texas, 5.10% Series (e)
Entergy Arkansas Noncontrolling
Interest (f)
Total Utility Preferred Stock or
Preferred Membership Interests
without sinking fund and
Noncontrolling Interest
Entergy Wholesale Commodities:
Preferred Stock without sinking
fund:
Entergy Finance Holding, Inc. 8.75%
(g)
Total Subsidiaries’ Preferred Stock
or Preferred Membership Interests
without sinking fund and
Noncontrolling Interest
Shares/Units
Authorized
Shares/Units
Outstanding
2021
2020
2021
2020
2021
2020
(Dollars in Thousands)
110,000
110,000
110,000
110,000
$107,425
$107,425
15,000
15,000
15,000
15,000
14,366
14,366
75,000
1,400,000
150,000
75,000
1,400,000
—
75,000
1,400,000
—
75,000
1,400,000
—
73,370
35,000
—
73,370
35,000
—
—
—
—
—
33,110
—
1,750,000
1,600,000
1,600,000
1,600,000
263,271
230,161
250,000
250,000
250,000
250,000
24,249
24,249
2,000,000
1,850,000
1,850,000
1,850,000
$287,520
$254,410
(a)
(b)
(c)
In October 2015, Entergy Utility Holding Company, LLC issued 110,000 units of $1,000 liquidation value
7.5% Series A Preferred Membership Interests, all of which are outstanding as of December 31, 2021. The
distributions are cumulative and payable 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 stock issuance costs.
In November 2017, Entergy Utility Holding Company, LLC issued 15,000 units of $1,000 liquidation value
6.25% Series B Preferred Membership Interests, all of which are outstanding as of December 31, 2021. The
distributions are cumulative and payable quarterly. These units are redeemable on or after February 28,
2038, at Entergy Utility Holding Company, LLC’s option, at the fixed redemption price of $1,000 per unit.
Dollar amount outstanding is net of $634 thousand of preferred stock issuance costs.
In November 2018, Entergy Utility Holding Company, LLC issued 75,000 units of $1,000 liquidation value
6.75% Series C Preferred Membership Interests, all of which are outstanding as of December 31, 2021. The
distributions are cumulative and payable quarterly. These units are redeemable on or after February 28,
134
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(d)
(e)
(f)
(g)
2039, at Entergy Utility Holding Company, LLC’s option, at the fixed redemption price of $1,000 per unit.
Dollar amount outstanding is net of $1,630 thousand of preferred stock issuance costs.
In September 2019, Entergy Texas issued $35 million of 5.375% Series A Preferred Stock, a total of
1,400,000 shares with a liquidation value of $25 per share, all of which are outstanding as of December 31,
2021. The dividends are cumulative and payable quarterly. The preferred stock is redeemable on or after
October 15, 2024 at Entergy Texas’s option, at a fixed redemption price of $25 per share.
In November 2021, Entergy Texas issued $3.75 million of 5.10% Series B Preferred Stock, a total of
150,000 shares with a liquidation value of $25 per share, all of which are outstanding and held by Entergy
Corporation as of December 31, 2021. The dividends are cumulative and payable quarterly. The preferred
stock is redeemable at Entergy Texas’s option at a fixed redemption price of $25.50 per share prior to
November 1, 2026 and at a fixed redemption price of $25 per share on or after November 1, 2026.
Currently, all shares are held by Entergy Corporation.
In December 2021, AR Searcy Partnership, LLC, a tax equity partnership between Entergy Arkansas and a
tax equity investor, acquired the Searcy Solar facility. Entergy Arkansas, as the managing member,
consolidates AR Searcy Partnership, LLC and the tax equity investor’s interest is shown as noncontrolling
interest in the financial statements. Entergy Arkansas uses the HLBV method of accounting for income or
loss allocation to the tax equity investor’s noncontrolling interest. See Note 1 to the financial statements for
further discussion on the presentation of the tax equity investor’s noncontrolling interest and the HLBV
method of accounting used to account for the investment in AR Searcy Partnership, LLC.
In December 2013, Entergy Finance Holding, Inc. issued 250,000 shares of $100 par value 8.75% Series
Preferred Stock, all of which are outstanding as of December 31, 2021. The dividends are cumulative and
payable quarterly. The preferred stock is redeemable on or after December 16, 2023, at Entergy Finance
Holding, Inc.’s option, at the fixed redemption price of $100 per share. Dollar amount outstanding is net of
$751 thousand of preferred stock issuance costs.
Dividends and distributions paid on all of Entergy Corporation’s subsidiaries’ preferred stock and
membership interests series may be eligible for the dividends received deduction.
Presentation of Preferred Stock without Sinking Fund
Accounting standards regarding noncontrolling interests and the classification and measurement of
redeemable securities require the classification of preferred securities between liabilities and shareholders’ equity on
the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board
of directors in certain circumstances. These rights would have the effect of giving the holders the ability to
potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered
remote. The outstanding preferred stock of Entergy Texas has protective rights with respect to unpaid dividends but
provides for the election of board members that would not constitute a majority of the board, and the preferred stock
of Entergy Texas is therefore classified as a component of equity.
The outstanding preferred securities of Entergy Utility Holding Company (a Utility subsidiary) and Entergy
Finance Holding (an Entergy Wholesale Commodities subsidiary), whose preferred holders have protective rights,
are presented between liabilities and equity on Entergy’s consolidated balance sheets. The preferred dividends or
distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.
135 Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 7. COMMON EQUITY
Common Stock
Common stock and treasury stock shares activity for Entergy for 2021, 2020, and 2019 is as follows:
2021
2020
2019
Common
Shares
Issued
Treasury
Shares
Common
Shares
Issued
Treasury
Shares
Common
Shares
Issued
Treasury
Shares
270,035,180
69,790,346
270,035,180
70,886,400
261,587,009
72,530,866
Beginning Balance,
January 1
Issuances:
Equity Distribution
Program
Equity forwards settled
Employee Stock-Based
Compensation Plans
Directors’ Plan
Ending Balance,
December 31
1,930,330
—
—
—
—
—
—
—
—
8,448,171
—
—
—
—
(461,903)
(16,117)
—
—
(1,076,511)
(19,543)
—
—
(1,624,358)
(20,108)
271,965,510
69,312,326
270,035,180
69,790,346
270,035,180
70,886,400
Entergy Corporation reissues treasury shares to meet the requirements of the Stock Plan for Outside
Directors (Directors’ Plan), the three equity plans of Entergy Corporation and Subsidiaries, and certain other stock
benefit plans. The Directors’ Plan awards to non-employee directors a portion of their compensation in the form of
a fixed dollar value of shares of Entergy Corporation common stock.
In October 2010 the Board granted authority for a $500 million share repurchase program. As of
December 31, 2021, $350 million of authority remains under the $500 million share repurchase program.
Dividends declared per common share were $3.86 in 2021, $3.74 in 2020, and $3.66 in 2019.
Equity Distribution Program
In January 2021, Entergy entered into an equity distribution sales agreement with several counterparties
establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to
time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of
Entergy common stock, Entergy may enter into forward sale agreements for the sale of its common stock. The
aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement
may not exceed an aggregate gross sales price of $1 billion.
During the year ended December 31, 2021, Entergy Corporation issued 1,930,330 shares of common stock
under the at the market equity distribution program. The net sales proceeds from these shares totaled
$200.8 million, which includes the gross sales price of $204.2 million received by Entergy Corporation less
$1.4 million of general issuance costs and $2.0 million of aggregate compensation to the agents with respect to such
sales.
In June, August, and October 2021, Entergy entered into forward sale agreements for 416,853 shares,
1,692,555 shares, and 250,743 shares of common stock, respectively. No amounts have or will be recorded on
Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreements
occur. The forward sale agreements require Entergy to, at its election prior to September 30, 2022, either (i)
physically settle the transactions by issuing the total of 416,853 shares, 1,692,555 shares, and 250,743 shares,
136
Entergy Corporation and Subsidiaries
Notes to Financial Statements
respectively, of its common stock to the forward counterparties in exchange for net proceeds at the then-applicable
forward sale price specified by the agreements (initially approximately $106.87, $111.16, and $100.35 per share,
respectively) or (ii) net settle the transactions in whole or in part through the delivery or receipt of cash or shares.
The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will
decrease by other fixed amounts specified in the agreements. In connection with the forward sale agreements, the
forward seller, or its affiliates, borrowed from third parties and sold 416,853 shares, 1,692,555 shares, and 250,743
shares, respectively, of Entergy Corporation’s common stock. The gross sales price of these shares totaled
$45 million, $190.1 million, and $25.4 million, respectively. In connection with the sales of these shares, Entergy
paid to the agents fees of $0.5 million, $1.9 million, and $0.3 million, respectively, which have not been deducted
from the gross sales prices. Entergy did not receive any proceeds from such sales of borrowed shares.
Until settlement of the forward sale agreements, earnings per share dilution resulting from the agreements,
if any, will be determined under the treasury stock method. Share dilution occurs when the average market price of
Entergy’s common stock is higher than the average forward sales price. At December 31, 2021, 1,158,917 shares
under the forward sale agreements were not included in the calculation of diluted earnings per share because their
effect would have been antidilutive.
Equity Forward Sale Agreements
In June 2018, Entergy marketed an equity offering of 15.3 million shares of common stock. In lieu of
issuing equity at the time of the offering, Entergy entered into forward sale agreements with various investment
banks. The equity forwards required Entergy to, at its election prior to June 7, 2019, either (i) physically settle the
transactions by issuing the total of 15.3 million shares of its common stock 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. The forward sale
price was subject to adjustment on a daily basis based on a floating interest rate factor and decreased by other fixed
amounts specified in the agreements.
In December 2018, Entergy physically settled a portion of its obligations under the forward sale agreements
by delivering 6,834,221 shares of common stock in exchange for cash proceeds of $500 million. The forward sale
price used to determine the cash proceeds received by Entergy was calculated based on the initial forward sale price
of $74.45 per share as adjusted in accordance with the forward sale agreements. Entergy incurred approximately
$728 thousand of common stock issuance costs with the settlement.
In May 2019, Entergy physically settled its remaining obligations under the forward sale agreements by
delivering 8,448,171 shares of common stock in exchange for cash proceeds of $608 million. The forward sale
price used to determine the cash proceeds received by Entergy was calculated based on the initial forward sale price
of $74.45 per share as adjusted in accordance with the forward sale agreements. Entergy incurred approximately $7
thousand of common stock issuance costs with the 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.
Retained Earnings and Dividends
Entergy implemented ASU No. 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities” effective January 1, 2019. The ASU makes a number of amendments to hedge
accounting, most significantly changing the recognition and presentation of highly effective hedges. Entergy
implemented this standard using a modified retrospective method and 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.
137 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy implemented ASU 2017-08 “Receivables (Topic 310): Nonrefundable Fees and Other Costs”
effective January 1, 2019. The ASU amends the amortization period for certain purchased callable debt securities
held at a premium to the earliest call date. Entergy implemented this standard using the modified retrospective
approach and recorded an adjustment decreasing retained earnings and decreasing accumulated other
comprehensive loss by approximately $1 million as of January 1, 2019 for the cumulative effect of the amended
amortization period.
Entergy Corporation received dividend payments and distributions from subsidiaries totaling $136 million
in 2021, $113 million in 2020, and $124 million in 2019.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheet of
Entergy. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for
the year ended December 31, 2021 by component:
Cash flow
hedges
net
unrealized
gain (loss)
Pension
and
other
postretirement
liabilities
Net
unrealized
investment
gain (loss)
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
$28,719
($534,576)
$56,650
($449,207)
1,439
130,371
(48,050)
83,760
(31,193)
65,558
(1,446)
32,919
(29,754)
($1,035)
195,929
($338,647)
(49,496)
$7,154
116,679
($332,528)
Beginning balance, January 1, 2021
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other comprehensive
income (loss)
Net other comprehensive income
(loss) for the period
Ending balance, December 31, 2021
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the
year ended December 31, 2020 by component:
Cash flow
hedges
net
unrealized
gain (loss)
Pension
and
other
postretirement
liabilities
Net
unrealized
investment
gain (loss)
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)
$84,206
($557,072)
$25,946
($446,920)
60,928
(49,113)
41,354
53,169
(116,415)
71,609
(10,650)
(55,456)
Beginning balance, January 1, 2020
Other comprehensive income (loss)
before reclassifications
Amounts reclassified from
accumulated other comprehensive
income (loss)
Net other comprehensive income
(loss) for the period
Ending balance, December 31, 2020 $28,719
(55,487)
22,496
($534,576)
30,704
$56,650
(2,287)
($449,207)
138
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the
years ended December 31, 2021 and 2020 are as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Cash flow hedges net unrealized gain (loss)
Power contracts
Interest rate swaps
Total realized gain (loss) on cash flow hedges
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
Pension and other postretirement liabilities
Amortization of prior-service costs
Amortization of loss
Settlement loss
Total amortization and settlement loss
Income taxes
Total amortization and settlement loss (net of tax)
Net unrealized investment gain (loss)
Realized gain (loss)
Income taxes
Total realized investment gain (loss) (net of tax)
Amounts reclassified
from AOCI
2021
2020
(In Thousands)
Income Statement
Location
$39,679
(194)
39,485
(8,292)
$31,193
$20,947
(88,838)
(16,379)
(84,270)
18,712
($65,558)
$147,554
Competitive business
operating revenues
(194) Miscellaneous - net
147,360
(30,945) Income taxes
$116,415
(a)
$20,769
(110,185) (a)
(243) (a)
(89,659)
18,050
($71,609)
Income taxes
$2,289
(843)
$1,446
$16,851
Interest and investment
income
(6,201) Income taxes
$10,650
Total reclassifications for the period (net of tax)
($32,919)
$55,456
(a)
These accumulated other comprehensive income (loss) components are included in the computation of net
periodic pension and other postretirement cost. See Note 11 to the financial statements for additional
details.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings
before various courts, regulatory authorities, and governmental agencies in the ordinary course of business. While
management is unable to predict with certainty the outcome of such proceedings, management does not believe that
the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash
flows, or financial condition. Entergy discusses regulatory proceedings in Note 2 to the financial statements and
discusses tax proceedings in Note 3 to the financial statements.
Vidalia Purchased Power Agreement
Entergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a
hydroelectric facility known as the Vidalia project. Entergy Louisiana made payments under the contract of
approximately $128.5 million in 2021, $132.7 million in 2020, and $135.5 million in 2019. If the maximum
percentage (94%) of the energy is made available to Entergy Louisiana, current production projections would
139
Entergy Corporation and Subsidiaries
Notes to Financial Statements
require estimated payments of approximately $137 million in 2022, and a total of $1.23 billion for the years 2023
through 2031. Entergy Louisiana currently recovers the costs of the purchased energy through its fuel adjustment
clause.
In an LPSC-approved settlement related to tax benefits from the tax treatment of the Vidalia contract,
Entergy Louisiana agreed to credit rates by $11 million each year for up to 10 years, beginning in October 2002. In
October 2011 the LPSC approved a settlement under which Entergy Louisiana agreed to provide credits to
customers by crediting billings an additional $20.235 million per year for 15 years beginning January
2012. Entergy Louisiana recorded a regulatory charge and a corresponding regulatory liability to reflect this
obligation. The settlement agreement allowed for an adjustment to the credits if, among other things, there was a
change in the applicable federal or state income tax rate. As a result of the enactment of the Tax Cuts and Jobs Act,
in December 2017, and the lowering 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 Jobs Act are discussed further in Note 3
to the financial statements. Pursuant to legislation enacted in 2021 and approved by Louisiana citizens by
amendment to the state constitution, beginning January 1, 2022, federal income taxes paid will no longer be
deductible for state income tax purposes, and the top Louisiana corporate income tax rate will be reduced from 8%
to 7.5%. As a result of this change in Louisiana tax law, deferred taxes must be adjusted to reflect the applicable
federal and state rates which has a corresponding effect on the Vidalia regulatory liability. Such effect is not
expected to be significant.
ANO Damage, Outage, and NRC Reviews
In March 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-
lifting apparatus collapsed while moving the generator stator out of the turbine building. The collapse resulted in
the death of an ironworker and injuries to 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
pursued its options for recovering damages that resulted from the stator drop, including its insurance coverage and
legal action. Entergy Arkansas collected $50 million in 2014 from Nuclear Electric Insurance Limited (NEIL), a
mutual insurance company that provides property damage coverage to the members’ nuclear generating plants.
Entergy Arkansas also collected 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 incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-
planned duration of the refueling outage. In February 2014 the APSC authorized Entergy Arkansas to retain the
$65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information
regarding various claims associated with the ANO stator incident is available.
In March 2015, after several NRC inspections and regulatory conferences, arising from the stator incident,
the NRC placed ANO 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 in early 2016 in order to address the issues required
to move ANO back to “licensee response” or Column 1 of the NRC’s Reactor Oversight 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 to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. 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.
In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In that
proceeding, the APSC approved a settlement agreement agreed upon by the parties, including a provision that
140 Entergy Corporation and Subsidiaries
Notes to Financial Statements
requires Entergy Arkansas to initiate a regulatory 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 to certain timelines and conditions set forth
in the settlement agreement.
In October 2021 the APSC approved Entergy Arkansas’s second request to extend the deadline for initiating
a regulatory proceeding for the purpose of recovering funds related to the stator incident for twelve additional
months, or until December 1, 2022.
Spent Nuclear Fuel Litigation
Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage
facilities for, and to dispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic
nuclear power reactors. Entergy’s nuclear owner/licensee subsidiaries have been charged fees for the estimated
future disposal costs of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982. The affected
Entergy companies entered into contracts with the DOE, whereby the DOE is to 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 generation prior to that
date. Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be proper
components of nuclear fuel expense. Provisions to recover such costs have been or will be made in applications to
regulatory authorities for the Utility plants. Following the defunding of the Yucca Mountain spent fuel repository
program, the National Association of Regulatory Utility Commissioners and others sued the government seeking
cessation of collection of the one mill per net kWh generated and sold after April 7, 1983 fee. In November 2013
the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset the fee to zero until the
DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January
2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C.
Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014.
Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy
Act of 1982 and has breached its spent fuel disposal contracts. As a result of the DOE’s failure to begin disposal of
spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts,
Entergy’s nuclear owner/licensee subsidiaries have incurred and will continue to incur damages. Beginning in
November 2003 these subsidiaries have pursued litigation to recover the damages caused by the DOE’s delay in
performance. Following are details of final judgments recorded by Entergy in 2019, 2020, and 2021 related to
Entergy’s nuclear owner licensee subsidiaries’ litigation with the DOE.
In August 2019 the U.S. Court of Federal Claims issued a final judgment in the amount of $19 million in
favor of Entergy Louisiana against the DOE in the second round River Bend damages case. Entergy Louisiana
received payment from the U.S. Treasury in September 2019. The effects in 2019 of recording the judgment were
reductions to plant, nuclear fuel expense, and other operation and maintenance expense. The River Bend damages
awarded included $12 million related to costs previously recorded as nuclear fuel expense, $5 million related to
costs previously recorded as other operation and maintenance expense, and $2 million in costs previously recorded
as plant.
In December 2019 the DOE submitted an offer of judgment to resolve claims in the third round ANO
damages case. The $80 million offer was accepted by Entergy Arkansas, and the U.S. Court of Federal Claims
issued a judgment in that amount in favor of Entergy Arkansas and against the DOE. Entergy Arkansas received
payment from the U.S. Treasury in January 2020. The effects in 2019 of recording the judgment were reductions to
plant, nuclear fuel expense, other operation and maintenance expense, depreciation expense, and taxes other than
income taxes. The ANO damages awarded included $55 million in costs previously recorded as plant, $12 million
related to costs previously recorded as nuclear fuel expense, $12 million related to costs previously recorded as
other operation and maintenance expense, and $1 million related to costs previously recorded as taxes other than
141 Entergy Corporation and Subsidiaries
Notes to Financial Statements
income taxes. Of the $55 million, Entergy Arkansas, recorded $5 million as a reduction to previously-recorded
depreciation expense.
In December 2019 the Entergy FitzPatrick Properties (formerly Entergy Nuclear FitzPatrick) and the DOE
entered into a settlement agreement and the U.S. Court of Federal Claims issued a judgment in the amount of $7
million in favor of Entergy FitzPatrick Properties against the DOE in the second round FitzPatrick damages case.
Entergy received payment from the U.S. Treasury in January 2020. Substantially all of the FitzPatrick damages
awarded relate to costs previously expensed as asset write-offs, impairments, and related charges, and in December
2019 Entergy recorded $7 million as a reduction to asset write-offs, impairments, and related charges.
In April 2020 the U.S. Court of Federal Claims issued a final judgment in the amount of $33 million in
favor of Entergy Louisiana against the DOE in the second round Waterford 3 damages case. Entergy Louisiana
received payment from the U.S. Treasury in June 2020. The effects of recording the judgment were reductions to
plant, nuclear fuel expense, and other operation and maintenance expense. The Waterford 3 damages awarded
included $20 million related to costs previously recorded as nuclear fuel expense, $8 million related to costs
previously recorded as other operation and maintenance expenses, and $5 million in costs previously recorded as
plant.
In October 2020 the U.S. Court of Federal Claims issued a final judgment in the amount of $40.5 million in
favor of System Energy and against the DOE in the third round Grand Gulf damages case. System Energy received
payment from the U.S. Treasury in December 2020. The effects of recording the judgment were reductions to plant,
nuclear fuel expense, and other operation and maintenance expense. The amounts of Grand Gulf damages awarded
related to System Energy’s 90% ownership of Grand Gulf included $5 million related to costs previously recorded
as plant, $21 million related to costs previously recorded as nuclear fuel expense, and $10 million related to costs
previously recorded as other operation and maintenance expense.
In January 2021 the U.S. Court of Federal Clams issued a final judgment in the amount of $23 million in
favor of Entergy Nuclear Palisades and against the DOE in the second round Palisades damages case. Entergy
received payment from the U.S. Treasury in February 2021. The effects of recording the judgment were reductions
to plant, other operation and maintenance expense, and taxes other than income taxes. The Palisades damages
awarded included $16 million related to costs previously recorded as plant, and $7 million related to costs
previously recorded as other operation and maintenance expenses. Of the $16 million previously capitalized,
Entergy recorded $9 million as a reduction to previously-recorded depreciation expense.
In August 2021 the U.S. Court of Federal Claims issued a final judgment in the amount of $37.6 million in
favor of Holtec Pilgrim, LLC against the DOE in the third round Pilgrim damages case. Holtec Pilgrim, LLC
received the payment from the U.S. Treasury in September 2021. The judgment proceeds were subsequently
transferred to Entergy pursuant to the terms of the Pilgrim sale. The receipt of the proceeds was recorded as a
deferred credit because Entergy has an indemnity obligation to Holtec related to pre-sale DOE litigation involving
Pilgrim that remains outstanding.
In August 2021 the U.S. Court of Federal Claims issued a final judgment in the amount of $21 million in
favor of Entergy Louisiana against the DOE in the third round River Bend damages case. Entergy Louisiana
received the payment from the U.S. Treasury in September 2021. The effects of recording the judgment were
reductions to plant, nuclear fuel expense, and other operation and maintenance expense. The River Bend damages
awarded included $9 million in costs previously capitalized, $8 million related to costs previously recorded as
nuclear fuel expense, and $4 million related to costs previously recorded as other operation and maintenance
expense.
In October 2021 the U.S. Court of Federal Claims issued a final judgment in the amount of $83 million in
favor of Entergy Nuclear Indian Point 2, LLC and Entergy Nuclear Indian Point 3, LLC against the DOE in the
Indian Point Unit 2 third round and Unit 3 second round combined damages case. Entergy received payment from
142 Entergy Corporation and Subsidiaries
Notes to Financial Statements
the U. S. Treasury in January 2022. The effect of recording the judgment was a reduction to asset write-offs,
impairments, and related charges. The damages awarded included $32 million related to costs previously recorded
as plant, $47 million related to costs previously recorded as other operation and maintenance expenses, and
$4 million related to costs previously recorded as taxes other than income taxes.
Management cannot predict the timing or amount of any potential recoveries on other claims filed by
Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of
Federal Claims damage awards.
Nuclear Insurance
Third Party Liability Insurance
The Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary
insurance pool that provides insurance coverage for the public in the event of a nuclear power plant accident. The
costs of this insurance are borne by the nuclear 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 protection must consist of two layers of
coverage:
1. The primary level is private insurance underwritten by American Nuclear Insurers (ANI) and provides
public liability insurance coverage of $450 million for each operating reactor. If this amount is not
sufficient to cover claims arising from an accident, the second level, Secondary Financial Protection,
applies.
2. Secondary Financial Protection: Currently, 95 nuclear reactors participate in the Secondary Financial
Protection program, which provides approximately $13 billion in secondary layer insurance coverage to
compensate the public in the event of a nuclear power reactor accident. The Price-Anderson Act provides
that all potential liability for a nuclear accident is limited to the amounts of insurance coverage available
under the primary and secondary layers.
Within the Secondary Financial Protection program, each nuclear reactor has a contingent obligation to pay
a retrospective premium, equal to its proportionate share of the loss in excess of the primary level,
regardless of proximity to the incident or fault, up to a maximum of approximately $137.6 million per
reactor per incident (Entergy’s maximum total contingent obligation per incident is $826 million following
the recent sale of the Indian Point Energy Center in May 2021). This retrospective premium is assessable at
approximately $21 million per year per incident per nuclear power reactor.
3. Total insurance coverage available is approximately $13.5 billion, among the primary ANI coverage and the
Secondary Financial Protection program, to respond to a nuclear power plant accident that causes third-
party damages (e.g. off-site property and environmental damage, off-site bodily injury and on-site third-
party bodily injury (i.e. contractors)). These coverages also respond to an accident caused by terrorism.
The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for
up to $100 billion in coverage in excess of existing coverage for a terrorist event. Under current law, the
Terrorism Risk Insurance Act extends through 2027.
The shutdown Big Rock Point facility maintains its site-specific statutory nuclear liability insurance requirement
limit of $44.4 million, as designated by the NRC.
Entergy Arkansas and Entergy Louisiana each have two licensed reactors. System Energy has one licensed
reactor (10% of Grand Gulf is owned by a non-affiliated company (Cooperative Energy) that would share on a pro-
rata basis in any retrospective premium assessment to System Energy under the Price-Anderson Act). The Entergy
143 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Wholesale Commodities segment includes the ownership, operation, and decommissioning of one remaining
nuclear power reactor at Palisades and the ownership of the shutdown Big Rock Point facility. The Indian Point
Energy Center was sold to Holtec in late May 2021, following the final shutdown of Indian Point Unit 2 and Indian
Point Unit 3 in April 2020 and 2021, respectively. Palisades is scheduled for shutdown in May 2022, with sale of
Palisades and Big Rock to follow soon thereafter. The Entergy Wholesale Commodities segment previously
included three nuclear power reactors that were sold (FitzPatrick sold in March 2017, Vermont Yankee sold in
January 2019, and Pilgrim sold in August 2019) in addition to the recently sold Indian Point Energy Center.
Property Insurance
Entergy’s nuclear owner/licensee subsidiaries are members of NEIL, a mutual insurance company that
provides property damage coverage, including decontamination and reactor stabilization, to the members’ nuclear
generating plants. The property damage insurance limits procured by Entergy for its Utility plants and Entergy
Wholesale Commodity plants are in compliance with the financial 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 billion per occurrence at each plant with an additional $100 million per nuclear property occurrence
that is shared among the plants. The nuclear property deductible is $10 million per site at the Utility plants, except
for earth movement, flood, and windstorm. Property damage from earth movement is excluded from the first $500
million in coverage for all Utility plants. Property damage from flood is excluded from the first $500 million in
coverage at ANO 1 and 2 and Grand Gulf. Property damage from flood for Waterford 3 and River Bend includes a
deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a
maximum deductible of $50 million. Property damage from wind for all of the Utility nuclear plants includes a
deductible of $10 million 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 (Palisades and Big Rock Point) have property damage
insurance limits as follows: Big Rock Point - $50 million per occurrence and Palisades - $1.115 billion per
occurrence. For losses that are considered non-nuclear in nature, the property damage insurance limit at Palisades
is $500 million. The nuclear property deductible is $10 million at Palisades and $5 million at Big Rock Point,
except for earth movement, flood, and windstorm. Property damage from earth movement, flood, and windstorm at
Palisades includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10
million, up to a maximum deductible of $50 million. Property damage from earth movement, flood, and windstorm
at Big Rock Point includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of
$10 million, up to a maximum deductible of $14 million.
The valuation basis of the insured property at Palisades has been changed from replacement cost to actual
cash value, given the site’s age, anticipated ownership horizon and/or shutdown status.
In addition, Waterford 3 and Grand Gulf are also covered under NEIL’s Accidental Outage Coverage
program. Accidental outage coverage provides indemnification for the actual cost incurred in the event of an
unplanned outage resulting from property damage covered under the NEIL Primary Property Insurance policy,
subject to a deductible period. The indemnification for the actual cost incurred is based on market power prices at
the time of the loss. After the deductible period has passed, weekly indemnities for an unplanned outage, covered
under NEIL’s Accidental Outage Coverage program, 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.
144 Under the property damage and accidental outage insurance programs, all NEIL insured plants could be
subject to assessments should losses exceed the accumulated funds available from NEIL. Effective April 1, 2021,
the maximum amounts of such possible assessments per occurrence were as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Utility:
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
System Energy
Entergy Wholesale Commodities
Assessments
(In Millions)
$27.6
$49.2
$0.11
$0.11
N/A
$21.4
N/A *
*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, and second, to complete decontamination operations. Only after proceeds are dedicated for such use and
regulatory approval is secured would 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 policies issued 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 additional amounts recovered for such losses from reinsurance,
indemnity, and any other sources applicable to such losses.
Non-Nuclear Property Insurance
Entergy’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, including associated storm surge. For earthquake shock and flood,
the insurance program provides coverage up to $400 million on an annual aggregate basis in excess of a $40 million
self-insured retention. For named windstorm and associated storm surge, the insurance program provides coverage
up to $125 million on an annual aggregate basis in excess of a $40 million self-insured retention. The coverage
provided by the insurance program for the Entergy New Orleans gas distribution system is limited to $50 million
per occurrence and is subject to the same annual aggregate 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-
related properties. Excluded property generally includes transmission and distribution lines, poles, and towers. For
substations valued at $5 million or less, coverage for named windstorm and associated storm surge is
excluded. This coverage is in place for Entergy Corporation, the Registrant Subsidiaries, and certain other Entergy
subsidiaries. Entergy also purchases $400 million in terrorism insurance coverage for its conventional
property. The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides
for up to $100 billion in coverage in excess of existing coverage for a terrorist event. Under current law, the
Terrorism Risk Insurance Act extends through 2027.
145
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Employment and Labor-related Proceedings
The Registrant Subsidiaries and other Entergy subsidiaries and related entities are responding to various
lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former
employees, recognized bargaining representatives, and certain third parties. Generally, the amount of damages
being sought is not specified in these proceedings. These actions may include, but are not limited to, allegations of
wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state
counterparts; claims of race, gender, age, and disability discrimination; disputes arising under collective bargaining
agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor
Relations Board or concerning the National Labor Relations Act; claims of retaliation; claims of harassment and
hostile work environment; and claims for or regarding benefits under various Entergy Corporation-sponsored plans.
Entergy and the Registrant Subsidiaries and related entities are responding to these lawsuits and proceedings and
deny liability to the claimants. Management believes that loss exposure has been and will continue to be handled so
that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of
operation, or cash flows of Entergy or the Utility operating companies.
NOTE 9. ASSET RETIREMENT OBLIGATIONS
Accounting standards require companies to record liabilities for all legal obligations associated with the
retirement of long-lived assets that result from the normal operation of the assets. For Entergy, substantially all of
its asset retirement obligations consist of its liability 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 the period in which they are incurred, with an accompanying addition to the recorded cost of the long-
lived asset. The asset retirement obligation is accreted each year through a charge to expense, to reflect the time
value of money for this present value obligation. The accretion 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 retirement obligations 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 the Registrant Subsidiaries include a component for removal costs that are not asset
retirement obligations under accounting standards. In accordance with regulatory accounting principles, the
Registrant Subsidiaries have recorded regulatory assets (liabilities) in the following amounts to reflect their
estimates of the difference between estimated incurred removal costs and estimated removal costs expected to be
recovered in rates:
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
System Energy
December 31,
2021
2020
(In Millions)
$224.3
$848.2
$136.8
$91.7
$98.1
$89.7
$212.6
$302.5
$107.3
$63.2
$115.3
$92.9
146
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As of December 31, 2021 and 2020, the regulatory asset for removal costs for the Utility operating companies
includes amounts related to storm restoration costs. See Note 2 to the financial statements for further discussion of
storm restoration costs and requested recovery.
The cumulative decommissioning and retirement cost liabilities and expenses recorded in 2021 and 2020 by
Entergy were as follows:
Liabilities as
of December 31,
2020
Accretion
Spending Dispositions
(In Millions)
Liabilities as
of December 31,
2021
$6,469.5
$317.9
($33.2)
($1,997.1)
$4,757.1
Entergy
Utility
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
System Energy
Entergy Wholesale Commodities
Big Rock Point
Indian Point 1
Indian Point 2
Indian Point 3
Palisades
Other (a)
1,314.2
1,573.3
9.8
3.8
8.1
968.9
41.1
246.6
839.8
869.4
594.1
0.5
77.7
79.9
0.5
0.2
0.4
38.7
3.4
8.8
28.9
29.1
50.1
0.1
—
—
—
—
—
—
(2.5)
(1.3)
(1.5)
—
—
—
—
—
—
(254.1) (b)
(25.1)
(843.6) (b)
(0.6)
(3.8)
—
(897.9) (b)
—
—
1,390.4
1,653.2
10.3
4.0
8.5
1,007.6
42.0
—
—
—
640.4
0.6
147
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy
Utility
Liabilities as
of December 31,
2019
Accretion
Spending
(In Millions)
Liabilities as
of December 31,
2020
$6,159.2
$394.6
($84.3)
$6,469.5
Entergy Arkansas
Entergy Louisiana
Entergy Mississippi
Entergy New Orleans
Entergy Texas
System Energy
Entergy Wholesale Commodities
Big Rock Point
Indian Point 1
Indian Point 2
Indian Point 3
Palisades
Other (a)
1,242.6
1,497.3
9.7
3.5
7.6
931.7
40.3
238.6
829.0
808.4
549.8
0.5
73.3
76.0
0.6
0.3
0.5
37.2
3.3
20.4
69.4
67.4
46.4
—
(1.7)
—
(0.5)
—
—
—
(2.5)
(12.4)
(58.6)
(6.4)
(2.1)
—
1,314.2
1,573.3
9.8
3.8
8.1
968.9
41.1
246.6
839.8
869.4
594.1
0.5
(a)
(b)
See “Coal Combustion Residuals” below for additional discussion regarding the asset retirement
obligations related to coal combustion residuals management.
See Note 14 to the financial statements for discussion of the sale of the Indian Point Energy Center to
Holtec International in May 2021.
Nuclear Plant Decommissioning
Entergy periodically reviews and updates estimated decommissioning costs. The actual decommissioning
costs may vary from the estimates because of the timing of plant decommissioning, regulatory requirements,
changes in technology, and increased costs of labor, materials, and equipment. Entergy did not update
decommissioning cost estimates in 2021 or 2020.
NRC Filings Regarding Trust Funding Levels
Plant owners are required to provide the NRC with a biennial report (annually for units that have shut down
or will shut down within five years), based on values as of December 31, addressing the owners’ ability to meet the
NRC minimum funding levels. Depending on the value of the trust funds, plant owners may be required to take
steps, such as providing financial guarantees through letters of credit or parent company guarantees or making
additional contributions to the trusts, to ensure that the trusts are adequately funded and that NRC minimum funding
requirements are met.
As nuclear plants individually approach and begin decommissioning, filings will be submitted to the NRC
for planned shutdown activities. These filings with the NRC also determine whether financial assurance may be
required in addition to the nuclear decommissioning trust fund.
148
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Coal Combustion Residuals
In June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contained two
primary regulatory options: (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 Resource Conservation
and Recovery Act (RCRA) Subtitle C; or (2) regulating CCRs destined for disposal in landfills or surface
impoundments as non-hazardous wastes under Subtitle D of RCRA. Under both options, CCRs that are beneficially
reused in certain processes would remain excluded from hazardous waste regulation. In April 2015 the EPA
published the final CCR rule with the material 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 its facilities, to the extent needed
for CCR that cannot be transferred for beneficial reuse. In December 2016 the Water Infrastructure Improvements
for the Nation Act (WIIN Act) was signed into law, which authorizes states to regulate coal ash rather than leaving
primary enforcement to citizen suit actions. States may submit to the EPA proposals for permit programs.
NOTE 10. LEASES
As of December 31, 2021 and 2020, Entergy held operating and finance leases for fleet vehicles used in
operations, real estate, and aircraft. Excluded are power purchase agreements not meeting the definition of a lease,
nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases under the accounting
standards.
Leases have remaining terms of one year to 59 years. Real estate leases generally include at least one five-
year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant
Subsidiary makes significant leasehold improvements or other modifications that would hinder its ability to easily
move. In certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant
Subsidiaries provide residual value guarantees to the lessor. Due to the nature of the agreements and Entergy’s
continuing relationship with the lessor, however, Entergy and the Registrant Subsidiaries expect to renegotiate or
refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe
it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease
liabilities and right-of-use assets are measured accordingly.
Entergy incurred the following total lease costs for the years ended December 31, 2021 and 2020:
Operating lease cost
Finance lease cost:
Amortization of right-of-use
assets
Interest on lease liabilities
2021
2020
(In Thousands)
$69,067
$67,471
$12,483
$2,845
$12,180
$2,884
Of the lease costs disclosed above, Entergy had $2.8 million and $759 thousand in short-term leases costs
for the years ended December 31, 2021 and 2020, respectively.
149
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries
for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for
the finance lease costs which are included in financing activities.
Entergy has elected to account for short-term leases in accordance with policy options provided by
accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized
above by Entergy or by its Registrant Subsidiaries in the table below.
Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at December 31,
2021 and 2020 are $212 million and $230 million related to operating leases, respectively, and $67 million and
$60 million related to finance leases, respectively.
The following lease-related liabilities are recorded within the respective Other lines on Entergy’s
consolidated balance sheet as of December 31, 2021 and 2020:
Current liabilities:
Operating leases
Finance leases
Non-current liabilities:
Operating leases
Finance leases
2021
2020
(In Thousands)
$59,437
$12,988
$152,363
$59,320
$59,004
$11,921
$170,980
$52,803
The following information contains the weighted average remaining lease term in years and the weighted
average discount rate for the operating and finance leases of Entergy at December 31, 2021 and 2020:
Weighted average remaining lease terms:
Operating leases
Finance leases
Weighted average discount rate:
Operating leases
Finance leases
2021
2020
4.44
6.18
3.37 %
3.96 %
4.82
6.34
3.58 %
4.42 %
150
Maturity of the lease liabilities for Entergy as of December 31, 2021 are as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Year
2022
2023
2024
2025
2026
Years thereafter
Minimum lease payments
Less: amount representing interest
Present value of net minimum lease payments
Operating
Leases
Finance
Leases
(In Thousands)
$65,270
55,527
48,281
28,174
15,864
14,531
227,647
15,847
$211,800
$15,312
14,611
13,296
11,913
10,061
15,756
80,949
8,640
$72,309
In allocating consideration in lease contracts to the lease and non-lease components, Entergy has made the
accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations,
fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease
and non-lease components for real estate leases.
NOTE 11. RETIREMENT, OTHER POSTRETIREMENT BENEFITS, AND DEFINED CONTRIBUTION
PLANS
Qualified Pension Plans
Entergy has eight defined benefit qualified pension plans. The Entergy Corporation Retirement Plan for
Non-Bargaining Employees (Non-Bargaining Plan I), the Entergy Corporation Retirement Plan for Bargaining
Employees (Bargaining Plan I), the Entergy Corporation Retirement Plan II for Non-Bargaining Employees (Non-
Bargaining Plan II), the Entergy Corporation Retirement Plan II for Bargaining Employees, the Entergy Corporation
Retirement Plan III, and the Entergy Corporation Retirement Plan IV for Bargaining Employees are non-
contributory final average pay plans that provide pension benefits based on employees’ credited service and
compensation during employment. Non-bargaining employees whose most recent date of hire is after June 30, 2014
and before January 1, 2021 do not participate in a final average pay plan, but instead participate in the Entergy
Corporation Cash Balance Plan for Non-Bargaining Employees (Non-Bargaining Cash Balance Plan). Effective
January 1, 2021, the Non-Bargaining Cash Balance Plan was closed to non-bargaining employees whose most
recent date of hire is after December 31, 2020, who instead may be eligible to participate in, and receive a
discretionary employer contribution under, the Savings Plan of Entergy Corporation and Subsidiaries VIII, an
Entergy-sponsored tax-qualified defined contribution plan that includes a 401(k) feature. Certain bargaining
employees whose most recent date of hire is after June 30, 2014, or such later date provided for in their applicable
collective bargaining agreements, participate in the Entergy Corporation Cash Balance Plan for Bargaining
Employees (Bargaining Cash Balance Plan). Effective January 1, 2021, the Bargaining Cash Balance Plan was
amended to close participation in the plan to those bargaining employees whose most recent hire date is after
December 31, 2020 or such later date provided for in their applicable collective bargaining agreements. The
Registrant Subsidiaries participate in these four plans: Non-Bargaining Plan I, Bargaining Plan I, Non-Bargaining
Cash Balance Plan, and Bargaining Cash Balance Plan. Effective January 1, 2022, the Non-Bargaining Cash
Balance Plan was merged with and into Non-Bargaining Plan I.
151
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The assets of the six final average pay defined benefit qualified pension plans are held in a master trust
established by Entergy, and the assets of the two cash balance pension plans are held in a second master trust
established by Entergy. Each pension plan has an undivided beneficial interest in each of the investment accounts
in its respective master trust that is maintained by a trustee. Use of the master trusts permits the commingling of the
trust assets of the pension plans of Entergy Corporation and its Registrant Subsidiaries for investment and
administrative purposes. Although assets in the master trusts are commingled, the trustee maintains supporting
records for the purpose of allocating the trust level equity in net earnings (loss) and the administrative expenses of
the investment accounts in each trust to the various participating pension plans in that particular trust. The fair
value of the trusts’ assets is determined by the trustee and certain investment managers. For each trust, the trustee
calculates a daily earnings factor, including realized and unrealized gains or losses, collected and accrued income,
and administrative expenses, and allocates earnings to each plan in the master trusts on a pro rata basis. Effective
January 1, 2022, the assets of the remaining cash balance pension plan held in a second master trust were merged
with and into a master trust that holds the assets of the six final average pay defined benefit qualified pension plans.
Within each pension plan, the record of each Registrant Subsidiary’s beneficial interest in the plan assets is
maintained by the plan’s actuary and is updated quarterly. Assets for each Registrant Subsidiary are increased for
investment net income and contributions, and are decreased for benefit payments. A plan’s investment net income/
loss (i.e. interest and dividends, realized and unrealized gains and losses and expenses) is allocated to the Registrant
Subsidiaries participating in that plan based on the value of assets for each Registrant Subsidiary at the beginning of
the quarter adjusted for contributions and benefit payments made during the quarter.
Entergy Corporation and its subsidiaries fund pension plans in an amount not less than the minimum
required contribution under the Employee Retirement Income Security Act of 1974, as amended, and the Internal
Revenue Code of 1986, as amended. The assets of the plans include common and preferred stocks, fixed-income
securities, interest in a money market fund, and insurance contracts. The Registrant Subsidiaries’ pension costs are
recovered from customers as a component of cost of service in each of their respective jurisdictions.
152 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Qualified Net Pension Cost and Other Amounts Recognized as a Regulatory Asset and/or
Accumulated Other Comprehensive Income (AOCI)
Entergy Corporation and its subsidiaries’ total 2021, 2020, and 2019 qualified pension costs and amounts
recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, included the
components:
following
Net periodic pension cost:
Service cost - benefits earned during the period
Interest cost on projected benefit obligation
Expected return on assets
Recognized net loss
Settlement charges
Net periodic pension costs
Other changes in plan assets and benefit obligations
recognized as a regulatory asset and/or AOCI (before tax)
Arising this period:
Net (gain)/loss
Amounts reclassified from regulatory asset and/or AOCI to net
periodic pension cost in the current year:
Amortization of net loss
Settlement charge
Total
2021
2020
(In Thousands)
2019
$165,278
191,107
(424,572)
334,124
205,878
$471,815
$161,487
239,614
(414,273)
350,010
36,946
$373,784
$134,193
293,114
(414,947)
241,117
23,492
$276,969
($448,532)
$483,653
$614,600
(334,124)
(205,878)
($988,534)
(358,473)
(36,946)
$88,234
(241,117)
(23,492)
$349,991
Total recognized as net periodic pension cost, regulatory asset,
and/or AOCI (before tax)
($516,719)
$462,018
$626,960
153
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension Obligations, Plan Assets, Funded Status, Amounts Recognized in the Balance Sheet
Qualified pension obligations, plan assets, funded status, amounts recognized in the Consolidated Balance
Sheets for Entergy Corporation and its Subsidiaries as of December 31, 2021 and 2020 are as follows:
Change in Projected Benefit Obligation (PBO)
Balance at January 1
Service cost
Interest cost
Actuarial (gain)/ loss
Benefits paid (including settlement lump sum benefit payments of ($553,576) in
2021 and ($84,754) in 2020)
Balance at December 31
Change in Plan Assets
Fair value of assets at January 1
Actual return on plan assets
Employer contributions
Benefits paid (including settlement lump sum benefit payments of ($553,576) in
2021 and ($84,754) in 2020)
Fair value of assets at December 31
Funded status
Amount recognized in the balance sheet
Non-current liabilities
Amount recognized as a regulatory asset
Net loss
Amount recognized as AOCI (before tax)
Net loss
2021
2020
(In Thousands)
$9,143,652
165,278
191,107
(158,276)
$8,406,203
161,487
239,614
969,609
(932,141)
$8,409,620
(633,261)
$9,143,652
$6,854,426
714,827
355,998
$6,271,160
900,229
316,298
(932,141)
$6,993,110
($1,416,510)
(633,261)
$6,854,426
($2,289,226)
($1,416,510)
($2,289,226)
$2,214,390
$2,926,670
$449,756
$726,010
The qualified pension plans incurred actuarial gains during 2021 primarily due to a rise in bond yields that resulted
in increases to the discount rates used to develop the benefit obligations and an actual return on assets exceeding the
expected return on assets for 2021. The qualified pension plans incurred actuarial losses during 2020 primarily due
to a fall in bond yields that resulted in decreases to the discount rates used to develop the benefit obligations. These
losses were partially offset by gains resulting from the actual return on assets exceeding the expected return on
assets for 2020.
Accumulated Pension Benefit Obligation
The accumulated benefit obligation for Entergy’s qualified pension plans was $7.8 billion and $8.4 billion
at December 31, 2021 and 2020, respectively.
Other Postretirement Benefits
Entergy also currently offers retiree medical, dental, vision, and life insurance benefits (other postretirement
benefits) for eligible retired 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 Entergy pension benefit), may become eligible for other
postretirement benefits.
154
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In March 2020, Entergy announced changes to its other postretirement benefits. Effective January 1, 2021,
certain retired, former non-bargaining employees age 65 and older who are eligible for Entergy-sponsored retiree
welfare benefits, and their eligible spouses who are age 65 and older (collectively, Medicare-eligible participants),
will be eligible to participate in a new Entergy-sponsored retiree health plan, and will no longer be eligible for
retiree coverage under the Entergy Corporation Companies’ Benefits Plus Medical, Dental and Vision Plans. Under
the new Entergy retiree health plan, Medicare-eligible participants will be eligible to participate in a health
reimbursement arrangement which they may use towards the purchase of various types of qualified insurance
offered through a Medicare exchange provider and for other qualified medical expenses. In accordance with
accounting standards, the effects of this change are reflected in the December 31, 2020 other postretirement
obligation. The changes affecting active bargaining unit employees will be negotiated with the unions prior to
implementation, where necessary, and to the extent required by law.
Effective January 1, 1993, Entergy adopted an accounting standard requiring a change from a cash method
to an accrual method 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 LPSC ordered Entergy Louisiana to continue the use of the pay-as-
you-go method for ratemaking purposes for postretirement benefits other than pensions. However, the LPSC retains
the flexibility to examine individual companies’ accounting for other postretirement benefits to 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 into external 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 and maintained by a trustee. Each participating Registrant Subsidiary holds a beneficial interest in the
trusts’ assets. The assets in the master trusts are commingled for investment and administrative purposes. Although
assets are commingled, supporting records are maintained for the purpose of allocating the beneficial interest in net
earnings/(losses) and the administrative expenses of the investment accounts to the various participating plans and
participating Registrant Subsidiaries. Beneficial interest in an investment account’s net income/(loss) is comprised
of interest and dividends, realized and unrealized gains and losses, and expenses. Beneficial interest from these
investments is allocated to the plans and participating Registrant Subsidiary based on their portion of net assets in
the pooled accounts.
Components of Net Other Postretirement Benefit Cost and Other Amounts Recognized as a Regulatory Asset
and/or AOCI
Entergy Corporation’s and its subsidiaries’ total 2021, 2020, and 2019 other postretirement benefit costs,
including amounts capitalized and amounts recognized as a regulatory asset and/or other comprehensive income,
included the following components:
155 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other postretirement costs:
Service cost - benefits earned during the period
Interest cost on accumulated postretirement benefit obligation
(APBO)
Expected return on assets
Amortization of prior service credit
Recognized net loss
Net other postretirement benefit income
Other changes in plan assets and benefit obligations recognized
as a regulatory asset and /or AOCI (before tax)
Arising this period:
Prior service credit for period
Net (gain)/loss
Amounts reclassified from regulatory asset and /or AOCI to net
periodic benefit cost in the current year:
Amortization of prior service credit
Amortization of net loss
Total
Total recognized as net periodic benefit (income)/cost, regulatory
asset, and/or AOCI (before tax)
2021
2020
(In Thousands)
2019
$26,578
$24,500
$18,699
21,278
(43,220)
(33,069)
2,853
($25,580)
28,597
(40,880)
(32,882)
3,481
($17,184)
47,901
(38,246)
(35,377)
1,430
($5,593)
($3,168)
6,210
($128,837)
41,031
$—
(38,526)
33,069
(2,853)
$33,258
32,882
(3,481)
($58,405)
35,377
(1,430)
($4,579)
$7,678
($75,589)
($10,172)
156
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and
Recognized in the Balance Sheet
Other postretirement benefit obligations, plan assets, funded status, and amounts not yet recognized and
recognized in the Consolidated Balance Sheets of Entergy Corporation and its Subsidiaries as of December 31, 2021
and 2020 are as follows:
Change in APBO
Balance at January 1
Service cost
Interest cost
Plan amendments
Plan participant contributions
Actuarial loss
Benefits paid
Medicare Part D subsidy received
Balance at December 31
Change in Plan Assets
Fair value of assets at January 1
Actual return on plan assets
Employer contributions
Plan participant contributions
Benefits paid
Fair value of assets at December 31
Funded status
Amounts recognized in the balance sheet
Current liabilities
Non-current liabilities
Total funded status
Amounts recognized as a regulatory asset
Prior service credit
Net gain
Amounts recognized as AOCI (before tax)
Prior service credit
Net loss
2021
2020
(In Thousands)
$1,181,075
26,578
21,278
(3,168)
22,023
20,955
(79,308)
249
$1,189,682
$1,252,903
24,500
28,597
(128,837)
37,176
80,162
(113,786)
360
$1,181,075
$737,866
57,965
32,773
22,023
(79,308)
$771,319
($418,363)
$686,262
80,011
48,203
37,176
(113,786)
$737,866
($443,209)
($42,000)
(376,363)
($418,363)
($38,963)
(404,246)
($443,209)
($37,693)
(7,981)
($45,674)
($45,501)
(8,565)
($54,066)
($61,488)
27,138
($34,350)
($83,581)
24,365
($59,216)
The other postretirement plans incurred actuarial losses during 2021 primarily due to a reduction in the projected
Employer Group Waiver Plan (EGWP) revenue and updated census data. These losses were partially offset by gains
resulting from the actual return on assets exceeding the expected return on assets for 2021 and a rise in bond yields
that resulted in increases to the discount rates used to develop the benefit obligations. The other postretirement plans
incurred actuarial losses during 2020 primarily due to a reduction in the projected EGWP revenue and a fall in bond
yields that resulted in decreases to the discount rates used to develop the benefit obligations. These losses were
partially offset by gains resulting from the actual return on assets exceeding the expected return on assets for 2020,
an update to the latest mortality projection scale MP-2020, and favorable claims experience.
157
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Non-Qualified Pension Plans
Entergy also sponsors non-qualified, non-contributory defined benefit pension plans that provide benefits to
certain key employees. Entergy recognized net periodic pension cost related to these plans of $28.6 million in 2021,
$18.1 million in 2020, and $22.6 million in 2019. In 2021 and 2019 Entergy recognized $10.9 million and
$7.4 million, respectively in settlement charges related to the payment of lump sum benefits out of the plan that is
included in the non-qualified pension plan cost above. In 2020 there were no settlement charges related to the
payment of lump sum benefits out of the plan.
The projected benefit obligation was $181.6 million as of December 31, 2021 of which $26.3 million was a
current liability and $155.3 million was a non-current liability. The projected benefit obligation was $182.4 million
as of December 31, 2020 of which $22.9 million was a current liability and $159.5 million was a non-current
liability. The accumulated benefit obligation was $165.5 million and $161.3 million as of December 31, 2021 and
2020, respectively. The unamortized prior service cost and net loss are recognized in regulatory assets
($74.9 million at December 31, 2021 and $77.3 million at December 31, 2020) and accumulated other
comprehensive income before taxes ($17 million at December 31, 2021 and $16.7 million at December 31, 2020).
A Rabbi Trust has been established for the benefit of certain participants in Entergy’s non-qualified, non-
contributory defined benefit pension plans. The Rabbi Trust assets are invested in money-market funds which are
recorded at fair value with all gains and losses recognized immediately in income. All of the investments are
classified as Level 1 investments for purposes of Fair Value Measurements. At December 31, 2021, the fair value
of the assets held in the Rabbi Trust was $35 million.
The non-qualified pension plans incurred actuarial losses during 2021 primarily due to differences in recent
retirement and lump sum experience relative to actuarial assumptions. The non-qualified pension plans incurred
actuarial losses during 2020 primarily due to a fall in bond yields that resulted in decreases to the discount rates
used to develop the benefit obligations.
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Entergy reclassified the following costs out of accumulated other comprehensive income (loss) (before
taxes and including amounts capitalized) as of December 31, 2021:
Entergy
Amortization of prior service cost
Amortization of loss
Settlement loss
Qualified
Pension
Costs
Other
Postretirement
Costs
Non-Qualified
Pension Costs
Total
(In Thousands)
$—
(84,661)
(12,001)
($96,662)
$21,151
(1,983)
—
$19,168
($204)
(2,194)
(4,378)
($6,776)
$20,947
(88,838)
(16,379)
($84,270)
158
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy reclassified the following costs out of accumulated other comprehensive income (loss) (before
taxes and including amounts capitalized) as of December 31, 2020:
Entergy
Amortization of prior service cost
Amortization of loss
Settlement loss
Qualified
Pension
Costs
Other
Postretirement
Costs
Non-Qualified
Pension Costs
Total
(In Thousands)
$—
(105,853)
(243)
($106,096)
$21,000
(1,006)
—
$19,994
($231)
(3,326)
—
($3,557)
$20,769
(110,185)
(243)
($89,659)
Accounting for Pension and Other Postretirement Benefits
Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit
plans. This is measured as the difference between plan assets at fair value and the benefit obligation. Entergy uses
a December 31 measurement date for 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 accounting standards) as comprehensive
income and/or as a regulatory asset reflective of the recovery mechanism for pension and other postretirement
benefit costs in the Registrant Subsidiaries’ respective regulatory jurisdictions. For the portion of Entergy Louisiana
that is not regulated, the unrecognized prior service cost, gains and losses, and transition asset/obligation for its
pension and other postretirement benefit obligations are recorded as other comprehensive income. Entergy
Louisiana recovers other postretirement benefit costs on a pay-as-you-go basis and records the unrecognized prior
service cost, gains and losses, and transition obligation for its other postretirement benefit obligation as other
comprehensive income. Accounting standards also require that changes in the funded status be recorded as other
comprehensive income and/or a regulatory asset in the period in which the changes occur.
With regard to pension and other postretirement costs, Entergy calculates the expected return on pension
and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the
market-related value (MRV) of plan assets. In general, Entergy determines the MRV of its pension plan assets by
calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns and for its
other postretirement benefit plan assets Entergy generally uses fair value.
In accordance with ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”, the other components of
net benefit cost are required to be presented in the income statement separately from the service cost component and
outside a subtotal of income from operations and are presented by Entergy in miscellaneous - net in other income.
Qualified Pension Settlement Cost
Year-to-date lump sum benefit payments from the Entergy Corporation Retirement Plan for Bargaining
Employees and the Entergy Corporation Retirement Plan for Non-Bargaining Employees exceeded the sum of the
Plans’ 2021 service and interest cost, resulting in settlement costs. In accordance with accounting standards,
settlement accounting requires immediate recognition of the portion of previously unrecognized losses associated
with the settled portion of the plans’ pension liability. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, Entergy Texas, and System Energy participate in one or both of the Entergy Corporation
Retirement Plan for Bargaining Employees and the Entergy Corporation Retirement Plan for Non-Bargaining
employees and incurred settlement costs. Similar to other pension costs, the settlement costs were included with
159
Entergy Corporation and Subsidiaries
Notes to Financial Statements
employee labor costs and charged to expense and capital in the same manner that labor costs were charged. Entergy
Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans received regulatory approval to defer
the expense portion of the settlement costs, with future amortization of the deferred settlement expense over the
period in which the expense otherwise would be recorded had the immediate recognition not occurred.
Entergy Texas Reserve
In September 2020, Entergy Texas elected to establish a reserve, in accordance with PUCT regulations, for
the difference between the amount recorded for pension and other postretirement benefits expense under generally
accepted accounting principles during 2019, the first year that rates from Entergy Texas’s last general rate
proceeding were in effect, and the annual amount of actuarially determined pension and other postretirement
benefits chargeable to Entergy Texas’s expense. The reserve amount will be evaluated in the next scheduled PUCT
rate case and a reasonable amortization period will be determined by the PUCT at that time. At December 31, 2021,
the balance in this reserve was approximately $14.6 million.
Qualified Pension and Other Postretirement Plans’ Assets
The Plan Administrator’s trust asset investment strategy is to invest the assets in a manner whereby long-
term earnings on the assets (plus cash contributions) provide adequate funding for retiree benefit payments. The
mix of assets is based on an optimization study that identifies asset allocation targets in order to achieve the
maximum return for an acceptable level of risk, while minimizing the expected contributions and pension and
postretirement expense.
In the optimization studies, the Plan Administrator formulates assumptions about characteristics, such as
expected asset class investment returns, volatility (risk), and correlation coefficients among the various asset
classes. The future market assumptions used in the optimization study are determined by examining historical
market characteristics of the various asset classes and making adjustments 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 are shown below. The expectation is that the allocation to fixed income securities will increase as
the pension plans’ funded status increases. 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 latest optimization 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-accounts within all trusts.
Entergy’s qualified pension and postretirement weighted-average asset allocations by asset category at
December 31, 2021 and 2020 and the target asset allocation and ranges for 2021 are as follows:
Pension Asset Allocation
Domestic Equity Securities
International Equity Securities
Fixed Income Securities
Other
Target
39%
19%
42%
0%
Range
Actual 2021 Actual 2020
32% to
15% to
39% to
0% to
46%
23%
45%
10%
40%
20%
40%
0%
38%
19%
42%
1%
160 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Postretirement Asset Allocation
Domestic Equity Securities
International Equity Securities
Fixed Income Securities
Other
Target
25%
17%
58%
0%
Non-Taxable and Taxable
Range
Actual 2021 Actual 2020
20% to
12% to
53% to
0% to
30%
22%
63%
5%
28%
17%
55%
0%
29%
18%
53%
0%
In determining its expected long-term rate of return on plan assets used in the calculation of benefit plan
costs, Entergy reviews past performance, current and expected future asset allocations, and capital market
assumptions of its investment consultant and some investment managers.
The expected long-term rate of return for the qualified pension plans’ assets is based primarily on the
geometric average of the historical annual performance of a representative portfolio weighted by the target asset
allocation defined in the table above, along with other 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 methodology described 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 asset allocation, in combination with the same methodology employed to determine the expected
return for other postretirement assets (as described above), and with a modification to reflect applicable taxes, is
used to produce the expected long-term rate of return for taxable postretirement trust assets.
Concentrations of Credit Risk
Entergy’s investment guidelines mandate the avoidance of risk concentrations. Types of concentrations
specified to be avoided include, but are not limited to, investment concentrations in a single entity, type of industry,
foreign country, geographic area and individual security issuance. As of December 31, 2021, all investment
managers and assets were materially in compliance with the approved investment guidelines, therefore there were
no significant concentrations (defined as greater than 10 percent of plan assets) of credit risk in Entergy’s pension
and other postretirement benefit plan assets.
Fair Value Measurements
Accounting standards provide the framework for measuring fair value. That framework provides a fair
value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
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 the ability to access at the measurement date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume to provide pricing information on an
ongoing basis.
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or
indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices
derived by an independent party that uses inputs such as benchmark yields, reported trades, broker/dealer
161
Entergy Corporation and Subsidiaries
Notes to Financial Statements
quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or
overridden if it is believed such would be more reflective of fair value. Level 2 inputs include the
following:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical assets or liabilities in inactive markets;
- inputs other than quoted prices that are observable for the asset or liability; or
-
inputs that are derived principally from or corroborated by observable market data by correlation or
other means.
If an asset or liability has a specified (contractual) term, the Level 2 input must be observable for
substantially the full term of the 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 value measurement. The following tables set forth by level within the fair value hierarchy, measured at fair
value on a recurring basis at December 31, 2021, and December 31, 2020, a summary of the investments held in the
master trusts for Entergy’s qualified pension and other postretirement plans in which the Registrant Subsidiaries
participate.
Qualified Defined Benefit Pension Plan Trusts
2021
Level 1
Level 2
Level 3
Total
(In Thousands)
Equity securities:
Corporate stocks:
Preferred
Common
Common collective trusts (c)
Fixed income securities:
$16,231 (b)
1,001,169 (b)
$—
—
U.S. Government securities
Corporate debt instruments
Registered investment companies (e)
Other
—
—
92,347 (d)
—
627,148 (a)
966,616 (a)
3,004 (d)
68,886 (f)
Other:
Insurance company general account
(unallocated contracts)
Total investments
Cash
Other pending transactions
Less: Other postretirement assets included
in total investments
Total fair value of qualified pension
assets
—
5,961 (g)
$1,109,747
$1,671,615
$—
—
—
—
—
—
—
$—
$16,231
1,001,169
3,123,111
627,148
966,616
1,129,070
68,886
5,961
$6,938,192
123,153
11,125
(79,360)
$6,993,110
162
2020
Level 1
Level 2
Level 3
Total
(In Thousands)
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Equity securities:
Corporate stocks:
Preferred
Common
Common collective trusts (c)
Fixed income securities:
$15,756 (b)
1,031,213 (b)
$—
—
U.S. Government securities
Corporate debt instruments
Registered investment companies (e)
Other
—
—
81,800 (d)
156 (f)
731,319 (a)
1,029,370 (a)
3,076 (d)
56,323 (f)
Other:
Insurance company general account
(unallocated contracts)
Total investments
—
6,253 (g)
$1,128,925
$1,826,341
Cash
Other pending transactions
Less: Other postretirement assets included
in total investments
Total fair value of qualified pension
assets
Other Postretirement Trusts
$—
—
—
—
—
—
—
$—
$15,756
1,031,213
2,958,767
731,319
1,029,370
1,128,107
56,479
6,253
$6,957,264
2,316
(29,121)
(76,033)
$6,854,426
2021
Level 1
Level 2
Level 3
Total
(In Thousands)
Equity securities:
Common collective trust (c)
Fixed income securities:
U.S. Government securities
Corporate debt instruments
Registered investment companies
Other
Total investments
Other pending transactions
Plus: Other postretirement assets included
in the investments of the qualified
pension trust
Total fair value of other postretirement
assets
62,240
(b)
—
28,450
(d)
—
$90,690
89,951
152,562
(a)
(a)
—
72,059
$314,572
(f)
—
—
—
—
$—
$312,594
152,191
152,562
28,450
72,059
$717,856
(25,897)
79,360
$771,319
163
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2020
Level 1
Level 2
Level 3
Total
(In Thousands)
Equity securities:
Common collective trust (c)
Fixed income securities:
U.S. Government securities
Corporate debt instruments
Registered investment companies
Other
Total investments
Other pending transactions
Plus: Other postretirement assets included
in the investments of the qualified
pension trust
Total fair value of other postretirement
assets
46,498
(b)
—
16,965
(d)
—
$63,463
97,604
147,287
(a)
(a)
—
60,219
$305,110
(f)
—
—
—
—
$—
$315,191
144,102
147,287
16,965
60,219
$683,764
(21,931)
76,033
$737,866
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Certain fixed income debt securities (corporate, government, and securitized) are stated at fair value as
determined by broker quotes.
Common stocks, certain preferred stocks, and certain fixed income debt securities (government) are stated
at fair value determined by quoted market prices.
The common collective trusts hold investments in accordance with stated objectives. The investment
strategy of the trusts is to capture the growth potential of equity markets by replicating the performance of a
specified index. Net asset value per share of common collective trusts estimate fair value. Common
collective trusts are not publicly quoted and are valued by the fund administrators using net asset value as a
practical expedient. Accordingly, these funds are not assigned a level in the fair value table, but are
included in the total.
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 and estimate fair value using net asset value per share.
Certain of these registered investment companies are not publicly quoted and are valued by the fund
administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a
level in the fair value table, but are included in the total.
The other remaining assets are U.S. municipal and foreign government bonds stated at fair value as
determined by broker quotes and quoted market values.
The unallocated insurance contract investments are recorded at contract value, which approximates fair
value. The contract value represents contributions made under the contract, plus interest, less funds used to
pay benefits and contract expenses, and less distributions to the master trust.
164
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Estimated Future Benefit Payments
Based upon the assumptions used to measure Entergy’s qualified pension and other postretirement benefit
obligations at December 31, 2021, and including pension and other postretirement benefits attributable to estimated
future employee service, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received
over the next ten years for Entergy Corporation and its subsidiaries will be as follows:
Estimated Future Benefits Payments
Qualified
Pension
Non-Qualified
Pension
Other Postretirement
(before Medicare
Subsidy)
Estimated Future
Medicare D Subsidy
Receipts
(In Thousands)
$550,204
$542,753
$549,913
$530,406
$525,278
$2,527,735
$26,336
$24,710
$21,230
$36,210
$14,377
$52,967
$72,400
$72,220
$71,506
$70,148
$68,744
$328,634
$70
$27
$34
$34
$39
$222
Year(s)
2022
2023
2024
2025
2026
2027 - 2031
Contributions
Entergy currently expects to contribute approximately $200 million to its qualified pension plans and
approximately $42.8 million to other postretirement plans in 2022. The expected 2022 pension and other
postretirement plan contributions of the Registrant Subsidiaries for their employees are shown below. The 2022
required pension contributions will be known with more certainty when the January 1, 2022 valuations are
completed, which is expected by April 1, 2022.
Actuarial Assumptions
The significant actuarial assumptions used in determining the pension PBO and the other postretirement
benefit APBO as of December 31, 2021 and 2020 were as follows:
Weighted-average discount rate:
Qualified pension
Other postretirement
Non-qualified pension
Weighted-average rate of increase in future compensation levels
Interest crediting rate
Assumed health care trend rate:
Pre-65
Post-65
Ultimate rate
Year ultimate rate is reached and beyond:
Pre-65
Post-65
2021
2020
2.99% - 3.08%
Blended 3.05%
2.94%
2.11%
3.98% - 4.40%
2.60%
2.60% - 2.83%
Blended 2.77%
2.62%
1.61%
3.98% - 4.40%
2.60%
5.65%
5.90%
4.75%
2032
2032
5.87%
6.31%
4.75%
2030
2028
165
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The significant actuarial assumptions used in determining the net periodic pension and other postretirement
benefit costs for 2021, 2020, and 2019 were as follows:
2021
2020
2019
Weighted-average discount rate:
Qualified pension:
Service cost
Interest cost
Other postretirement:
Service cost
Interest cost
Non-qualified pension:
Service cost
Interest cost
2.81%
2.08%
2.98%
1.86%
1.48%
2.14%
3.42%
2.99%
3.27%
2.41%
2.71%
2.25%
Weighted-average rate of increase in future
compensation levels
Expected long-term rate of return on plan assets:
3.98% - 4.40%
3.98% - 4.40%
4.57%
4.15%
4.62%
4.01%
3.94%
3.46%
3.98%
Pension assets
Other postretirement non-taxable assets
Other postretirement taxable assets
Assumed health care trend rate:
Pre-65
Post-65
Ultimate rate
Year ultimate rate is reached and beyond:
Pre-65
Post-65
6.75%
6.00% - 6.75%
5.00%
7.00%
6.25% - 7.25%
5.25%
7.25%
6.50% - 7.50%
5.50%
5.87%
6.31%
4.75%
2030
2028
6.13%
6.25%
4.75%
2027
2027
6.59%
7.15%
4.75%
2027
2026
With respect to the mortality assumptions, Entergy used the Pri-2012 Employee and Healthy Annuitant
Tables with a fully generational MP-2020 projection scale, in determining its December 31, 2021 and 2020 pension
plans’ PBOs and the Pri.H 2012 (headcount weighted) Employee and Healthy Annuitant Tables with a fully
generational MP-2020 projection scale, in determining its December 31, 2021 and 2020 other postretirement benefit
APBO.
Defined Contribution Plans
Entergy sponsors the Savings Plan of Entergy Corporation and Subsidiaries (System Savings Plan). The
System Savings Plan is a defined contribution plan covering eligible employees of Entergy and certain of its
subsidiaries. The participating Entergy subsidiary makes matching contributions to the System Savings Plan for all
eligible participating employees in an amount equal to either 70% or 100% of the participants’ basic contributions,
up to 6% of their eligible earnings per pay period. The matching contribution is allocated to investments as directed
by the employee.
Entergy also sponsors the Savings Plan of Entergy Corporation and Subsidiaries VI (established in April
2007) and the Savings Plan of Entergy Corporation and Subsidiaries VII (established in April 2007) to which
matching contributions are also made. The plans are defined contribution plans that cover eligible employees, as
defined by each plan, of Entergy and certain of its subsidiaries.
Entergy also sponsors the Savings Plan of Entergy Corporation and Subsidiaries VIII (established January
2021) and the Savings Plan of Entergy Corporation and Subsidiaries IX (established January 2021) to which
166
Entergy Corporation and Subsidiaries
Notes to Financial Statements
company contributions are made. The participating Entergy subsidiary makes matching contributions to these
defined contribution plans for all eligible participating employees in an amount equal to 100% of the participants’
basic contributions, up to 5% of their eligible earnings per pay period. Eligible participants may also receive a
discretionary annual company contribution up to 4% of the participant’s eligible earnings (subject to vesting).
Entergy’s subsidiaries’ contributions to defined contribution plans collectively were $62.3 million in 2021,
$63.1 million in 2020, and $57.6 million in 2019. The majority of the contributions were to the System Savings
Plan.
NOTE 12. STOCK-BASED COMPENSATION
Entergy grants stock options, restricted stock, performance units, and restricted stock units to key
employees of the Entergy subsidiaries under its equity plans which are shareholder-approved stock-based
compensation plans. Effective May 3, 2019, Entergy’s shareholders approved the 2019 Omnibus Incentive Plan
(2019 Plan). The maximum number of common shares that can be issued from the 2019 Plan for stock-based
awards is 7,300,000 all of which are available for incentive stock option grants. The 2019 Plan applies to awards
granted on or after May 3, 2019 and awards expire ten years from the date of grant. As of December 31, 2021, there
were 4,711,095 authorized shares remaining for stock-based awards.
Stock Options
Stock options are granted at exercise prices that equal the closing market price of Entergy Corporation
common stock on the date of grant. Generally, stock options granted will become exercisable in equal amounts on
each of the first three anniversaries of the date of grant. Unless they are forfeited previously under the terms of the
grant, options expire 10 years after the date of the grant if they are not exercised.
The following table includes financial information for stock options for each of the years presented:
Compensation expense included in Entergy’s consolidated net income
Tax benefit recognized in Entergy’s consolidated net income
Compensation cost capitalized as part of fixed assets and inventory
2021
$4.2
$1.1
$1.5
2020
(In Millions)
$3.9
$1.0
$1.5
2019
$3.8
$1.0
$1.4
Entergy determines the fair value of the stock option grants by considering factors such as lack of
marketability, stock retention requirements, and regulatory restrictions on exercisability in accordance with
accounting standards. The stock option weighted-average assumptions used in determining the fair values are as
follows:
Stock price volatility
Expected term in years
Risk-free interest rate
Dividend yield
Dividend payment per share
2021
23.93%
6.93
0.74%
4.00%
$3.86
2020
17.16%
7.04
1.49%
4.00%
$3.74
2019
17.23%
7.32
2.50%
4.50%
$3.66
Stock price volatility is calculated based upon the daily public stock price volatility of Entergy Corporation common
stock over a period equal to the expected term of the award. The expected term of the options is based upon
historical option exercises and the weighted average life of options when exercised and the estimated weighted
average life of all vested but unexercised options. In 2008, Entergy implemented stock ownership guidelines for its
senior executive officers. These guidelines require an executive officer to own shares of Entergy Corporation
167
Entergy Corporation and Subsidiaries
Notes to Financial Statements
common stock equal to a specified multiple of his or her salary. Until an executive officer achieves this ownership
position the executive officer is required to retain 75% of the net-of-tax net profit upon exercise of the option to be
held in Entergy Corporation common stock. The reduction in fair value of the stock options due to this restriction is
based upon an estimate of the 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, 2021 and changes during the year are
presented below:
Options outstanding as of January 1, 2021
Options granted
Options exercised
Options forfeited/expired
Options outstanding as of December 31, 2021
Options exercisable as of December 31, 2021
Weighted-average grant-date fair value of
options granted during 2021
Weighted-
Average
Exercise
Price
$89.63
$95.87
$80.54
$117.89
$90.82
$81.91
Number
of Options
2,399,379
508,704
(72,138)
(16,301)
2,819,644
1,788,702
$12.27
Aggregate
Intrinsic
Value
Weighted-
Average
Contractual
Life
$71,110,949
$58,164,228
6.34 years
5.16 years
The weighted-average grant-date fair value of options granted during the year was $11.45 for 2020 and $8.32 for
2019. The total intrinsic value of stock options exercised was $2 million during 2021, $26 million during 2020, and
$29 million during 2019. The intrinsic value, which has no effect on net income, of the outstanding stock options
exercised is calculated by the positive difference between the weighted average exercise price of the stock options
granted and Entergy Corporation’s common stock price as of December 31, 2021. The aggregate intrinsic value of
the stock options outstanding as of December 31, 2021 was $71.1 million. Stock options outstanding as of
December 31, 2021 includes 501,316 out of the money options with an intrinsic value of zero. Entergy recognizes
compensation cost over the vesting period of the options based on their grant-date fair value. The total fair value of
options that vested was approximately $5 million during 2021, $5 million during 2020, and $5 million during 2019.
Cash received from option exercises was $6 million for the year ended December 31, 2021. The tax benefits
realized from options exercised was $0.5 million for the year ended December 31, 2021.
The following table summarizes information about stock options outstanding as of December 31, 2021:
Options Outstanding
Options Exercisable
Range of
Exercise Price
$51 - $64.99
$65 - $78.99
$79 - $91.99
$92 - $131.72
$51 - $131.72
As of
December 31,
2021
240,200
915,839
653,585
1,010,020
2,819,644
Weighted-Average
Remaining
Contractual Life-
Yrs.
1.72
5.19
6.21
8.58
6.34
Weighted
Average
Exercise Price
Number
Exercisable
as of
December 31,
2021
$63.69
$73.80
$89.35
240,200
915,839
465,577
$113.66
$90.82
167,086
1,788,702
Weighted
Average
Exercise Price
$63.69
$73.80
$89.41
$131.72
$81.91
Stock-based compensation cost related to non-vested stock options outstanding as of December 31, 2021
not yet recognized is approximately $7 million and is expected to be recognized over a weighted-average period of
1.72 years.
168
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Restricted Stock Awards
Entergy grants restricted stock awards earned under its stock benefit plans in the form of stock units. One-
third of the restricted stock awards will vest upon each anniversary of the grant date and are expensed ratably over
the three-year vesting period. Shares of restricted stock have the same dividend and voting rights as other common
stock and are considered issued and outstanding shares of Entergy upon vesting. In January 2021 the Board
approved and Entergy granted 392,383 restricted stock awards under the 2019 Plan. The restricted stock awards
were made effective on January 28, 2021 and were valued at $95.87 per share, which was the closing price of
Entergy Corporation’s common stock on that date.
The following table includes information about the restricted stock awards outstanding as of December 31,
2021:
Outstanding shares at January 1, 2021
Granted
Vested
Forfeited
Outstanding shares at December 31, 2021
Weighted-Average
Grant Date Fair
Value Per Share
$107.89
$96.45
$99.28
$108.57
$104.91
Shares
648,498
419,095
(323,698)
(58,540)
685,355
The following table includes financial information for restricted stock for each of the years presented:
Compensation expense included in Entergy’s consolidated net income
Tax benefit recognized in Entergy’s consolidated net income
Compensation cost capitalized as part of fixed assets and inventory
2021
$24.7
$6.3
$9.3
2020
(In Millions)
$23.1
$5.9
$8.5
2019
$20.2
$5.1
$7.1
The total fair value of the restricted stock awards granted was $40 million, $44 million, and $34 million for
the years ended December 31, 2021, 2020, and 2019, respectively.
The total fair value of the restricted stock awards vested was $32 million, $27 million, and $25 million for
the years ended December 31, 2021, 2020, and 2019, respectively.
Long-Term Performance Unit Program
Entergy grants long-term incentive awards earned under its stock benefit plans in the form of performance
units, which represents the value of, and are settled with, one share of Entergy Corporation common stock at the end
of the three-year performance period, plus dividends accrued during the performance period on the number of
performance units earned. The Long-Term Performance Unit Program specifies a minimum, target, and maximum
achievement level, the achievement of which will determine the number of performance units that may be earned.
Entergy measures performance by assessing Entergy’s total shareholder return relative to the total shareholder
return of the companies in the Philadelphia Utility Index. To emphasize the importance of strong cash generation
for the long-term health of its business, Entergy Corporation replaced the cumulative adjusted earnings per share
metric with a credit measure – adjusted funds from operations/debt ratio for the 2021-2023 performance period. For
the 2021-2023 performance period, performance will be measured based eighty percent on relative total shareholder
return and twenty percent on the credit metric.
169
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In January 2021 the Board approved and Entergy granted 203,983 performance units under the 2019
Plan. The performance units were granted on January 28, 2021, and eighty percent were valued at $110.74 per
share based on various factors, primarily market conditions; and twenty percent were valued at $95.87 per share, the
closing price of Entergy Corporation’s common stock on that date. Performance units have the same dividend and
voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are
expensed ratably over the 3-year vesting period, and compensation cost for the portion of the award based on
cumulative adjusted earnings per share will be adjusted based on the number of units that ultimately vest.
The following table includes information about the long-term performance units outstanding at the target
level as of December 31, 2021:
Outstanding shares at January 1, 2021
Granted
Vested
Forfeited
Outstanding shares at December 31, 2021
Weighted-Average
Grant Date Fair
Value Per Share
$110.82
$104.02
$82.42
$122.87
$119.23
Shares
475,765
303,092
(235,983)
(21,038)
521,836
The following table includes financial information for the long-term performance units for each of the years
presented:
Compensation expense included in Entergy’s consolidated net income
Tax benefit recognized in Entergy’s consolidated net income
Compensation cost capitalized as part of fixed assets and inventory
2021
2020
(In Millions)
$12.6
$3.2
$4.9
$14.5
$3.7
$5.8
2019
$11.1
$2.8
$4.0
The total fair value of the long-term performance units granted was $32 million, $40 million, and $23
million for the years ended December 31, 2021, 2020, and 2019, respectively.
In January 2021, Entergy issued 235,983 shares of Entergy Corporation common stock at a share price of
$95.12 for awards earned and dividends accrued under the 2018-2020 Long-Term Performance Unit Program. In
January 2020, Entergy issued 423,184 shares of Entergy Corporation common stock at a share price of $126.31 for
awards earned and dividends accrued under the 2017-2019 Long-Term Performance Unit Program. In January
2019, Entergy issued 226,208 shares of Entergy Corporation common stock at a share price of $86.03 for awards
earned and dividends accrued under the 2016-2018 Long-Term Performance Unit Program.
Restricted Stock Unit Awards
Entergy 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 shares of Entergy Corporation common stock at the time of vesting. The costs
of restricted stock unit awards are charged to income over the restricted period, which varies from grant to
grant. The average vesting period for restricted stock unit awards granted is 35 months. As of December 31, 2021,
there were 88,648 unvested restricted stock units that are expected to vest over an average period of 18 months.
170
The following table includes information about the restricted stock unit awards outstanding as of
December 31, 2021:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Outstanding shares at January 1, 2021
Granted
Vested
Outstanding shares at December 31, 2021
Weighted-Average
Grant Date Fair
Value Per Share
$92.92
$105.06
$90.89
$99.18
Shares
86,175
39,478
(37,005)
88,648
The following table includes financial information for restricted stock unit awards for each of the years
presented:
Compensation expense included in Entergy’s consolidated net income
Tax benefit recognized in Entergy’s consolidated net income
Compensation cost capitalized as part of fixed assets and inventory
2021
$1.9
$0.5
$0.7
2020
(In Millions)
$2.0
$0.5
$0.9
2019
$2.2
$0.6
$0.9
The total fair value of the restricted stock unit awards granted was $4 million, $2 million, and $3 million for
the years ended December 31, 2021, 2020, and 2019, respectively.
The total fair value of the restricted stock unit awards vested was $3 million, $4 million, and $5.9 million
for the years ended December 31, 2021, 2020, and 2019, respectively.
NOTE 13. BUSINESS SEGMENT INFORMATION
Entergy’s reportable segments as of December 31, 2021 were Utility and Entergy Wholesale
Commodities. Utility includes the generation, transmission, distribution, and sale of electric power in portions of
Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana. Entergy
Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located
in the northern United States and the sale of the electric power produced by its operating plants to wholesale
customers. Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants
that sell the electric power produced by those plants to wholesale customers. “All Other” includes the parent
company, Entergy Corporation, and other business activity.
171
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s segment financial information was as follows:
2021
Utility
Entergy
Wholesale
Commodities
Operating revenues
Asset write-offs, impairments,
and related charges
Depreciation, amortization, &
decommissioning
Interest and investment income
Interest expense
Income taxes
Consolidated net income (loss)
Total assets
Cash paid for long-lived asset
additions
$11,044,674
$698,164
All Other
(In Thousands)
$87
Eliminations
Consolidated
($29) $11,742,896
$—
$263,625
$—
$—
$263,625
$1,823,389
$442,817
$692,004
$264,209
$1,488,487
$59,733,625
$—
$2,706
$10,932
$143,614
$164,602
$118,597
$13,334
($47,454)
($25,381)
($120,689) ($121,457)
$1,242,675
$561,168
($141,880)
($14,258)
$1,990,697
$430,466
$834,694
$191,374
($127,622) $1,118,719
($2,083,226) $59,454,242
$—
$6,409,855
$12,100
$157
$—
$6,422,112
2020
Utility
Entergy
Wholesale
Commodities
Operating revenues
Asset write-offs, impairments,
and related charges
Depreciation, amortization, &
decommissioning
Interest and investment income
Interest expense
Income taxes
Consolidated net income (loss)
Total assets
Cash paid for long-lived asset
additions
$9,170,714
$942,869
All Other
(In Thousands)
$78
Eliminations
Consolidated
($25) $10,113,636
$—
$26,623
$—
$—
$26,623
$1,685,138
$299,004
$648,851
($282,311)
$1,816,354
$55,940,153
$306,974
$234,194
$22,432
$104,937
($62,763) ($219,344)
$2,835
$19,563
$146,730
$55,868
$3,800,378
$552,632
$—
($159,943)
($32,350)
$1,994,947
$392,818
$785,663
($121,506)
($127,594) $1,406,653
($2,053,951) $58,239,212
$—
$5,102,322
$54,455
$84
$—
$5,156,861
2019
Utility
Entergy
Wholesale
Commodities
Operating revenues
Asset write-offs, impairments,
and related charges
Depreciation, amortization, &
decommissioning
Interest and investment income
Interest expense
Income taxes
Consolidated net income (loss)
Total assets
Cash paid for long-lived asset
additions
$9,583,985
$1,294,719
All Other
(In Thousands)
$21
Eliminations
Consolidated
($52) $10,878,673
$—
$290,027
$—
$—
$290,027
$1,493,167
$289,570
$589,395
$19,634
$1,425,643
$49,557,664
$384,707
$414,636
$29,450
($161,295)
$148,870
$4,154,961
$2,944
$26,295
$178,575
($28,164)
($188,675)
$514,020
$—
($182,589)
($54,995)
$1,880,818
$547,912
$742,425
($169,825)
($127,594) $1,258,244
($2,502,733) $51,723,912
$—
$4,527,045
$104,300
$160
$—
$4,631,505
172
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Entergy Wholesale Commodities business
“competitive
businesses.” Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the
Utility segment.
sometimes
referred
the
as
to
is
Results of operations for 2021 include a charge of $340 million ($268 million net-of-tax) as a result of the
sale of the Indian Point Energy Center in May 2021. See Note 14 to the financial statements for further discussion
of the sale of the Indian Point Energy Center.
Results of operations for 2020 include resolution of the 2014-2015 IRS audit, which resulted in a reduction
in deferred income tax expense of $230 million that includes a $396 million reduction in deferred income tax
expense at Utility related to the basis of assets contributed in the 2015 Entergy Louisiana and Entergy Gulf States
Louisiana business combination, including the recognition of previously uncertain tax positions, and deferred
income tax expense of $105 million at Entergy Wholesale Commodities and $61 million at Parent and Other
resulting from the revaluation of net operating losses as a result of the release of the reserves. See Note 3 to the
financial statements for further discussion of the IRS audit resolution.
Results of operations for 2019 include: 1) a loss of $190 million ($156 million net-of-tax) as a result of the
sale of the Pilgrim plant in August 2019; 2) a $156 million reduction in income tax expense recognized by Entergy
Wholesale Commodities as a result of an internal restructuring; and 3) impairment charges of $100 million
($79 million net-of-tax) due to costs being charged 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 exit the Entergy Wholesale Commodities’
merchant power business. See Note 3 to the financial statements for further discussion of the internal restructuring.
See Note 14 to the financial statements for further discussion of the sale of the Pilgrim plant.
Entergy Wholesale Commodities
In January 2019, Entergy sold the Vermont Yankee plant, which it had previously shut down, to NorthStar.
In August 2019, Entergy sold the Pilgrim plant, which it had previously shut down, to Holtec. In May 2021,
Entergy sold Indian Point 1, Indian Point 2, and Indian Point 3 to Holtec. Entergy has also announced plans to shut
down Palisades in May 2022 and has a purchase and sale agreement with Holtec expected to close after the plant is
shut down. Management expects these transactions to result in the cessation of merchant power generation at all
Entergy Wholesale Commodities nuclear power plants owned and operated by Entergy by 2022. Entergy will
continue to have the obligation to decommission the Palisades plant pending its sale to Holtec.
The decisions to shut down these plants and the related 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 the consolidated income
statements.
173 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total restructuring charges in 2021, 2020, and 2019 were comprised of the following:
Employee retention
and severance
expenses and other
benefits-related costs
Contracted
economic
development costs
Total
(In Millions)
$179
91
141
$129
71
55
$145
12
120
$37
$14
—
—
$14
—
—
$14
1
15
$—
$193
91
141
$143
71
55
$159
13
135
$37
Balance as of December 31, 2018
Restructuring costs accrued
Cash paid out
Balance as of December 31, 2019
Restructuring costs accrued
Cash paid out
Balance as of December 31, 2020
Restructuring costs accrued
Cash paid out
Balance as of December 31, 2021
In addition, Entergy Wholesale Commodities incurred $264 million in 2021, $19 million in 2020, and $290 million
in 2019 of impairment, loss on sales, and other related charges associated with these strategic decisions and
transactions. See Note 14 to the financial statements for further discussion of these impairment charges.
Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance
expenses of approximately $5 million in 2022 associated with these strategic transactions.
Geographic Areas
For the years ended December 31, 2021, 2020, and 2019, the amount of revenue Entergy derived from
outside of the United States was insignificant. As of December 31, 2021 and 2020, Entergy had no long-lived
assets located outside of the United States.
NOTE 14. ACQUISITIONS, DISPOSITIONS, AND IMPAIRMENT OF LONG-LIVED ASSETS
Acquisitions
Searcy Solar Facility
In March 2019, Entergy Arkansas entered into a build-own-transfer agreement for the purchase of an
approximately 100 MW solar energy facility to be sited on approximately 800 acres in White County near Searcy,
Arkansas. The project, Searcy Solar facility, was being constructed by a subsidiary of NextEra Energy Resources.
In April 2020 the APSC issued an order approving Entergy Arkansas’s acquisition of the Searcy Solar facility as
being in the public interest. In May 2021, Entergy Arkansas filed with the APSC an application seeking to amend
its certificate for the Searcy Solar facility to allow for the use of a tax equity partnership to acquire and own the
facility. The tax equity partnership structure is expected to reduce costs and yield incremental net benefits to
customers beyond those expected under the build-own-transfer structure alone. The APSC approved Entergy
Arkansas’s tax equity partnership request in September 2021. AR Searcy Partnership, LLC was formed for the tax
equity partnership with Entergy Arkansas as its managing member. In November 2021 both Entergy Arkansas and
the tax equity investor made capital contributions to the tax equity partnership that were then used to acquire the
facility. Upon substantial completion of the facility in December 2021, the tax equity partnership completed the
174
Entergy Corporation and Subsidiaries
Notes to Financial Statements
purchase of the Searcy Solar facility. The purchase price for the Searcy Solar facility was approximately
$133 million, which includes a final payment of approximately $1 million to be made in 2022. See Note 1 to the
financial statements for further discussion of the HLBV method of accounting used to account for the investment in
AR Searcy Partnership, LLC.
Hardin County Peaking Facility
In June 2021, Entergy Texas purchased the Hardin County Peaking Facility, an existing 147 MW simple-
cycle gas-fired peaking power plant in Kountze, Texas, from East Texas Electric Cooperative, Inc. In addition, also
in June 2021, Entergy Texas sold a 7.56% partial interest in the Montgomery County Power Station to East Texas
Electric Cooperative, Inc. for approximately $68 million. The two interdependent transactions were approved by
the PUCT in April 2021. The purchase price for the Hardin County Peaking Facility was approximately
$37 million.
Washington Parish Energy Center
In April 2017, Entergy Louisiana entered into an agreement with a subsidiary of Calpine Corporation for
the construction and purchase of Washington Parish Energy Center, which consists of two natural gas-fired
combustion turbine units with a total nominal capacity of approximately 361 MW. In November 2020, Entergy
Louisiana completed the purchase, as approved by the LPSC, of the Washington Parish Energy Center. The total
investment including transmission and other related costs, is approximately $261 million, including a payment of
$222 million to purchase the plant.
Choctaw Generating Station
In October 2019, Entergy Mississippi purchased the Choctaw Generating Station, an 810 MW natural gas
fired combined-cycle turbine plant located near French Camp, Mississippi, from a subsidiary of GenOn Energy Inc.
The purchase price for the Choctaw Generating Station was approximately $305 million.
Dispositions
Indian Point Energy Center
In April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests
in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 had been shut
down and defueled, to a Holtec International subsidiary. In November 2020 the NRC approved the sale of the plant
to Holtec. Indian Point 3 was shut down in April 2021 and defueled in May 2021. In May 2021 the New York State
Public Service Commission approved the sale of the plant to Holtec. The transaction closed in May 2021. The sale
included the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for
the three units. The transaction resulted in a charge of $340 million ($268 million net-of-tax) in the second quarter
of 2021. The disposition-date fair value of the nuclear decommissioning trust funds was approximately
$2,387 million and the disposition-date fair value of the asset retirement obligations was $1,996 million. The
transaction also included materials and supplies and prepaid assets.
Pilgrim
In July 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a
Holtec subsidiary 100% of the equity interests in Entergy Nuclear Generation Company, the owner of the Pilgrim
plant. In August 2019 the NRC approved the sale of the plant to Holtec. The transaction closed in August 2019 for
a purchase price of $1,000 (subject to adjustments for net liabilities and other amounts). The sale included the
transfer of the Pilgrim nuclear decommissioning trust and the asset retirement obligation for spent fuel management
and plant decommissioning. The transaction resulted in a loss of $190 million ($156 million net-of-tax) in the third
175 Entergy Corporation and Subsidiaries
Notes to Financial Statements
quarter 2019. The disposition-date fair value of the nuclear decommissioning trust fund was approximately $1,030
million and the disposition-date fair value of the asset retirement obligation was $837 million. The transaction also
included property, plant, and equipment with a net book value of zero, materials and supplies, and prepaid assets.
Vermont Yankee
In November 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 Entergy Nuclear Vermont Yankee to NorthStar included the transfer of the
nuclear decommissioning trust fund and the asset retirement obligation 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 of Vermont agencies and other interested parties that set forth the terms on which the
agencies and parties support the Vermont Public Utility Commission’s approval of the transaction. The agreements
provide additional financial assurance for decommissioning, spent fuel management and site restoration, and detail
the site restoration standards. In October 2018 the NRC issued an order approving the application to transfer
Vermont Yankee’s license to NorthStar for decommissioning. In December 2018 the Vermont Public Utility
Commission 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 credit facility was guaranteed by Entergy Corporation. A subsidiary of Entergy assumed the
obligations under the credit facility, which remains outstanding. At the closing 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 the
balance 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 the significant conditions of the sale, Entergy concluded that as of December 31, 2018, Vermont
Yankee was in held for sale status. Entergy accordingly evaluated the Vermont Yankee asset retirement obligation
in light of the terms of the sale transaction and evaluated the remaining values of the Vermont Yankee assets. These
evaluations resulted in an increase in the asset retirement obligation and $173 million of asset impairment and
related other charges in the fourth quarter 2018. Upon closing of the transaction in January 2019, the Vermont
Yankee decommissioning trust, along with the decommissioning obligation for the plant, was transferred to
NorthStar.
The Vermont Yankee spent fuel disposal contract was assigned to NorthStar as part of the transaction. The
Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019. The deferred
tax asset could not be fully realized by Entergy in the first quarter of 2019; accordingly, Entergy accrued a net tax
expense of $29 million on the disposition of Vermont Yankee. The transaction also resulted in other charges of
$5.4 million ($4.2 million net-of-tax) in the first quarter 2019.
176 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Impairment of Long-lived Assets
2019, 2020, and 2021 Impairments
Entergy continues to execute its strategy to shut down and sell all of the remaining plants in Entergy
Wholesale Commodities’ merchant nuclear fleet, with a planned shutdown of the only remaining operating plant,
Palisades, by May 31, 2022. The other five Entergy Wholesale Commodities’ nuclear plants, FitzPatrick, Vermont
Yankee, Pilgrim, Indian Point 2, and Indian Point 3, have been 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. The
Pilgrim plant was sold to Holtec International on August 26, 2019. The Indian Point 2 and Indian Point 3 plants
were sold to Holtec International on May 28, 2021.
Entergy Wholesale Commodities incurred $7 million in 2021, $19 million in 2020, and $100 million in
2019 of impairment charges primarily related to nuclear fuel spending, nuclear refueling outage spending, and
expenditures for capital assets. These costs were charged to expense as incurred as a result of the impaired fair
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 exit the Entergy Wholesale
Commodities merchant power business.
With respect to Palisades, Entergy and Consumers Energy had agreed to amend the existing PPA so that it
would terminate early, on May 31, 2018. In September 2017, however, Entergy and Consumers Energy agreed to
terminate the PPA amendment agreement. Entergy continues to operate Palisades under the current PPA with
Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut
down the Palisades plant permanently no later than May 31, 2022. As a result of the change in expected operating
life of the Palisades plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017
exceeded the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling
outage spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 are no longer
charged to expense as incurred, but recorded as assets and depreciated or amortized, subject to the typical periodic
impairment reviews prescribed in the accounting rules.
The impairments and other related charges are recorded as a separate line item in Entergy’s consolidated
statements of operations and are included within the results of the Entergy Wholesale Commodities segment. In
addition to the impairments and other related charges, Entergy expects to incur additional charges through mid-2022
associated with these strategic transactions. See Note 13 to the financial statements for further discussion of these
additional charges.
NOTE 15. RISK MANAGEMENT AND FAIR VALUES
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the
potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or
instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk
including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate
commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based
rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative
instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for
resale costs, that are recovered from customers.
177 Entergy Corporation and Subsidiaries
Notes to Financial Statements
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in
MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also
sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas
contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and
options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was
expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow.
Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale
Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in
April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale
Commodities portfolio.
Entergy’s exposure to market risk is determined by a number of factors, including the size, term,
composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as
options, the time period during which the option may be exercised and the relationship between the current market
price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of
market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use
of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to
mitigate risk associated with future energy and capacity prices; however, other considerations are factored into
hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk,
hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by
actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its
hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and
rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to
ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions
while others are classified as normal purchase/normal sale transactions due to their physical settlement
provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel
purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include
natural gas and electricity swaps and options. Entergy may enter into financially-settled swap and option contracts
to manage market risk that may or may not be designated as hedging instruments.
Entergy entered 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 settled against day-ahead
power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Planned
generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 99% for 2022, all
of which is sold under normal purchase/normal sale contracts. Total planned generation for 2022 is 2.8 TWh.
Entergy used standardized master netting agreements to help mitigate the credit risk of derivative
instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and
may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as
security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to
post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented
an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in
accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation
of all positions in the event of a failure or inability to post collateral.
178 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants
contained provisions that required an Entergy subsidiary to provide credit support to secure its obligations
depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these
requirements was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment
grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the
applicable date. As of December 31, 2021, there were no outstanding derivative contracts held by Entergy
Wholesale Commodities. As of December 31, 2021, $8 million in cash collateral was required to be posted by the
Entergy subsidiary to its counterparties. As of December 31, 2020, there were no derivative contracts with
counterparties in a liability position. In addition to the corporate guarantee, $5 million in cash collateral was
required to be posted by the Entergy subsidiary to its counterparties and $39 million in letters of credit were
required to be posted by its counterparties to the Entergy subsidiary.
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New
Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle
against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options are
marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the
program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual
exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected
winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy
has executed natural gas swaps and options as of December 31, 2021 is 2.25 years for Entergy Louisiana and the
maximum length of time over which Entergy has executed natural gas swaps as of December 31, 2021 is 10 months
for Entergy Mississippi and 3 months for Entergy New Orleans. The total volume of natural gas swaps and options
outstanding as of December 31, 2021 is 33,083,500 MMBtu for Entergy, including 16,420,000 MMBtu for Entergy
Louisiana, 16,017,800 MMBtu for Entergy Mississippi, and 645,700 MMBtu for Entergy New Orleans. Credit
support for these natural gas swaps and options is covered by master agreements that do not require Entergy to
provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to
requests for collateral.
During the second quarter 2021, Entergy participated in the annual financial transmission rights auction
process for the MISO planning year of June 1, 2021 through May 31, 2022. Financial transmission rights are
derivative instruments that represent economic hedges of future congestion charges that will be incurred in serving
Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial
transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair
value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission
rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating
companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights.
The total volume of financial transmission rights outstanding as of December 31, 2021 is 57,836 GWh for Entergy,
including 12,561 GWh for Entergy Arkansas, 25,973 GWh for Entergy Louisiana, 6,429 GWh for Entergy
Mississippi, 2,643 GWh for Entergy New Orleans, and 10,003 GWh for Entergy Texas. Credit support for financial
transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each
Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy
Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial
transmission rights exposure for Entergy Wholesale Commodities as of December 31, 2021 and 2020. Letters of
credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi and Entergy
Texas as of December 31, 2021 and for Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy
Texas as of December 31, 2020.
179 Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31,
2021 are shown in the table below. Certain investments, including those not designated as hedging instruments, are
subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with
accounting guidance for derivatives and hedging.
Instrument
Balance Sheet
Location
Gross
Fair
Value
(a)
Offsetting
Position
(b)
Net Fair
Value (c)
(d)
(In Millions)
Business
Derivatives not
designated as hedging
instruments
Assets:
Natural gas swaps and
options
Natural gas swaps and
options
Financial transmission
rights
Liabilities:
Natural gas swaps and
options
Prepayments and other
(current portion)
Other deferred debits
and other assets (non-
current portion)
$6
$5
$—
$—
Prepayments and other
$4
$—
$6
$5
$4
Utility
Utility
Utility and
Entergy
Wholesale
Commodities
Other current liabilities
(current portion)
$7
$—
$7
Utility
180
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31,
2020 are shown in the table below. Certain investments, including those not designated as hedging instruments, are
subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with
accounting guidance for derivatives and hedging.
Instrument
Balance Sheet
Location
Gross
Fair
Value
(a)
Offsetting
Position
(b)
Net Fair
Value (c)
(d)
(In Millions)
Business
Derivatives designated as
hedging instruments
Electricity swaps and
options
Liabilities:
Electricity swaps and
options
Derivatives not
designated as hedging
instruments
Assets:
Natural gas swaps and
options
Natural gas swaps and
options
Financial transmission
rights
Liabilities:
Natural gas swaps and
options
Natural gas swaps and
options
Prepayments and other
(current portion)
$39
($1)
$38
Other current liabilities
(current portion)
$1
($1)
$—
Entergy Wholesale
Commodities
Entergy Wholesale
Commodities
Prepayments and other
(current portion)
Other deferred debits
and other assets (non-
current portion)
Prepayments and other
Other current liabilities
(current portion)
Other non-current
liabilities (non-current
portion)
$1
$1
$9
$6
$1
$—
$—
$—
$—
$—
$1
$1
$9
$6
$1
Utility
Utility
Utility and Entergy
Wholesale
Commodities
Utility
Utility
(a)
(b)
(c)
(d)
Represents the gross amounts of recognized assets/liabilities
Represents the netting of fair value balances with the same counterparty
Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’
Consolidated Balance Sheet
Excludes cash collateral in the amount of $8 million posted as of December 31, 2021 and $5 million posted
as of December 31, 2020. Also excludes letters of credit in the amount of $1 million posted and $39 million
held as of December 31, 2020.
181
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income
statements for the years ended December 31, 2021, 2020, and 2019 are as follows:
Amount of gain
(loss)
recognized in
other
comprehensive
income
(In Millions)
Income Statement location
Amount of gain
(loss) reclassified
from accumulated
other
comprehensive
income into
income (a)
(In Millions)
$2
Competitive business operating revenues
$40
$77
Competitive business operating revenues
$148
$232
Competitive business operating revenues
$97
Instrument
2021
Electricity swaps and options
2020
Electricity swaps and options
2019
Electricity swaps and options
(a)
Before taxes of $8 million, $31 million, and $20 million, for the years ended December 31, 2021, 2020, and
2019, respectively
Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the
original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other
comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are
included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses
on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset
as they flow through to earnings.
182
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated
income statements for the years ended December 31, 2021, 2020, and 2019 are as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Statement
location
Amount of gain
(loss) recorded in
the income
statement
(In Millions)
Instrument
2021
Natural gas swaps and options
Financial transmission rights
Electricity swaps and options (c)
2020
Natural gas swaps and option
Financial transmission rights
Electricity swaps and options (c)
2019
Natural gas swaps
Financial transmission rights
Electricity swaps and options (c)
Fuel, fuel-related
expenses, and gas
purchased for resale
Purchased power expense
Competitive business
operating revenues
Fuel, fuel-related
expenses, and gas
purchased for resale
Purchased power expense
Competitive business
operating revenues
Fuel, fuel-related
expenses, and gas
purchased for resale
Purchased power expense
Competitive business
operating revenues
(a)
(b)
(a)
(b)
(a)
(b)
$32
$179
($2)
($12)
$92
$1
($13)
$94
$12
(a)
(b)
(c)
Due to regulatory treatment, the natural gas swaps and options are marked-to-market through fuel, fuel-
related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and
recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when
the swaps and options are settled are recovered or refunded through fuel cost recovery mechanisms.
Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the
Utility operating companies are recorded through purchased power expense and then such amounts are
simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses
recorded as purchased power expense when the financial transmission rights for the Utility operating
companies are settled are recovered or refunded through fuel cost recovery mechanisms.
There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps
and options.
183
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical
prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the
estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize
in a current market exchange. Gains or losses realized on financial instruments are reflected in future rates and
therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified
as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these
instruments.
Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or
the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market
participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input
data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily
observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries
endeavor to use the best available information to determine fair value.
Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair
value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the
identical asset or liability and the lowest priority for unobservable inputs.
The three levels of the fair value hierarchy are:
•
•
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that
the entity has the ability to access at the measurement date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume to provide pricing information on an
ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents
(temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments,
and gas swaps traded on exchanges with active markets. Cash equivalents includes all unrestricted highly
liquid debt instruments with an original or remaining maturity of three months or less at the date of
purchase.
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or
indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices
derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer
quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or
overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include
the following:
–
–
–
–
quoted prices for similar assets or liabilities in active markets;
quoted prices for identical assets or liabilities in inactive markets;
inputs other than quoted prices that are observable for the asset or liability; or
inputs that are derived principally from or corroborated by observable market data by correlation or
other means.
Level 2 consists primarily of individually-owned debt instruments and gas swaps and options valued using
observable inputs.
•
Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective
sources. These inputs are used with internally developed methodologies to produce management’s best
184 Entergy Corporation and Subsidiaries
Notes to Financial Statements
estimate of fair value for the asset or liability. Level 3 consists primarily of financial transmission rights
and derivative power contracts used as cash flow hedges of power sales at merchant power plants.
Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale
Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in
April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale
Commodities portfolio.
The values for power contract assets or liabilities prior to expiration in April 2021 were based on both
observable inputs including public market prices and interest rates, and unobservable inputs such as implied
volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates.
They were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed
by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The
primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting
market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’
commercial transactions, developing and administering protocols for the management of market risks, and
implementing and maintaining controls around changes to market data in the energy trading and risk management
system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk
management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities
Accounting group performed functions related to market and counterparty settlements, revenue reporting and
analysis, and financial accounting. The Office of Corporate Risk Oversight report to the Vice President and
Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the
contracts were 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 equaled the estimated amount receivable to or payable by Entergy if the contracts
were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash
flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were based on the
mark-to-market comparison between the fixed contract prices and the floating prices determined each period from
quoted forward power market prices. The differences between the fixed price in the swap contract and these
market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit
adjusted risk free rate were recorded as derivative contract assets or liabilities. For contracts that had unit
contingent terms, a further discount was applied based on the historical relationship between contract and market
prices for similar contract terms.
The amounts reflected as the fair values of electricity options were valued based on a Black Scholes model,
and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day
forward market prices for the period when the transactions settled, implied volatilities based on market volatilities
provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further
below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a
better representation of fair value.
On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps
and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to
other sources of forward market prices or to settlement prices of actual market transactions. Significant differences
were analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of
actual market transactions. Implied volatilities used to value options were also validated using actual counterparty
quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market
implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-
market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was
communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all
proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to
185 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this
analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale
Commodities.
The values of financial transmission rights are based on unobservable inputs, including estimates of
congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of
historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities
are performed by the Office of Corporate Risk Oversight. The values are calculated internally and verified against
the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these
valuations for reasonableness, with the assistance of others within the organization with knowledge of the various
inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President
and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that
are accounted for at fair value on a recurring basis as of December 31, 2021 and December 31, 2020. The
assessment of the significance of a particular input to a fair value measurement requires judgment and may affect
their placement within the fair value hierarchy levels.
2021
Level 1
Level 2
Level 3
Total
(In Millions)
Assets:
Temporary cash investments
Decommissioning trust funds (a):
Equity securities
Debt securities (b)
Common trusts (c)
Securitization recovery trust account
Escrow accounts
Gas hedge contracts
Financial transmission rights
Liabilities:
Gas hedge contracts
$398
$—
$—
$398
132
770
29
49
6
—
$1,384
—
1,407
—
—
5
—
$1,412
—
—
—
—
—
4
$4
132
2,177
3,205
29
49
11
4
$6,005
$7
$—
$—
$7
186
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2020
Level 1
Level 2
Level 3
Total
(In Millions)
Assets:
Temporary cash investments
Decommissioning trust funds (a):
Equity securities
Debt securities
Common trusts (c)
Power contracts
Securitization recovery trust account
Escrow accounts
Gas hedge contracts
Financial transmission rights
Liabilities:
Gas hedge contracts
$1,630
$—
$—
$1,630
1,533
919
—
42
148
1
—
$4,273
—
1,698
—
—
—
1
—
$1,699
$6
$1
—
—
38
—
—
—
9
$47
$—
1,533
2,617
3,103
38
42
148
2
9
$9,122
$7
(a)
(b)
(c)
The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to
approximate the returns of major market indices. Fixed income securities are held in various governmental
and corporate securities. See Note 9 to the financial statements for additional information on the investment
portfolios.
The decommissioning trust funds fair value presented herein does not include the recognition pursuant to
ASU 2016-13 of a credit loss valuation allowance of $0.4 million as of December 31, 2021 and $0.1 million
as of December 31, 2020 on debt securities. See Note 16 to the financial statements for additional
information on the allowance for expected credit losses.
Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value
as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund
administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of
derivatives classified as Level 3 in the fair value hierarchy for the years ended December 31, 2021, 2020, and 2019:
2021
2020
2019
Power
Contracts
Financial
transmission
rights
Power
Contracts
Financial
transmission
rights
Power
Contracts
Financial
transmission
rights
$38
(2)
2
—
—
(38)
$—
$9
—
—
162
12
(179)
$4
(In Millions)
$118
$10
($31)
$15
1
77
—
—
(158)
$38
1
—
67
23
(92)
$9
12
232
—
—
(95)
$118
—
—
54
35
(94)
$10
Balance as of January 1,
Total gains (losses) for the
period (a)
Included in earnings
Included in other
comprehensive income
Included as a regulatory
liability/asset
Issuances of financial
transmission rights
Settlements
Balance as of December 31,
187
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(a)
Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the
reporting period is ($0.3) million and ($9.2) million for the years ended December 31, 2020 and 2019,
respectively.
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated
internally and verified against historical pricing data published by MISO.
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair
value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant
Unobservable Input
Transaction Type
Position
Change to Input
Effect on Fair
Value
Unit contingent discount
Electricity swaps
Sell
Increase (Decrease) Decrease (Increase)
NOTE 16. DECOMMISSIONING TRUST FUNDS
The NRC requires Entergy subsidiaries to maintain nuclear decommissioning trusts to fund the costs of
decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, and Palisades. Entergy’s nuclear
decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.
As discussed in Note 14 to the financial statements, in May 2021, Entergy completed the transfer of Indian
Point 1, Indian Point 2, and Indian Point 3 to Holtec. As part of the transaction, Entergy transferred the Indian Point
1, Indian Point 2, and Indian Point 3 decommissioning trust funds to Holtec. The disposition-date fair value of the
decommissioning trust funds was approximately $2,387 million.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability
of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory
treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of
unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River
Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the
unrealized trust earnings not currently expected to be needed to decommission the plant. Decommissioning trust
funds for the Entergy Wholesale Commodities nuclear plants do not meet the criteria for regulatory accounting
treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized
in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in
the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost
exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the
accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than
temporary and therefore recorded in earnings. A portion of Entergy’s decommissioning trust funds were held in a
wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt
securities held in the registered investment company were recognized in earnings. In December 2020, Entergy
liquidated its interest in the registered investment company. Generally, Entergy records gains and losses on its debt
and equity securities using the specific identification method to determine the cost basis of its securities.
The unrealized gains/(losses) recognized during the year ended December 31, 2021 on equity securities still
held as of December 31, 2021 were $605 million. The equity securities are generally held in funds that are designed
to approximate or somewhat exceed the return of the Standard Poor’s 500 Index. A relatively small percentage of
the equity securities are held in funds intended to replicate the return of the Wilshire 4500 index or the Russell 3000
Index. The debt securities are generally held in individual government and credit issuances.
188
The available-for-sale securities held as of December 31, 2021 and 2020 are summarized as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair
Value
Total
Unrealized
Gains
(In Millions)
Total
Unrealized
Losses
2021
Debt Securities
$2,177
$65
$12
2020
Debt Securities
$2,617
$197
$3
The unrealized gains/(losses) above are reported before deferred taxes of $2 million as of December 31,
2021 and $31 million as of December 31, 2020 for debt securities. The amortized cost of available-for-sale debt
securities was $2,125 million as of December 31, 2021 and $2,423 million as of December 31, 2020. As of
December 31, 2021, available-for-sale debt securities had an average coupon rate of approximately 2.74%, an
average duration of approximately 6.94 years, and an average maturity of approximately 10.55 years.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of
time that the securities had been in a continuous loss position, were as follows as of December 31, 2021 and 2020:
December 31, 2021
December 31, 2020
Fair Value
Gross
Unrealized
Losses
Fair Value
Gross
Unrealized
Losses
Less than 12 months
More than 12 months
Total
$770
99
$869
(In Millions)
$8
4
$12
$187
2
$189
$3
—
$3
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of
December 31, 2021 and 2020 are as follows:
Less than 1 year
1 year - 5 years
5 years - 10 years
10 years - 15 years
15 years - 20 years
20 years+
Total
2021
2020
(In Millions)
$—
473
655
389
130
530
$2,177
($4)
672
852
377
144
576
$2,617
During the years ended December 31, 2021, 2020, and 2019, proceeds from the dispositions of available-
for-sale securities amounted to $1,465 million, $1,024 million, and $1,427 million, respectively. During the years
ended December 31, 2021, 2020, and 2019, gross gains of $29 million, $47 million, and $25 million, respectively,
and gross losses of $17 million, $4 million, and $4 million, respectively, related to available-for-sale securities were
reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
189
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear
plant as of December 31, 2021 was $576 million for Palisades. The fair values of the decommissioning trust funds
related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2020 were $631 million for Indian
Point 1, $794 million for Indian Point 2, $991 million for Indian Point 3, and $554 million for Palisades. The fair
values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Allowance for expected credit losses
Entergy implemented ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, effective January 1, 2020. In accordance with the new standard, Entergy
estimates the expected credit losses for its available for sale securities based on the current credit rating and
remaining life of the securities. To the extent an individual security is determined to be uncollectible it is written
off against this allowance. Entergy’s available-for-sale securities are held in trusts managed by third parties who
operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and
sales of investments. Specifically, available-for-sale securities are subject to credit worthiness restrictions, with
requirements for both the average credit rating of the portfolio and minimum credit ratings for individual debt
securities. As of December 31, 2021 and 2020, Entergy’s allowance for expected credit losses related to available-
for-sale securities were $0.4 million and $0.1 million, respectively. Entergy did not record any impairments of
available-for-sale debt securities for the years ended December 31, 2021 and 2020.
Other-than-temporary impairments and unrealized gains and losses
Prior to the implementation of ASU 2016-13 on January 1, 2020, Entergy evaluated the available-for-sale
debt securities in the Entergy Wholesale Commodities nuclear decommissioning trust funds with unrealized losses
at the end of each period to determine whether an other-than-temporary impairment had occurred. The assessment
of whether an investment in a debt security suffered an other-than-temporary impairment was based on whether
Entergy had the intent to sell or more likely than not would have been required to sell the debt security before
recovery of its amortized costs. Further, if Entergy did not expect to recover the entire amortized cost basis of the
debt security, an other-than-temporary impairment was considered to have occurred and it was 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 the year ended
December 31, 2019.
NOTE 17. VARIABLE INTEREST ENTITIES
Under applicable authoritative accounting guidance, a variable interest entity (VIE) is an entity that
conducts a business or holds property that possesses any of the following characteristics: an insufficient amount of
equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of
the entity (or have voting rights that are disproportionate to their ownership interest), or where equity holders do not
receive expected losses or returns. An entity may have an interest in a VIE through ownership or other contractual
rights or obligations, and is required to consolidate a VIE if it is the VIE’s primary beneficiary. The primary
beneficiary of a VIE is the entity that has the power to direct the activities of the VIE that most significantly affect
the VIE’s economic performance and has the obligation to absorb losses or has the right to residual returns that
would potentially be significant to the entity.
Entergy Arkansas, Entergy Louisiana, and System Energy consolidate the respective companies from which
they lease nuclear fuel, usually in a sale and leaseback transaction. This is because Entergy directs the nuclear fuel
companies with respect to nuclear fuel purchases, 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 its obligations. During the term of the
arrangements, none of the Entergy operating companies have been required to provide financial support apart from
190 Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 losses associated with their respective interests in the nuclear fuel companies.
Entergy Gulf States Reconstruction Funding I, LLC, and Entergy Texas Restoration Funding, LLC,
companies wholly-owned and consolidated by Entergy Texas, are variable interest entities and Entergy Texas is the
primary beneficiary. In June 2007, Entergy Gulf States Reconstruction Funding issued senior secured transition
bonds (securitization bonds) to finance Entergy Texas’s Hurricane Rita reconstruction costs. Although the principal
amount was not due until June 2022, Entergy Gulf States Reconstruction Funding made principal payments on the
bonds in 2021, after which the bonds were fully repaid. In November 2009, Entergy Texas Restoration Funding
issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Ike and
Hurricane Gustav restoration costs. With the proceeds, the variable interest entities purchased from Entergy Texas
the transition property, which is the right to recover from customers through a transition charge amounts sufficient
to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated
Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of the
variable interest entities, including the 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 the financial statements for additional
details regarding the securitization bonds.
Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy
Arkansas, is a variable interest entity and Entergy Arkansas is the primary beneficiary. In August 2010, Entergy
Arkansas Restoration Funding issued storm cost recovery bonds to finance Entergy Arkansas’s January 2009 ice
storm damage restoration costs. With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy
Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge
amounts sufficient to service the securitization bonds. Although the principal amount was not due until August
2021, Entergy Arkansas Restoration Funding made principal payments on the bonds in 2020, after which the bonds
were fully repaid. Entergy Arkansas Restoration Funding, LLC was then legally dissolved in January 2021. See
Note 5 to the financial 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, is a variable interest entity and Entergy Louisiana is the primary beneficiary. In September
2011, Entergy Louisiana Investment Recovery Funding issued investment recovery bonds to recover Entergy
Louisiana’s investment recovery costs associated with the canceled Little Gypsy repowering project. With the
proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana the investment
recovery property, which is the right to recover from customers through an investment recovery charge amounts
sufficient to service the bonds. Although the principal amount was not due until September 2023, Entergy
Louisiana Investment Recovery Funding made principal payments on the bonds in 2021, after which the bonds were
fully repaid. See Note 5 to the financial statements for additional 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 Recovery Funding issued storm cost recovery bonds to recover Entergy New
Orleans’s Hurricane Isaac storm restoration costs, including carrying costs, 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 of Entergy New Orleans do not have recourse to the assets or revenues of Entergy New
Orleans Storm Recovery Funding, including the storm recovery property, and the creditors of Entergy New Orleans
Storm Recovery Funding do not have recourse to the assets or revenues of Entergy New Orleans. Entergy New
191 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Orleans has no payment obligations to Entergy New Orleans Storm Recovery Funding except to remit storm
recovery charge collections. See Note 5 to the financial statements for additional details regarding the securitization
bonds.
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided
interest in the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in
more detail in Note 5 to the financial statements. System Energy made payments on its lease, including interest, of
$17.2 million in 2021, $17.2 million in 2020, and $17.2 million in 2019. The lessor is a bank acting in the capacity
of owner trustee for the benefit of equity investors in the transaction pursuant to trust agreement entered solely for
the purpose of facilitating the lease transaction. It is possible that System Energy may be considered as the primary
beneficiary of the lessor, but it is unable to apply the authoritative accounting guidance with respect to this VIE
because the lessor is not required to, and could not, provide the necessary financial information to consolidate the
lessor. Because System Energy accounts for this leasing arrangement as a capital financing, however, System
Energy believes that consolidating the lessor would not materially affect the financial statements. In the unlikely
event of default under a lease, remedies available to the lessor include payment by the lessee of the fair value of the
undivided interest in the plant, payment of the present value of the basic rent payments, or payment of a
predetermined casualty value. System Energy believes, however, that the obligations recorded on the balance sheet
materially represent its potential exposure to loss.
AR Searcy Partnership, LLC, is a tax equity partnership that qualifies as a variable interest entity, which
Entergy Arkansas is required to consolidate as it is the primary beneficiary. See Note 14 to the financial statements
for additional discussion on the establishment of AR Searcy Partnership, LLC and the acquisition of the Searcy
Solar facility. The entity is a VIE because the membership interests do not give Entergy Arkansas or the third party
tax equity investor substantive kick out rights typical of equity owners. Entergy Arkansas is the primary beneficiary
of the partnership because it is the managing member and has the right to a majority of the operating income of the
partnership. See Note 1 to the financial statements for further discussion on the presentation of the third party tax
equity partner’s noncontrolling interest and the HLBV method of accounting used to account for Entergy
Arkansas’s investment in AR Searcy Partnership, LLC. As of December 31, 2021, AR Searcy Partnership, LLC
recorded assets equal to $140 million, primarily consisting of property, plant, and equipment, and the carrying value
of Entergy Arkansas’s ownership interest in the partnership was approximately $107 million.
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 interest entities. In these cases, Entergy has determined that it is not the primary
beneficiary of the related VIE because it does not have the power to direct the activities of the VIE that most
significantly affect the VIE’s economic performance, or it does not have the obligation to absorb losses or the right
to residual returns that would potentially be significant to the entity, or both.
NOTE 18. TRANSACTIONS WITH AFFILIATES
Transactions with Equity Method Investees
EWO Marketing, LLC, an indirect wholly-owned subsidiary of Entergy, paid capacity charges and gas
transportation to RS Cogen in the amounts of $24 million in 2021, $26 million in 2020, and $24.5 million in 2019.
Entergy’s operating transactions with its other equity method investees were not significant in 2021, 2020,
or 2019.
192
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 19. REVENUE
Revenues from electric service and the sale of natural gas are recognized when services are transferred to
the customer in an amount equal to what Entergy has the right to bill the customer because this amount represents
the value of services provided to customers. Entergy’s total revenues for the years ended December 31, 2021, 2020
and 2019 are as follows:
Utility:
Residential
Commercial
Industrial
Governmental
Total billed retail
Sales for resale (a)
Other electric revenues (b)
Revenues from contracts with customers
Other revenues (c)
Total electric revenues
Natural gas
Entergy Wholesale Commodities:
Competitive businesses sales from contracts
with customers (a)
Other revenues (c)
Total competitive businesses revenues
2021
2020
(In Thousands)
2019
$3,981,846
2,610,207
2,942,370
245,685
9,780,108
601,895
375,312
10,757,315
116,680
10,873,995
170,610
$3,550,317
2,292,740
2,331,170
212,131
8,386,358
295,810
348,102
9,030,270
16,373
9,046,643
124,008
$3,531,500
2,475,586
2,541,287
228,470
8,776,843
285,722
343,143
9,405,708
24,270
9,429,978
153,954
672,493
25,798
698,291
771,360
171,625
942,985
1,164,552
130,189
1,294,741
Total operating revenues
$11,742,896
$10,113,636
$10,878,673
(a)
(b)
(c)
Sales for resale and competitive businesses sales include day-ahead sales of energy in a market
administered by an ISO. These sales represent financially binding commitments for the sale of physical
energy the next day. These sales are adjusted to actual power generated and delivered in the real time
market. Given the short duration of these transactions, Entergy does not consider them to be derivatives
subject to fair value adjustments, and includes them as part of customer revenues.
Other electric revenues consist primarily of transmission and ancillary services provided to participants of
an ISO-administered market and unbilled revenue.
Other revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue
programs, provisions for revenue subject to refund, and late fees.
Electric Revenues
Entergy’s primary source of revenue is from retail electric sales sold under tariff rates approved by
regulators in its various jurisdictions. 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. Entergy’s Utility operating companies provide power to customers on
demand throughout the month, measured by a meter located at the customer’s property. Approved rates vary by
customer class due to differing requirements of the customers and market factors involved in fulfilling those
193
Entergy Corporation and Subsidiaries
Notes to Financial Statements
requirements. Entergy issues monthly bills to customers 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 an estimate for energy delivered since the latest billings. The Utility operating companies
calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual
generation in the month, historical line loss factors, and market prices of power in the respective jurisdiction. The
inputs are revised as needed to approximate actual usage and cost. Each month, estimated unbilled amounts are
recorded as unbilled revenue and accounts receivable, and the prior month’s estimate is reversed. Price and volume
differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the
other.
Entergy may record revenue based on rates that are subject to refund. Such revenues are reduced by
estimated refund amounts when 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 are presented as other revenues 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 Grand Gulf nuclear plant to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans. System Energy issues monthly 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 transactions with MISO, a regional transmission organization that maintains functional control over the
combined transmission systems of its members and manages one of the largest energy markets in the U.S. In the
MISO market, Entergy offers its generation and bids its load into the market. MISO settles these offers and bids
based on locational marginal prices. These represent pricing for energy at a given location based on a market
clearing price that takes into account physical limitations on the transmission system, generation, and demand
throughout the MISO region. MISO evaluates each market participant’s energy offers and demand bids to
economically and reliably dispatch the entire MISO system. Entergy nets purchases and sales within the MISO
market and reports in operating revenues when in a net selling position and in operating expenses when in a net
purchasing position.
Natural Gas
Entergy 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 Revenues
The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power
and capacity produced by its operating plants to wholesale customers. The majority of Entergy Wholesale
Commodities’ 2021 revenues were from the Palisades nuclear power plant located in Michigan. Entergy issues
monthly invoices to the counterparties for these electric sales at the respective contracted or ISO market rate of
electricity and related services provided during the previous month.
Almost all of the Palisades nuclear plant output is sold under a 15-year PPA with Consumers Energy,
executed as part of the acquisition of the plant in 2007 and expiring in April 2022. Prices under the original PPA
range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh.
Entergy executed an additional PPA to cover the period from the expiration of the original PPA through final
194 Entergy Corporation and Subsidiaries
Notes to Financial Statements
shutdown in May 2022, at a price of $24.14/MWh. Entergy issues monthly invoices to Consumers Energy for
electric sales based on the actual output of electricity and related services provided during the previous month at the
contract price. The PPA was at below-market prices at the time of the acquisition and Entergy amortizes a liability
to revenue over the life of the agreement. The amount amortized each period is based upon the present value,
calculated at the date of acquisition, of each year’s difference between revenue under the agreement and revenue
based on estimated market prices. Amounts amortized to revenue were $12 million in 2021, $11 million in 2020,
and $10 million in 2019. Amounts to be amortized to revenue through the remaining life of the agreement will be
approximately $5 million in 2022.
Practical Expedients and Exceptions
Entergy has elected not to disclose the value of unsatisfied performance obligations for contracts with an
original expected term of one year or less, or for revenue recognized in an amount equal to what Entergy has the
right to bill the customer for services performed.
Most of Entergy’s contracts, except in a few cases where there are defined minimums or stated terms, are on
demand. This results in customer bills that vary each month based on an approved tariff and usage. Entergy
imposes monthly or annual minimum requirements on some customers primarily as credit and cost recovery
guarantees and not as pricing for unsatisfied performance obligations. These minimums typically expire after the
initial term or when specified costs have been recovered. The minimum amounts are part of each month’s bill and
recognized as revenue accordingly. Some of the subsidiaries within the Entergy Wholesale Commodities 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 Costs
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel
factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed
to customers. Where the fuel component of revenues is based on a pre-determined fuel cost (fixed fuel factor), the
fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor
filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The
capital costs are based on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus
System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-
producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and
some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues.
Allowance for doubtful accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of expected losses on its accounts
receivable balances. Due to the essential nature of utility services, Entergy has historically experienced a low rate
of default on its accounts receivables. Due to the effect of the COVID-19 pandemic on customer receivables,
however, Entergy recorded an increase in 2020 in its allowance for doubtful accounts, as shown below. The
following tables set forth a reconciliation of changes in the allowance for doubtful accounts for the years ended
December 31, 2021 and 2020.
195 Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy
Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New
Orleans
Entergy
Texas
Balance as of December 31, 2020 $117.7
56.2
Provisions (a)
(118.2)
Write-offs
12.9
Recoveries
$68.6
Balance as of December 31, 2021
$18.3
30.4
(38.9)
3.3
$13.1
(In Millions)
$45.7
16.7
(38.3)
5.1
$29.2
$19.5
0.7
(15.7)
2.7
$7.2
$17.4
7.3
(12.3)
0.9
$13.3
$16.8
1.1
(13.0)
0.9
$5.8
Entergy
Entergy
Arkansas
Entergy
Louisiana
Entergy
Mississippi
Entergy
New
Orleans
Entergy
Texas
Balance as of December 31, 2019
Provisions (b)
(8.6)
Write-offs
Recoveries
9.9
Balance as of December 31, 2020 $117.7
$7.4
109.0
$1.2
16.2
(1.8)
2.7
$18.3
(In Millions)
$1.9
43.7
(3.5)
3.6
$45.7
$0.6
18.8
(1.2)
1.3
$19.5
$3.2
14.1
(1.0)
1.1
$17.4
$0.5
16.2
(1.1)
1.2
$16.8
(a)
(b)
Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from
the COVID-19 pandemic of $30.4 million for Entergy, $22.2 million for Entergy Arkansas, $7.4 million for
Entergy Louisiana, ($2.4) million for Entergy Mississippi, $4.3 million for Entergy New Orleans, and
($1.1) million for Entergy Texas that have been deferred as regulatory assets. See Note 2 to the financial
statements for discussion of the COVID-19 orders issued by retail regulators.
Provisions include estimated incremental bad debt expenses resulting from the COVID-19 pandemic of
$87.1 million for Entergy, $10.5 million for Entergy Arkansas, $36 million for Entergy Louisiana,
$15.5 million for Entergy Mississippi, $12.2 million for Entergy New Orleans, and $12.9 million for
Entergy Texas that have been deferred as regulatory assets. See Note 2 to the financial statements for
discussion of the COVID-19 orders issued by retail regulators.
The allowance for currently expected credit losses is calculated as the historical rate of customer write-offs
multiplied by the current accounts receivable balance, taking into account the length of time the receivable balances
have been outstanding. Although the rate of customer write-offs has historically experienced minimal variation,
management monitors the current condition of individual customer accounts to manage collections and ensure bad
debt expense is recorded in a timely manner.
196
BOARD OF DIRECTORS
AS OF MARCH 25, 2022
JOHN R. BURBANK
Independent Strategic Advisor
Groton, Connecticut
An Entergy director since 2018. Age 58
PATRICK J. CONDON
Retired Audit Partner,
Deloitte & Touche LLP
Frankfort, Illinois
An Entergy director since 2015. Age 73
LEO P. DENAULT
Chairman of the Board and Chief Executive
Officer,
Entergy Corporation
New Orleans, Louisiana
Chairman and Chief Executive Officer since
2013. Age 62
KIRKLAND H. DONALD
Chairman of the Board,
Huntington Ingalls Industries, Inc.
Mount Pleasant, South Carolina
An Entergy director since 2013. Age 68
BRIAN W. ELLIS
Senior Vice President and General Counsel,
Danaher Corporation
Bethesda, Maryland
An Entergy director since 2020. Age 56
PHILIP L. FREDERICKSON
Former Executive Vice President,
ConocoPhillips
Arden, North Carolina
An Entergy director since 2015. Age 65
ALEXIS M. HERMAN
Chair and Chief Executive Officer,
New Ventures, LLC
McLean, Virginia
An Entergy director since 2003. Age 74
M. ELISE HYLAND
Former Senior Vice President, EQT Corporation
and Senior Vice President and Chief Operating
Officer,
EQT Midstream Services, LLC
Pittsburg, Pennsylvania
An Entergy director since 2019. Age 62
STUART L. LEVENICK
Lead Director
Former Group President and Executive Office
Member,
Caterpillar Inc.
Naples, Florida
An Entergy director since 2005. Age 69
BLANCHE LAMBERT LINCOLN
Founder and Principal,
Lincoln Policy Group
Little Rock, Arkansas
An Entergy director since 2011. Age 61
KAREN A. PUCKETT
Former President and Chief Executive Officer,
Harte Hanks, Inc.
Houston, Texas
An Entergy director since 2015. Age 61
197
EXECUTIVE OFFICERS
AS OF MARCH 25, 2022
A. CHRISTOPHER BAKKEN, III
Executive Vice President and
Chief Nuclear Officer
Joined Entergy in 2016. Former Project
Director, Hinkley Point C of EDF Energy.
Age 61
MARCUS V. BROWN
Executive Vice President and
General Counsel
Joined Entergy in 1995. Became Executive Vice
President and General Counsel in 2013, after
serving as Senior Vice President and General
Counsel. Age 60
KATHRYN A. COLLINS
Senior Vice President and
Chief Human Resource Officer
Joined Entergy in 2020. Former Chief Human
Resource Officer for Arcosa. Age 58
LEO P. DENAULT
Chairman and Chief Executive Officer
Joined Entergy in 1999. Became Chairman and
Chief Executive Officer in 2013, after serving as
Executive Vice President and Chief Financial
Officer. Age 62
KIMBERLY A. FONTAN
Senior Vice President and
Chief Accounting Officer
Joined Entergy in 1996. Became Senior Vice
President and Chief Accounting Officer in 2019,
after serving as Vice President of System
Planning. Age 49
JULIE E. HARBERT
Senior Vice President, Corporate Business
Services
Joined Entergy in 2017. Became Senior Vice
President, Corporate Business Services in 2019
after serving as Vice President, Shared Services.
Age 48
PAUL D. HINNENKAMP
Executive Vice President and
Chief Operating Officer
Joined Entergy in 2001. Became Executive Vice
President and Chief Operating Officer in 2017,
after serving as Senior Vice President and Chief
Operating Officer. Age 60
ANDREW S. MARSH
Executive Vice President and
Chief Financial Officer
Joined Entergy in 1998. Became Executive Vice
President and Chief Financial Officer in 2013,
after serving as Vice President of System
Planning. Age 50
PETER S. NORGEOT, JR.
Senior Vice President, Sustainable Planning,
Development and Operations
Joined Entergy in 2014. Became Senior Vice
President, Sustainable Planning, Development
and Operations in 2021 after serving as Senior
Vice President, Transformation. Age 57
RODERICK K. WEST
Group President, Utility Operations
Joined Entergy in 1999. Became Group
President, Utility Operations in 2017, after
serving as Executive Vice President and Chief
Administrative Officer. Age 53
198
INVESTOR INFORMATION
Shareholder Materials
Visit our investor relations website at www.entergy.com/investor_relations for earnings reports, financial
releases, SEC filings and other investor information, including Entergy’s Corporate Governance
Guidelines; Board Committee Charters for the Audit, Corporate Governance, and Personnel Committees;
Entergy’s Code of Entegrity; and Entergy’s Code of Business Conduct and Ethics. You can also request
and receive information via email. Printed copies of the above are also available without charge by calling
504-576-5225 or writing to:
Entergy Corporation
Investor Relations
P.O. Box 61000
New Orleans, LA 70161
Individual Investor Inquiries
Individual shareholders may contact Shareholder Services at 504-576-3074.
Institutional Investor Inquiries
Securities analysts and representatives of financial institutions may contact William Abler, Vice
President, Investor Relations, at 504-576-3097 or wabler@entergy.com.
Shareholder Account Information
EQ Shareowner Services is Entergy’s transfer agent, registrar, dividend disbursing agent and dividend
reinvestment and stock purchase plan agent. Shareholders of record with questions about lost certificates,
lost or missing dividend checks, or notifications of change of address should contact:
EQ Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
Phone: 1-855-854-1360
Internet: www.shareowneronline.com
Common Stock Information
The company’s common stock is listed on the New York and Chicago exchanges under the symbol
“ETR.” The Entergy share price is reported daily in the financial press under “Entergy” in most listings of
New York Stock Exchange securities. Entergy common stock is a component of the following indices:
S&P 500, S&P Utilities Index, Philadelphia Utility Index and the NYSE Composite Index, among others.
As of February 1, 2022, there were 203,529,179 shares of Entergy common stock outstanding.
Shareholders of record totaled 21,686 and 402,585 investors holding Entergy stock in “street name”
through a broker.
199 INVESTOR INFORMATION
Certifications
In June 2021, Entergy’s chief executive officer certified to the New York Stock Exchange that he was not
aware of any violation of the NYSE corporate governance listing standards. Also, Entergy filed
certifications regarding the quality of the company’s public disclosure, required by Section 302 of the
Sarbanes-Oxley Act of 2002, as exhibits to our Annual Report on Form 10-K for the fiscal year ended
Dec. 31, 2021.
Dividend Payments
All of Entergy’s 2021 distributions were non-dividend distributions. The board of directors declares
dividends quarterly and sets the record and payment dates. Subject to board discretion, those dates for
2022 are:
Declaration Date
January 28
April 11
July 29
October 28
Record Date
February 11
May 5
August 11
November 14
Payment Date
March 1
June 1
September 1
December 1
Quarterly Dividend Payments (in cents-per-share):
2021
Quarter
95
1
95
2
95
3
101
4
2022
101
2020
93
93
93
95
2019
91
91
91
93
2018
89
89
89
91
Dividend Reinvestment/Stock Purchase
Entergy offers an automatic Dividend Reinvestment and Stock Purchase Plan administered by EQ
Shareowner Services. The plan is designed to provide Entergy shareholders and other investors with a
convenient and economical method to purchase shares of the company’s common stock. The plan also
accommodates payments of up to $10,000 per month for the purchase of Entergy common shares. First
time investors may make an initial minimum purchase of $250. Contact EQ Shareowner Services by
telephone or internet for information and an enrollment form.
Direct Registration System
Entergy has elected to participate in a Direct Registration System that provides investors with an
alternative method for holding shares. DRS will permit investors to move shares between the company’s
records and the broker/dealer of their choice.
200
BR29364G-0322-10K