Item 4. Controls and Procedures

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of September 30, 2021, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended September 30, 2021 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

ENTERGY ARKANSAS, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

Winter Storm Uri

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy Arkansas’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Arkansas were approximately $145 million in February 2021 compared to approximately $40 million in February 2020. See Note 2 to the financial statements herein and in the Form 10-K for discussion of fuel cost recovery at Entergy Arkansas.

In March 2021 the APSC opened an investigation into Arkansas utilities’ preparation, response, operational performance, and communication regarding the February 2021 extreme weather events. Comments from jurisdictional utilities were filed in August 2021. In April 2021 the Arkansas Attorney General notified utilities of its intent to conduct an investigation into the fuel costs that were charged during the February 2021 winter storms; specifically, whether there was price gouging by suppliers.

Results of Operations

Net Income

Third Quarter 2021 Compared to Third Quarter 2020

Net income increased $19 million primarily due to higher volume/weather and higher retail electric price, partially offset by higher depreciation and amortization expenses and higher other operation and maintenance expenses.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net income increased $63.9 million primarily due to higher volume/weather, the reversal in 2021 of the remaining regulatory liability for the formula rate plan 2019 historical year netting adjustment, and higher retail electric price, partially offset by a higher effective income tax rate, higher depreciation and amortization expenses, and higher other operation and maintenance expenses.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Operating Revenues

Third Quarter 2021 Compared to Third Quarter 2020

Following is an analysis of the change in operating revenues comparing the third quarter 2021 to the third quarter 2020:


			Amount
			(In Millions)
2020 operating revenues			$644.4
Fuel, rider, and other revenues that do not significantly affect net income			37.9
Volume/weather			25.8
Retail electric price			14.6
2021 operating revenues			$722.7

Entergy Arkansas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The volume/weather variance is primarily due to an increase of 433 GWh, or 7%, in billed electricity usage, primarily due to an increase in industrial usage and the effect of more favorable weather on residential sales. The increase in industrial usage is primarily due to an increase in demand from expansion projects, primarily in the metals industry.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of May 2021. See Note 2 to the financial statements herein for further discussion of the 2020 formula rate plan filing.

Billed electric energy sales for Entergy Arkansas for the three months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	2,443	2,380	3
Commercial	1,664	1,619	3
Industrial	2,379	2,056	16
Governmental	65	63	3
Total retail	6,551	6,118	7
Sales for resale:
Associated companies	642	520	23
Non-associated companies	1,569	1,494	5
Total	8,762	8,132	8

See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020:


			Amount
			(In Millions)
2020 operating revenues			$1,618.1
Fuel, rider, and other revenues that do not significantly affect net income			146.8
Volume/weather			69.8
Retail electric price			21.6
2021 operating revenues			$1,856.3

The volume/weather variance is primarily due to an increase of 1,302 GWh, or 8%, in billed electricity usage, primarily due to an increase in industrial usage and the effect of more favorable weather on residential sales. The increase in industrial usage is primarily due to an increase in demand from expansion projects, primarily in the metals industry.

Billed electric energy sales for Entergy Arkansas for the nine months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	6,400	5,951	8
Commercial	4,189	4,079	3
Industrial	6,346	5,605	13
Governmental	171	169	1
Total retail	17,106	15,804	8
Sales for resale:
Associated companies	1,763	1,232	43
Non-associated companies	5,300	3,471	53
Total	24,169	20,507	18

See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Other Income Statement Variances

Third Quarter 2021 Compared to Third Quarter 2020

Other operation and maintenance expenses increased primarily due to:

the deferral in the third quarter 2020 of $3 million in estimated incremental bad debt expenses that were incurred in second quarter 2020 resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity associated with the COVID-19 pandemic;
an increase of $2.5 million in distribution operations expenses primarily due to a higher scope of work, including contract costs; and
an increase of $2 million in compensation and benefits costs in 2021 primarily due to 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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs.

The increase was partially offset by:

a decrease of $1.6 million in meter reading expenses as a result of the deployment of advanced metering systems;
a decrease of $1.3 million in energy efficiency expenses due to the timing of recovery from customers; and
a decrease of $1.2 million in nuclear generation expenses primarily due to lower nuclear labor costs, including contract labor, and a lower scope of work performed in 2021 as compared to 2020.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Other regulatory charges (credits) - net for the third quarter 2020 included regulatory credits of $13.6 million 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 in the Form 10-K for discussion of the 2019 formula rate plan filing. Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation related costs collected in revenue. Entergy Arkansas recorded regulatory charges in the third quarter 2021 as a result of portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds.

Other income increased primarily due to changes in decommissioning trust fund investment activity, including portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds in the third quarter 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Other operation and maintenance expenses increased primarily due to:

an increase of $6 million in non-nuclear generation expenses due to a higher scope of work performed during plant outages in 2021 as compared to 2020;
an increase of $5.9 million in compensation and benefits costs in 2021 primarily due to 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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs;

lower nuclear insurance refunds of $5.8 million;
an increase of $3.9 million in distribution operations expenses primarily due to an increase in vegetation maintenance costs and higher contractor costs;
the deferral in 2020 of $3 million in estimated incremental bad debt expenses resulting from the COVID-19 pandemic. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity associated with the COVID-19 pandemic;
an increase of $2.4 million as a result of the amount of transmission costs allocated by MISO; and
an increase of $2.1 million primarily due to contract costs in 2021 related to customer solutions and sustainability initiatives.

The increase was partially offset by:

a decrease of $5.1 million in nuclear generation expenses primarily due to lower nuclear labor costs, including contract labor, and a lower scope of work performed in 2021 as compared to 2020;
a decrease of $4.6 million in meter reading expenses as a result of the deployment of advanced metering systems; and
a decrease of $3.4 million in energy efficiency expenses due to the timing of recovery from customers.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Other regulatory charges (credits) - net for the nine months ended September 30, 2021 includes the reversal of the remaining $38.8 million regulatory liability for the 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding. Other regulatory charges (credits) - net for the nine months ended September 30, 2020 included regulatory credits of $35.8 million 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 in the Form 10-K for discussion of the 2020 and 2019 formula rate plan filings. Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation related costs collected in revenue. Entergy Arkansas recorded regulatory charges in the third quarter 2021 as a result of portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds.

Other income increased primarily due to changes in decommissioning trust fund investment activity, including portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds in 2021.

Income Taxes

The effective income tax rate was 24.5% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 21.7% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items and the amortization of excess accumulated deferred income taxes. See Note 10 to the financial statements herein and Note 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 26.2% for the third quarter 2020. The difference in the effective income tax rate for the third quarter 2020 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items. See Note 10 to the financial

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

statements herein and Note 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 20.2% for the nine months ended September 30, 2020. The difference in the effective income tax rate for the nine months ended September 30, 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes. See Note 10 to the financial statements herein and Note 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:


	2021	2020
	(In Thousands)
Cash and cash equivalents at beginning of period	$192,128	$3,519

Cash flow provided by (used in):
Operating activities	453,077	511,952
Investing activities	(546,953)	(634,739)
Financing activities	(915)	717,172
Net increase (decrease) in cash and cash equivalents	(94,791)	594,385

Cash and cash equivalents at end of period	$97,337	$597,904

Operating Activities

Net cash flow provided by operating activities decreased $58.9 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

increased fuel costs, including those related to Winter Storm Uri, and the timing of recovery of fuel and purchased power costs. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
the timing of collections of receivables from customers, in part due to the COVID-19 pandemic;
$25 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
an increase of $21.6 million in pension contributions in 2021. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

The decrease was partially offset by the timing of payments to vendors.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Investing Activities

Net cash flow used in investing activities decreased $87.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

a decrease of $72.1 million in storm spending;
money pool activity;
a decrease of $27.6 million in transmission construction expenditures primarily due to a lower scope of work on projects performed in 2021 as compared to 2020;
a decrease of $23 million in information technology expenditures primarily due to decreased spending on various technology projects, including advanced metering infrastructure; and
a decrease of $17.5 million in non-nuclear generation construction expenditures primarily due to a lower scope of work performed in 2021 as compared to 2020.

The decrease was partially offset by:

$55 million in proceeds received from the DOE in 2020 resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
an increase of $27.9 million in distribution construction expenditures primarily due to a higher scope of work performed in 2021 as compared to 2020.

Increases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increased by $4.2 million for the nine months ended September 30, 2021 compared to increasing by $51.7 million for the nine months ended September 30, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Arkansas’s financing activities used $0.9 million of cash for the nine months ended September 30, 2021 compared to providing $717.2 million for the nine months ended September 30, 2020 primarily due to the following activity:

the issuance of $400 million of 3.35% Series mortgage bonds in March 2021 as compared to the issuances of $100 million of 4.00% Series mortgage bonds in March 2020 and $675 million of 2.65% Series mortgage bonds in September 2020;
the repayment, at maturity, of $350 million of 3.75% Series mortgage bonds due February 2021;
the repayment, at maturity, of $45 million of 2.375% governmental bonds due January 2021;
higher prepaid deposits of $29.8 million related to contributions-in-aid-of-construction generation interconnection agreements in 2021 as compared to 2020; and
money pool activity.

Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $21.6 million for the nine months ended September 30, 2020.

See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Capital Structure

Entergy Arkansas’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to an increase in equity resulting from net income.


	September 30, 2021		December 31, 2020
Debt to capital	52.8	%	54.8	%
Effect of subtracting cash	(0.6	%)	(1.2	%)
Net debt to net capital	52.2	%	53.6	%

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratio in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition. Entergy Arkansas also uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Arkansas’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.

Entergy Arkansas is developing its capital investment plan for 2022 through 2024 and currently anticipates making $2.6 billion in capital investments during that period. The preliminary estimate includes generation projects to modernize, decarbonize, and diversify Entergy Arkansas’s portfolio, such as the Walnut Bend Solar Facility and the West Memphis Solar Facility; investments in ANO 1 and 2; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience and support customers’ sustainability goals for renewable expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:


September 30, 2021	December 31, 2020	September 30, 2020	December 31, 2019
(In Thousands)
$7,301	$3,110	$51,697	($21,634)

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in June 2026. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2022. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of September 30, 2021, no cash borrowings and no letters of credit were outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2021, a $2 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in June 2024. As of September 30, 2021, $5.3 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.

Searcy Solar Facility

As discussed in the Form 10-K, 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. 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. Subject to the terms of the tax equity partnership, Entergy Arkansas will purchase the facility upon mechanical completion and after the other purchase contingencies have been met. Closing is expected to occur by the end of 2021.

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. Closing is expected to occur 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.

State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Retail Rates

2020 Formula Rate Plan Filing

As discussed in the Form 10-K, in December 2020, Entergy Arkansas filed a petition for rehearing of the APSC’s decision in the 2020 formula rate plan proceeding regarding the 2019 netting adjustment, and in January 2021 the APSC granted further consideration of Entergy Arkansas’s petition. Based on the progress of the proceeding to date, in December 2020, Entergy Arkansas recorded a regulatory liability of $43.5 million to reflect the netting adjustment for 2019, as included in the APSC’s December 2020 order, which would be returned to customers in 2021. Entergy Arkansas also requested an extension of the formula rate plan rider for a second five-year term. In March 2021 the Arkansas Governor signed HB1662 into law (Act 404). Act 404 clarified aspects of the original formula rate plan legislation enacted in 2015, including with respect to the extension of a formula rate plan, the methodology for the netting adjustment, and debt and equity levels; it also reaffirmed the customer protections of the original formula rate plan legislation, including the cap on annual formula rate plan rate changes. Pursuant to Act 404, Entergy Arkansas’s formula rate plan rider is extended for a second five-year term. Entergy Arkansas filed a compliance tariff in its formula rate plan docket in April 2021 to effectuate the netting provisions of Act 404, which reflected a net change in required formula rate plan rider revenue of $39.8 million, effective with the first billing cycle of May 2021. In April 2021 the APSC issued an order approving the compliance tariff and recognizing the formula rate plan extension. Also in April 2021, Entergy Arkansas filed for approval of modifications to the formula rate plan tariff incorporating the provisions in Act 404, and the APSC approved the tariff modifications in April 2021. Given the APSC general staff’s support for the expedited approval of these filings by the APSC, Entergy Arkansas supported an amendment to Act 404 to achieve a reduced return on equity from 9.75% to 9.65% to apply for years applicable to the extension term; that amendment was signed by the Arkansas Governor in April 2021 and is now Act 894. Based on the APSC’s order issued in April 2021, in the first quarter 2021, Entergy Arkansas reversed the remaining regulatory liability for the netting adjustment for 2019. 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.

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. Also in October 2021 the APSC issued an order canceling the evidentiary hearing, accepting all filed testimony and exhibits into the record, and excusing all witnesses. The APSC will rule on the settlement agreement at a later date.

Energy Cost Recovery Rider

As discussed in the Form 10-K, in January 2014, Entergy Arkansas filed a motion with the APSC relating to its 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

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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 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 in the Form 10-K for further discussion of the ANO stator incident.

In March 2021, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01052 per kWh to $0.00959 per kWh. The redetermined rate calculation also included an adjustment to account for a portion of the increased fuel costs resulting from the February 2021 winter storms. The redetermined rate became effective with the first billing cycle in April 2021 through the normal operation of the tariff.

Opportunity Sales Proceeding

As discussed in the Form 10-K, 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. 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.

As discussed in the Form 10-K, in May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting approval of a special rider tariff to recover from its retail customers the costs of the opportunity sales payments made to the other Utility operating companies, and in July 2020 the APSC issued a decision finding that Entergy Arkansas’s application is not in the public interest. In September 2020, Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of these payments. The court held a hearing in February 2021 regarding issues addressed in the pre-trial conference report, and 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.

Net Metering Legislation

See the Form 10-K for discussion of Arkansas net metering legislation and subsequent APSC net metering proceedings. In January 2021, Entergy Arkansas, pursuant to an APSC order, filed an updated net metering tariff, which was approved in February 2021. In May 2021, Entergy Arkansas filed a motion to dismiss its pending judicial appeal of the APSC’s September 2020 order on rehearing in the proceeding addressing its net metering rules. In June 2021 the Arkansas Court of Appeals granted the motion and dismissed Entergy Arkansas’s appeal, although other appeals of the September 2020 APSC order remain pending with that court.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Green Promise Renewable Tariff

In July 2021, Entergy Arkansas filed a proposed green tariff designed to help participating customers meet their renewable and sustainability goals and to enhance economic development efforts in Arkansas. The total proposed amount of solar capacity currently available under this tariff is up to 200 MW. In September and October 2021 the APSC general staff and two net-metering solar developer intervenors filed responses indicating opposition to the tariff as proposed. The tariff is supported by certain commercial and industrial customers that have indicated an interest in subscribing to the tariff. In October 2021, Entergy Arkansas, Walmart, and industrial customers filed a non-unanimous settlement agreement supporting that the tariff should be approved as filed; the Arkansas Attorney General stated it does not oppose the settlement. A hearing is scheduled in January 2022.

COVID-19 Orders

See the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. In March 2021 the APSC issued an order confirming the lifting of the moratorium on service disconnects effective in May 2021. 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. As of September 30, 2021, Entergy Arkansas had a regulatory asset of $24.5 million for costs associated with the COVID-19 pandemic.

Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.

Nuclear Matters

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

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Three Months Ended		Nine Months Ended
	2021	2020	2021	2020
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$722,683	$644,389	$1,856,343	$1,618,068

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	94,580	77,239	295,317	217,342
Purchased power	74,579	57,599	206,248	145,811
Nuclear refueling outage expenses	13,207	13,010	39,389	42,809
Other operation and maintenance	175,236	169,898	503,242	486,525
Decommissioning	19,567	18,449	57,847	54,596
Taxes other than income taxes	36,892	34,379	96,741	92,611
Depreciation and amortization	90,887	84,515	269,442	252,574
Other regulatory charges (credits) - net	31,988	(28,348)	(27,649)	(67,632)
TOTAL	536,936	426,741	1,440,577	1,224,636

OPERATING INCOME	185,747	217,648	415,766	393,432

OTHER INCOME
Allowance for equity funds used during construction	4,113	3,876	10,714	10,671
Interest and investment income	53,661	2,218	78,809	18,402
Miscellaneous - net	(4,805)	(4,465)	(15,968)	(17,034)
TOTAL	52,969	1,629	73,555	12,039

INTEREST EXPENSE
Interest expense	35,452	36,902	104,862	108,494
Allowance for borrowed funds used during construction	(1,793)	(1,702)	(4,655)	(4,686)
TOTAL	33,659	35,200	100,207	103,808

INCOME BEFORE INCOME TAXES	205,057	184,077	389,114	301,663

Income taxes	50,166	48,234	84,593	61,055

NET INCOME	$154,891	$135,843	$304,521	$240,608





See Notes to Financial Statements.

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ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	2021	2020
	(In Thousands)
OPERATING ACTIVITIES
Net income	$304,521	$240,608
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	380,481	366,549
Deferred income taxes, investment tax credits, and non-current taxes accrued	105,147	79,948
Changes in assets and liabilities:
Receivables	(107,075)	(73,890)
Fuel inventory	26,521	4,761
Accounts payable	15,485	(26,547)
Taxes accrued	(19,899)	(10,733)
Interest accrued	25,616	18,125
Deferred fuel costs	(113,004)	3,203
Other working capital accounts	(26,618)	(9,027)
Provisions for estimated losses	(1,266)	3,508
Other regulatory assets	74,022	(50,262)
Other regulatory liabilities	(46,061)	(484)

Pension and other postretirement liabilities	(81,913)	(31,245)
Other assets and liabilities	(82,880)	(2,562)
Net cash flow provided by operating activities	453,077	511,952

INVESTING ACTIVITIES
Construction expenditures	(495,203)	(593,249)
Allowance for equity funds used during construction	10,714	10,671
Payment for purchase of assets	—	(5,988)
Nuclear fuel purchases	(72,528)	(72,601)
Proceeds from sale of nuclear fuel	16,239	30,638
Proceeds from nuclear decommissioning trust fund sales	434,674	254,847
Investment in nuclear decommissioning trust funds	(436,658)	(266,397)
Changes in money pool receivable - net	(4,191)	(51,697)
Changes in securitization account	—	4,036

Litigation proceeds for reimbursement of spent nuclear fuel storage costs	—	55,001


Net cash flow used in investing activities	(546,953)	(634,739)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	708,126	1,058,977

Retirement of long-term debt	(717,214)	(298,071)



Change in money pool payable - net	—	(21,634)

Common equity distributions paid	(25,000)	(25,000)

Other	33,173	2,900
Net cash flow provided by (used in) financing activities	(915)	717,172

Net increase (decrease) in cash and cash equivalents	(94,791)	594,385
Cash and cash equivalents at beginning of period	192,128	3,519
Cash and cash equivalents at end of period	$97,337	$597,904

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$77,434	$86,906


See Notes to Financial Statements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$867	$24,108
Temporary cash investments	96,470	168,020
Total cash and cash equivalents	97,337	192,128

Accounts receivable:
Customer	235,409	183,719
Allowance for doubtful accounts	(18,997)	(18,334)
Associated companies	52,447	34,216
Other	55,837	35,845
Accrued unbilled revenues	131,016	109,000
Total accounts receivable	455,712	344,446

Deferred fuel costs	59,541	—
Fuel inventory - at average cost	17,290	43,811
Materials and supplies - at average cost	246,719	237,640
Deferred nuclear refueling outage costs	45,525	32,692


Prepayments and other	15,434	13,296
TOTAL	937,558	864,013

OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds	1,376,256	1,273,921

Other	338	341
TOTAL	1,376,594	1,274,262

UTILITY PLANT
Electric	13,135,507	12,905,322

Construction work in progress	401,058	234,213
Nuclear fuel	166,440	163,044
TOTAL UTILITY PLANT	13,703,005	13,302,579
Less - accumulated depreciation and amortization	5,449,425	5,255,355
UTILITY PLANT - NET	8,253,580	8,047,224

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	1,758,362	1,832,384
Deferred fuel costs	68,618	68,220
Other	17,513	14,028
TOTAL	1,844,493	1,914,632

TOTAL ASSETS	$12,412,225	$12,100,131

See Notes to Financial Statements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$—	$485,000

Accounts payable:
Associated companies	67,547	59,448
Other	209,269	208,591
Customer deposits	91,575	98,506
Taxes accrued	61,938	81,837

Interest accrued	48,361	22,745
Deferred fuel costs	—	53,065

Other	45,930	40,628
TOTAL	524,620	1,049,820

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	1,406,576	1,286,123
Accumulated deferred investment tax credits	29,599	30,500
Regulatory liability for income taxes - net	441,555	467,031
Other regulatory liabilities	666,287	686,872
Decommissioning	1,372,007	1,314,160
Accumulated provisions	68,903	70,169
Pension and other postretirement liabilities	279,615	361,682
Long-term debt	3,959,194	3,482,507
Other	108,179	75,098
TOTAL	8,331,915	7,774,142

Commitments and Contingencies



EQUITY
Member's equity	3,555,690	3,276,169
TOTAL	3,555,690	3,276,169

TOTAL LIABILITIES AND EQUITY	$12,412,225	$12,100,131

See Notes to Financial Statements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)


						Member's Equity
						(In Thousands)

Balance at December 31, 2019						$3,125,937

Net income						44,595




Balance at March 31, 2020						$3,170,532

Net income						60,170




Balance at June 30, 2020						$3,230,702

Net income						135,843
Common equity distributions						(25,000)



Balance at September 30, 2020						$3,341,545


Balance at December 31, 2020						$3,276,169

Net income						93,037






Balance at March 31, 2021						$3,369,206

Net income						56,593






Balance at June 30, 2021						$3,425,799

Net income						154,891



Common equity distributions						(25,000)


Balance at September 30, 2021						$3,555,690

See Notes to Financial Statements.

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

Hurricane Ida

In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and transmission systems resulting in widespread power outages. Total restoration costs for the repair and/or replacement of the electrical system damaged by Hurricane Ida are currently estimated to be in the range of $2.0 billion to $2.3 billion. Also, Entergy Louisiana’s revenues in 2021 were adversely affected by extended power outages resulting from the hurricane.

Entergy Louisiana has recorded accounts payable for the estimated costs incurred that were necessary to return customers to service. Entergy Louisiana recorded corresponding regulatory assets of approximately $800 million and construction work in progress of approximately $1.2 billion. Entergy Louisiana 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 Louisiana has not gone through the regulatory process regarding these storm costs, there is an element of risk, and Entergy Louisiana 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 Louisiana 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 to facilitate issuance of approximately $1 billion of shorter-term 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 - 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. Storm cost recovery or financing will be subject to review by applicable regulatory authorities, with a prudence review likely being initiated in the first quarter of 2022.

Hurricane Laura, Hurricane Delta, and Hurricane Zeta

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Laura, Hurricane Delta, and Hurricane Zeta” in the Form 10-K for a discussion of Hurricane Laura, Hurricane Delta, and Hurricane Zeta, which caused significant damage to portions of Entergy Louisiana’s service area. See Note 2 to the financial statements herein for discussion of storm cost filings made in 2021 by Entergy Louisiana.

Winter Storm Uri

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy Louisiana’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Louisiana were approximately $285 million in February 2021 compared to approximately $95 million in February 2020. See Note 2 to the financial statements herein for discussion of the storm cost filings made in 2021 by Entergy Louisiana. See Note 2 to the financial statements herein and in the Form 10-K for discussion of fuel cost recovery at Entergy Louisiana.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Results of Operations

Net Income

Third Quarter 2021 Compared to Third Quarter 2020

Net income remained relatively unchanged, increasing by $1 million, primarily due to higher retail electric price, higher other income, and lower other operation and maintenance expenses, partially offset by lower volume/weather, higher depreciation and amortization expenses, and higher interest expense.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net income decreased $48.3 million primarily due to the $58 million reduction in income tax expense resulting from an IRS settlement in the first quarter 2020 related to the uncertain tax position regarding the Hurricane Isaac Louisiana Act 55 financing, which also resulted in a $29 million ($21 million net-of-tax) regulatory charge to reflect Entergy Louisiana’s agreement to share the savings with customers. Also contributing to the decrease was higher other operation and maintenance expenses, higher depreciation and amortization expenses, a higher effective income tax rate, and higher interest expense. The decrease was partially offset by higher retail electric price. See Note 3 to the financial statements in the Form 10-K for further discussion of the tax settlement.

Operating Revenues

Third Quarter 2021 Compared to Third Quarter 2020

Following is an analysis of the change in operating revenues comparing the third quarter 2021 to the third quarter 2020:


			Amount
			(In Millions)
2020 operating revenues			$1,120.0
Fuel, rider, and other revenues that do not significantly affect net income			300.3
Retail electric price			37.8
Volume/weather			(37.4)

2021 operating revenues			$1,420.7

Entergy Louisiana’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to:

an increase in overall formula rate plan revenues, including an increase in the transmission recovery mechanism, effective September 2020;
an interim increase in formula rate plan revenues effective December 2020 due to the inclusion of the first-year revenue requirement for the Washington Parish Energy Center; and
an increase in formula rate plan revenues, including increases in the transmission and distribution recovery mechanisms, implemented with the first billing cycle of September 2021.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

proceedings.

The volume/weather variance is primarily due to the effect of a decrease in the unbilled sales period, partially offset by an increase in billed sales. The decrease in the unbilled sales period was primarily due to a decrease in usage as a result of Hurricane Ida in the third quarter 2021. The increase in billed sales is due to an increase in industrial usage primarily due to increased demand from expansion projects, primarily in the chemicals, metals, and transportation industries, increased demand from existing customers, primarily in the chemicals and industrial gases industries, and an increase in demand from co-generation customers. The increase in billed sales is partially offset by less favorable weather on residential and commercial sales and a decrease in residential and commercial usage primarily due to the effects of Hurricane Ida in the third quarter 2021. The decrease in residential and commercial usage is partially offset by the effects of Hurricane Laura in the third quarter 2020. See “Hurricane Ida” above and see the “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the impacts from the storms.

Billed electric energy sales for Entergy Louisiana for the three months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	4,259	4,557	(7)
Commercial	2,950	3,033	(3)
Industrial	7,687	7,129	8
Governmental	202	202	—
Total retail	15,098	14,921	1
Sales for resale:
Associated companies	1,397	1,477	(5)
Non-associated companies	803	630	27
Total	17,298	17,028	2

See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020:


			Amount
			(In Millions)
2020 operating revenues			$3,062.3
Fuel, rider, and other revenues that do not significantly affect net income			624.6
Retail electric price			113.2
Volume/weather			(4.2)

2021 operating revenues			$3,795.9

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to:

an interim increase in formula rate plan revenues effective April 2020 due to the inclusion of the first-year revenue requirement for the Lake Charles Power Station;
an increase in overall formula rate plan revenues, including an increase in the transmission recovery mechanism, effective September 2020;
an interim increase in formula rate plan revenues effective December 2020 due to the inclusion of the first-year revenue requirement for the Washington Parish Energy Center; and
an increase in formula rate plan revenues, including increases in the transmission and distribution recovery mechanisms, implemented with the first billing cycle of September 2021.

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

The volume/weather variance is primarily due to a decrease in the unbilled sales period, partially offset by an increase in billed sales. The decrease in the unbilled sales period was primarily due to a decrease in usage in the third quarter 2021 as a result of Hurricane Ida. The increase in billed sales is due to the effect of more favorable weather on residential sales and an increase in industrial usage primarily due to increased demand from expansion projects, primarily in the chemicals and transportation industries, and an increase in demand from co-generation customers. The increase in industrial usage is partially offset by a decrease in demand from mid-to-small customers and existing customers in the chemicals and petroleum refining industries. The increase in billed sales is partially offset by a decrease in residential and commercial usage primarily due to the effects of Hurricane Ida in the third quarter 2021. The decrease in residential and commercial usage is partially offset by the effects of Hurricane Laura in the third quarter 2020. See “Hurricane Ida” above and see the “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of the impacts from the storms.

Billed electric energy sales for Entergy Louisiana for the nine months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	10,728	10,771	—
Commercial	7,860	7,947	(1)
Industrial	22,431	22,006	2
Governmental	600	590	2
Total retail	41,619	41,314	1
Sales for resale:
Associated companies	3,523	4,225	(17)
Non-associated companies	1,741	1,631	7
Total	46,883	47,170	(1)

See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Other Income Statement Variances

Third Quarter 2021 Compared to Third Quarter 2020

Other operation and maintenance expenses decreased primarily due to a gain of $14.8 million on the sale of a pipeline.

The decrease was partially offset by:

an increase of $8.2 million in distribution operations expenses primarily due to higher reliability costs and higher vegetation maintenance costs; and
an increase of $2.6 million in compensation and benefits costs in 2021 primarily due to 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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Other income increased primarily due to changes in decommissioning trust fund activity.

Interest expense increased primarily due to:

the issuance of $1.1 billion of 0.62% Series mortgage bonds, $300 million of 2.90% Series mortgage bonds, and $300 million of 1.60% Series mortgage bonds, each in November 2020; and
the issuance of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021.

The increase was partially offset by the repayment of $200 million of 5.25% Series mortgage bonds and $100 million of 4.70% Series mortgage bonds, each in December 2020, and the repayment of $200 million of 4.8% Series mortgage bonds in May 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Other operation and maintenance expenses increased primarily due to:

an increase of $13.7 million in distribution operations expenses primarily due to higher reliability costs and higher vegetation maintenance costs;
an increase of $11.3 million in compensation and benefits costs in 2021 primarily due to 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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs;
an increase of $17.3 million in nuclear generation expenses primarily due to a higher scope of work performed in 2021 as compared to 2020 primarily due to the effects of the COVID-19 pandemic in 2020;
an increase of $7.5 million in non-nuclear generation expenses due to higher expenses associated with plants placed in service, including the Lake Charles Power Station, which began commercial operation in March 2020, and the Washington Parish Energy Center, purchased in November 2020;

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

an increase of $5.8 million in energy efficiency costs due to the timing of recovery from customers;
lower nuclear insurance refunds of $4.2 million;
an increase of $3.9 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for further information on the recovery of these costs; and
an increase of $3.5 million primarily due to contract costs in 2021 related to customer solutions and sustainability initiatives.

The increase was partially offset by a gain of $14.8 million, recorded in the third quarter 2021, on the sale of a pipeline.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes. Ad valorem taxes increased primarily due to higher assessments.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Lake Charles Power Station, which was placed in service in March 2020, and the Washington Parish Energy Center, which was placed in service in November 2020.

Other regulatory charges (credits) - net includes regulatory charges of $29 million recorded in first quarter 2020 due to a settlement with the IRS related to the uncertain tax position regarding Hurricane Isaac Louisiana Act 55 financing because the savings will be shared with customers. See Note 3 in the Form 10-K for further discussion of the settlement and savings obligation.

Other income increased primarily due to changes in decommissioning trust fund activity. The increase was 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.

Interest expense increased primarily due to:

the issuance of $350 million of 2.90% Series mortgage bonds in March 2020;
the issuance of $1.1 billion of 0.62% Series mortgage bonds, $300 million of 2.90% Series mortgage bonds, and $300 million of 1.60% Series mortgage bonds, each in November 2020;
the issuance of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021; and
a decrease in the allowance for borrowed funds used during construction due to higher construction work in progress in 2020, including the Lake Charles Power Station project.

The increase was partially offset by the repayment of $200 million of 5.25% Series mortgage bonds and $100 million of 4.70% Series mortgage bonds, each in December 2020, and $200 million of 4.8% Series mortgage bonds in May 2021.

Income Taxes

The effective income tax rate was 20.1% for the third quarter 2021 and 18.4% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, the amortization of excess accumulated deferred income taxes, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

The effective income tax rate was 18.1% for the third quarter 2020. The difference in the effective income tax rate for the third quarter 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 5.7% for the nine months ended September 30, 2020. The difference in the effective income tax rate for the nine months ended September 30, 2020 versus the federal statutory rate of 21% was primarily due to the settlement with the IRS on the treatment of funds received in conjunction with the Act 55 financing of Hurricane Isaac storm costs, permanent differences related to income tax deductions for stock-based compensation, the amortization of excess accumulated deferred income taxes, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein for discussion of the IRS settlement. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:


	2021	2020
	(In Thousands)
Cash and cash equivalents at beginning of period	$728,020	$2,006

Cash flow provided by (used in):
Operating activities	1,047,987	1,113,574
Investing activities	(2,224,730)	(1,096,819)
Financing activities	715,416	233,402
Net increase (decrease) in cash and cash equivalents	(461,327)	250,157

Cash and cash equivalents at end of period	$266,693	$252,163

Operating Activities

Net cash flow provided by operating activities decreased $65.6 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

an increase of approximately $130.7 million in storm spending in 2021, primarily due to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Hurricane Ida restoration efforts. See “Hurricane Ida” above and see the “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of storm restoration efforts;
an increase of $29 million in spending on nuclear refueling outages;
income tax refunds of $20.7 million in 2020. Entergy Louisiana had income tax refunds in 2020 as a result of a refund of an overpayment on a prior year state income tax return; and

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

an increase of $28.4 million in pension contributions in 2021. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

The decrease was partially offset by the timing of collection of receivables from customers and timing of recovery of fuel and purchased power costs.

Investing Activities

Net cash flow used in investing activities increased $1,127.9 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

an increase of $993.4 million in storm spending in 2021, primarily due to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Hurricane Ida restoration efforts. See “Hurricane Ida” above and see the “Hurricane Laura, Hurricane Delta, and Hurricane Zeta” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for discussion of storm restoration efforts;
an increase of $100.5 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of Entergy Louisiana’s distribution system;
$39.1 million in net receipts from storm reserve escrow accounts in 2020;
an increase of $29.9 million in nuclear decommissioning trust fund activity as a result of a lump sum contribution for amounts collected over a 17-month period. See Note 2 in the Form 10-K for a discussion of nuclear decommissioning expense recovery;
an increase of $21.6 million in transmission construction expenditures primarily due to a higher scope of work on projects performed in 2021 as compared to 2020;
an increase of $20.8 million as a result of fluctuations in nuclear fuel activity, primarily due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
an increase of $20.1 million in nuclear construction expenditures primarily due to increased spending on various projects in 2021.

The increase was partially offset by:

a decrease of $56.1 million in non-nuclear generation construction expenditures due to higher spending in 2020 on the Lake Charles Power Station;
money pool activity;
the sale of a pipeline for $15 million in 2021; and
the purchase of a portion of a transmission operating center from Entergy Services for $14.5 million in 2020.

Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana’s receivable from the money pool increased by $6.6 million for the nine months ended September 30, 2021 compared to increasing by $21.6 million for the nine months ended September 30, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $482 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

the issuance of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021, as compared to the issuances of $350 million of 2.90% Series mortgage bonds and $300 million of 4.20% Series mortgage bonds, each in March 2020;
the repayment of $250 million of 3.95% Series mortgage bonds in August 2020;
money pool activity; and
net long-term borrowings of $44.3 million in 2021 compared to net repayments of long-term borrowings of $37.9 million in 2020 on the nuclear fuel company variable interest entities’ credit facilities.

The increase was partially offset by:

the repayment of $200 million of 4.80% Series mortgage bonds in May 2021;
the repayment of Entergy Louisiana Waterford VIE’s $40 million of 3.92% Series H secured notes in February 2021; and
an increase of $38.5 million in common equity distributions in 2021 primarily to maintain Entergy Louisiana’s targeted capital structure. In addition, common equity distributions were lower in 2020 due to spending on the Lake Charles Power Station and the purchase of the Washington Parish Energy Center.

Decreases in Entergy Louisiana’s payable to the money pool are a use of cash flow, and Entergy Louisiana’s payable to the money pool decreased by $82.8 million for the nine months ended September 30, 2020.

See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Capital Structure

Entergy Louisiana’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Louisiana is primarily due to the issuance of $1 billion of mortgage bonds in March 2021.


	September 30, 2021		December 31, 2020
Debt to capital	55.3	%	54.8	%
Effect of excluding securitization bonds	0.0	%	0.0	%
Debt to capital, excluding securitization bonds (a)	55.3	%	54.8	%
Effect of subtracting cash	(0.6	%)	(2.1	%)
Net debt to net capital, excluding securitization bonds (a)	54.7	%	52.7	%

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

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Louisiana also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Louisiana’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.

Entergy Louisiana is developing its capital investment plan for 2022 through 2024 and currently anticipates making $4.1 billion in capital investments during that period, excluding capital spending as a result of Hurricane Ida. The preliminary estimate includes generation projects to modernize, decarbonize, and diversify Entergy Louisiana’s portfolio; investments in River Bend and Waterford 3; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience and support customers’ sustainability goals for renewable expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:


September 30, 2021	December 31, 2020	September 30, 2020	December 31, 2019
(In Thousands)
$20,061	$13,426	$21,649	($82,826)

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in June 2026. The credit facility includes fronting commitments for the issuance of letters of credit against $15 million of the borrowing capacity of the facility. As of September 30, 2021, there were no cash borrowings and no letters of credit outstanding under the credit facility. In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2021, $6.8 million in letters of credit were outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, each in the amount of $105 million and scheduled to expire in June 2024. As of September 30, 2021, $53.2 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of September 30, 2021, $49.3 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.

State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel cost recovery. The following are updates to that discussion.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Retail Rates - Electric

2017 Formula Rate Plan Filing

As discussed in the Form 10-K, in June 2018, Entergy Louisiana filed its formula rate plan evaluation report for its 2017 calendar year operations, and filed a supplemental formula rate plan evaluation report in August 2018. 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. 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.

As also discussed in the Form 10-K, in May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the J. Wayne Leonard Power Station (formerly St. Charles Power Station). In February 2021 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

As discussed in the Form 10-K, in May 2019, Entergy Louisiana filed its formula rate plan evaluation report for its 2018 calendar year operations. 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.

2019 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2020, Entergy Louisiana filed with the LPSC its formula rate plan evaluation report for its 2019 calendar year operations. 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.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Request for Extension and Modification of Formula Rate Plan

As discussed in the Form 10-K, in May 2020, Entergy Louisiana filed with the LPSC its application for authority to extend its formula rate plan. The parties reached a settlement in April 2021 regarding Entergy Louisiana’s proposed FRP extension. 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 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.

Storm Cost Filings

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 to facilitate issuance of shorter-term bonds to provide interim financing for restoration costs associated with Hurricane Laura, Hurricane Delta, and Hurricane Zeta. Subsequently, Entergy Louisiana and the LPSC staff filed a joint motion seeking approval to exclude from the derivation of Entergy Louisiana’s capital structure and

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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 incremental outages. As discussed below 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, as included in the July 2021 supplemental filing, for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by the 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 with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. In 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. In October 2021 an updated procedural schedule was established with a hearing in March 2022.

Fuel and purchased power recovery

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. The report did contain prospective recommendations on internal informational reporting.

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 MISO resettlement process. At its April 2021 meeting, the LPSC authorized its staff to review the prudence of February 2021 fuel costs incurred by all LPSC-jurisdictional utilities. At its June 2021 meeting, the LPSC approved the hiring of consultants to assist its staff in this review. Discovery is ongoing.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subject to LPSC review and approval, of losses and expenses incurred due to compliance with the LPSC’s COVID-19 orders. The suspension of late fees and disconnects for non-payment was approved through the first billing cycle after July 16, 2020. In January 2021, Entergy Louisiana resumed disconnections for customers in all customer classes with past-due balances that have not made payment arrangements. Utilities seeking to recover the regulatory asset must formally petition the LPSC to do so, identifying the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval. As of September 30, 2021, Entergy Louisiana had a regulatory asset of $59.2 million for costs associated with the COVID-19 pandemic.

Industrial and Commercial Customers

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.

Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.

Nuclear Matters

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

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	Three Months Ended		Nine Months Ended



	2021	2020	2021	2020
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$1,407,737	$1,110,217	$3,741,979	$3,024,359
Natural gas	12,971	9,805	53,971	37,962
TOTAL	1,420,708	1,120,022	3,795,950	3,062,321

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	421,464	162,981	922,060	469,083
Purchased power	176,473	160,069	573,030	474,598
Nuclear refueling outage expenses	11,932	13,796	37,407	41,080
Other operation and maintenance	239,132	244,136	752,214	693,010
Decommissioning	17,250	16,407	51,108	48,611
Taxes other than income taxes	63,428	61,797	167,880	160,592
Depreciation and amortization	165,469	154,162	489,343	453,552
Other regulatory charges (credits) - net	(1,920)	(17,822)	7,560	(25,892)
TOTAL	1,093,228	795,526	3,000,602	2,314,634

OPERATING INCOME	327,480	324,496	795,348	747,687

OTHER INCOME
Allowance for equity funds used during construction	7,247	6,255	20,183	27,197
Interest and investment income	39,225	61,487	171,197	135,625
Miscellaneous - net	(8,924)	(40,025)	(79,595)	(57,235)
TOTAL	37,548	27,717	111,785	105,587

INTEREST EXPENSE
Interest expense	87,295	82,716	260,731	248,529
Allowance for borrowed funds used during construction	(3,278)	(3,256)	(9,105)	(13,590)
TOTAL	84,017	79,460	251,626	234,939

INCOME BEFORE INCOME TAXES	281,011	272,753	655,507	618,335

Income taxes	56,536	49,287	120,479	35,014

NET INCOME	$224,475	$223,466	$535,028	$583,321

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	Three Months Ended		Nine Months Ended


	2021	2020	2021	2020
	(In Thousands)		(In Thousands)

Net Income	$224,475	$223,466	$535,028	$583,321
Other comprehensive income (loss)
Pension and other postretirement liabilities (net of tax expense (benefit) of ($46), ($282), $18, and $2,724)	(131)	(800)	50	7,722
Other comprehensive income (loss)	(131)	(800)	50	7,722
Comprehensive Income	$224,344	$222,666	$535,078	$591,043

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	2021	2020
	(In Thousands)
OPERATING ACTIVITIES
Net income	$535,028	$583,321
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	607,299	591,045
Deferred income taxes, investment tax credits, and non-current taxes accrued	159,723	56,767
Changes in working capital:
Receivables	(91,771)	(100,718)
Fuel inventory	5,763	(3,845)
Accounts payable	450,064	169,577
Prepaid taxes and taxes accrued	94,751	148,379
Interest accrued	4,464	(4,220)
Deferred fuel costs	(49,786)	(61,732)
Other working capital accounts	(41,769)	(33,691)
Changes in provisions for estimated losses	(764)	(42,624)
Changes in other regulatory assets	(938,646)	(129,843)
Changes in other regulatory liabilities	92,138	(19,761)
Changes in pension and other postretirement liabilities	(68,132)	(49,168)
Other	289,625	10,087
Net cash flow provided by operating activities	1,047,987	1,113,574

INVESTING ACTIVITIES
Construction expenditures	(2,147,096)	(1,064,765)
Allowance for equity funds used during construction	20,183	27,197
Payment for purchase of assets	—	(14,511)
Proceeds from sale of assets	15,000	—
Nuclear fuel purchases	(75,349)	(76,392)
Proceeds from the sale of nuclear fuel	13,201	35,041
Receipts from storm reserve escrow account	—	40,601

Payments to storm reserve escrow account	—	(1,467)

Changes to securitization account	(2,815)	(5,925)
Proceeds from nuclear decommissioning trust fund sales	505,840	281,131
Investment in nuclear decommissioning trust funds	(555,749)	(301,170)
Changes in money pool receivable - net	(6,635)	(21,649)


Litigation proceeds for reimbursement of spent nuclear fuel storage costs	8,690	5,090



Net cash flow used in investing activities	(2,224,730)	(1,096,819)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	2,404,102	1,800,392
Retirement of long-term debt	(1,628,383)	(1,453,564)



Change in money pool payable - net	—	(82,826)
Distributions paid:
Common equity distributions paid	(60,000)	(21,500)

Other	(303)	(9,100)
Net cash flow provided by financing activities	715,416	233,402

Net increase (decrease) in cash and cash equivalents	(461,327)	250,157
Cash and cash equivalents at beginning of period	728,020	2,006
Cash and cash equivalents at end of period	$266,693	$252,163

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized	$247,878	$246,456
Income taxes	$—	($20,684)

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2021 and December 31, 2020
(Unaudited)

	2021	2020
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$401	$1,303
Temporary cash investments	266,292	726,717
Total cash and cash equivalents	266,693	728,020

Accounts receivable:
Customer	380,218	317,905
Allowance for doubtful accounts	(38,103)	(45,693)
Associated companies	95,988	81,624
Other	42,341	41,760
Accrued unbilled revenues	192,398	178,840
Total accounts receivable	672,842	574,436

Deferred fuel costs	52,036	2,250
Fuel inventory	44,917	50,680
Materials and supplies - at average cost	463,854	437,933
Deferred nuclear refueling outage costs	50,004	48,407



Prepayments and other	51,239	36,813
TOTAL	1,601,585	1,878,539

OTHER PROPERTY AND INVESTMENTS
Investment in affiliate preferred membership interests	1,390,587	1,390,587
Decommissioning trust funds	1,987,336	1,794,042

Non-utility property - at cost (less accumulated depreciation)	332,838	323,110

Other	13,622	13,399
TOTAL	3,724,383	3,521,138

UTILITY PLANT
Electric	26,433,677	25,619,789

Natural gas	277,164	262,744

Construction work in progress	1,908,777	667,281
Nuclear fuel	208,699	210,128
TOTAL UTILITY PLANT	28,828,317	26,759,942
Less - accumulated depreciation and amortization	9,735,089	9,372,224
UTILITY PLANT - NET	19,093,228	17,387,718

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets (includes securitization property of $— as of September 30, 2021 and $5,088 as of December 31, 2020)	2,664,712	1,726,066
Deferred fuel costs	168,122	168,122
Other	39,938	23,924
TOTAL	2,872,772	1,918,112

TOTAL ASSETS	$27,291,968	$24,705,507

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2021 and December 31, 2020
(Unaudited)

	2021	2020
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$—	$240,000

Accounts payable:
Associated companies	124,691	103,148
Other	2,411,444	1,450,008
Customer deposits	150,826	152,612
Taxes accrued	137,368	42,617

Interest accrued	96,713	92,249





Current portion of unprotected excess accumulated deferred income taxes	33,400	31,138
Other	61,681	62,968
TOTAL	3,016,123	2,174,740

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	2,307,263	2,138,522
Accumulated deferred investment tax credits	103,770	107,317
Regulatory liability for income taxes - net	410,807	447,628

Other regulatory liabilities	1,044,990	918,293
Decommissioning	1,632,846	1,573,307
Accumulated provisions	24,175	24,939
Pension and other postretirement liabilities	624,645	692,728
Long-term debt (includes securitization bonds of $—as of September 30, 2021 and $10,278 as of December 31, 2020)	9,813,493	8,787,451

Other	381,129	382,894
TOTAL	16,343,118	15,073,079

Commitments and Contingencies

EQUITY

Member's equity	7,928,350	7,453,361
Accumulated other comprehensive income	4,377	4,327
TOTAL	7,932,727	7,457,688

TOTAL LIABILITIES AND EQUITY	$27,291,968	$24,705,507

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Common Equity
	Member’s Equity	Accumulated Other Comprehensive Income	Total
	(In Thousands)

Balance at December 31, 2019	$6,392,556	$4,562	$6,397,118

Net income	189,396	—	189,396
Other comprehensive income	—	9,467	9,467



Distributions declared on common equity	(11,500)	—	(11,500)


Other	(10)	—	(10)
Balance at March 31, 2020	$6,570,442	$14,029	$6,584,471

Net income	170,459	—	170,459
Other comprehensive loss	—	(945)	(945)



Distributions declared on common equity	(5,000)	—	(5,000)


Other	(13)	—	(13)
Balance at June 30, 2020	$6,735,888	$13,084	$6,748,972

Net income	223,466	—	223,466
Other comprehensive loss	—	(800)	(800)



Distributions declared on common equity	(5,000)	—	(5,000)


Other	(8)	—	(8)
Balance at September 30, 2020	$6,954,346	$12,284	$6,966,630

Balance at December 31, 2020	$7,453,361	$4,327	$7,457,688

Net income	166,626	—	166,626
Other comprehensive loss	—	(407)	(407)





Other	(16)	—	(16)
Balance at March 31, 2021	$7,619,971	$3,920	$7,623,891

Net income	143,927	—	143,927
Other comprehensive income	—	588	588






Other	(12)	—	(12)
Balance at June 30, 2021	$7,763,886	$4,508	$7,768,394

Net income	224,475	—	224,475
Other comprehensive loss	—	(131)	(131)



Distributions declared on common equity	(60,000)	—	(60,000)


Other	(11)	—	(11)
Balance at September 30, 2021	$7,928,350	$4,377	$7,932,727

See Notes to Financial Statements.

ENTERGY MISSISSIPPI, LLC

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

Winter Storm Uri

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy Mississippi’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Mississippi were approximately $65 million in February 2021 compared to approximately $35 million in February 2020. See Note 2 to the financial statements in the Form 10-K for discussion of storm cost recovery and fuel cost recovery at Entergy Mississippi.

In February 2021 the MPSC announced that it would launch a comprehensive review of the condition and resiliency of the state’s public utility infrastructure in response to the impacts of the February 2021 winter storms. Although the MPSC did not open a formal docket, the MPSC submitted data requests to Entergy Mississippi regarding the actions taken to ensure reliable operations of the electric network during the winter storm events and in anticipation of other future extreme weather events. In April 2021, Entergy Mississippi submitted responses to the MPSC data requests.

In April 2021 the MPSC opened a proceeding to investigate Entergy Mississippi’s membership in MISO. In the order, the MPSC noted the impact of the February 2021 winter storms, stating that it observed “excessive prices of natural gas and electricity” during the winter event. Entergy Mississippi submitted comments in the proceeding in June 2021. In October 2021 the MPSC established a procedural schedule requesting additional comments and responses.

Results of Operations

Net Income

Third Quarter 2021 Compared to Third Quarter 2020

Net income increased $4 million primarily due to higher retail electric price and lower other operation and maintenance expenses, partially offset by higher depreciation and amortization expenses and lower volume/weather.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net income increased $20 million primarily due to higher retail electric price and higher volume/weather, partially offset by higher depreciation and amortization expenses, higher other operation and maintenance expenses, higher taxes other than income taxes, higher interest expenses, and a higher effective tax rate.

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

Operating Revenues

Third Quarter 2021 Compared to Third Quarter 2020

Following is an analysis of the change in operating revenues comparing the third quarter 2021 to the third quarter 2020:


			Amount
			(In Millions)
2020 operating revenues			$356.5
Fuel, rider, and other revenues that do not significantly affect net income			43.1
Retail electric price			24.2
Volume/weather			(3.5)
2021 operating revenues			$420.3

Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to increases in formula rate plan rates effective with the first billing cycles of April 2021 and July 2021. See Note 2 to the financial statements herein for further discussion of the formula rate plan filing.

The volume/weather variance is primarily due to a decrease in usage during the unbilled sales period.

Billed electric energy sales for Entergy Mississippi for the three months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	1,799	1,855	(3)
Commercial	1,337	1,298	3
Industrial	615	629	(2)
Governmental	117	115	2
Total retail	3,868	3,897	(1)
Sales for resale:
Non-associated companies	1,134	1,762	(36)
Total	5,002	5,659	(12)

See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020:


			Amount
			(In Millions)
2020 operating revenues			$948.4
Fuel, rider, and other revenues that do not significantly affect net income			100.1
Retail electric price			49.0
Volume/weather			8.5
2021 operating revenues			$1,106

The retail electric price variance is primarily due to increases in formula rate plan rates effective with the first billing cycles of April 2020, April 2021, and July 2021. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filings.

The volume/weather variance is primarily due an increase of 257 GWh, or 3%, in billed electricity usage, including the effect of more favorable weather on residential sales and an increase in commercial usage partially offset by a decrease in industrial usage and a decrease in usage during the unbilled sales period. The increase in commercial usage was primarily due to an increase in customers and reduced impacts from the COVID-19 pandemic on businesses as compared to prior year. The decrease in industrial usage is primarily due to a decrease in demand from mid-to-small customers.

Billed electric energy sales for Entergy Mississippi for the nine months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	4,389	4,222	4
Commercial	3,387	3,270	4
Industrial	1,710	1,747	(2)
Governmental	309	299	3
Total retail	9,795	9,538	3
Sales for resale:
Non-associated companies	4,230	3,628	17
Total	14,025	13,166	7

See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

Other Income Statement Variances

Third Quarter 2021 Compared to Third Quarter 2020

Other operation and maintenance expenses decreased primarily due to a decrease of $3.7 million in energy efficiency expenses due to the timing of recovery from customers and a decrease of $1.5 million in vegetation maintenance costs. The decrease was partially offset by an increase of $1.4 million as a result of the amount of transmission costs allocated by MISO.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Other operation and maintenance expenses increased primarily due to:

an increase of $8.2 million in distribution operations expenses primarily due to higher vegetation maintenance costs, higher contractor costs, and higher reliability costs;
an increase of $3.9 million as a result of the amount of transmission costs allocated by MISO;
an increase of $2.5 million in compensation and benefits costs in 2021 primarily due to 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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs;
an increase of $1.3 million primarily due to contract costs in 2021 related to customer solutions and sustainability initiatives;
an increase of $1.2 million primarily due to the amortization of deferred litigation costs related to the Mississippi Attorney General complaint against Entergy Mississippi, which was dismissed by the Hinds County Chancery Court in February 2020; and
several individually insignificant items.

The increase was partially offset by a decrease of $6.7 million in energy efficiency expenses due to the timing of recovery from customers, a decrease of $2.3 million in loss provisions, and a decrease of $1.8 million in meter reading expenses as a result of the deployment of advanced metering systems.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes due to higher assessments.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Other regulatory charges (credits) - net includes regulatory credits of $19.9 million, recorded in the second quarter 2021, to reflect the effects of the joint stipulation reached in the 2021 formula rate plan filing proceeding. See Note 2 to the financial statements herein for discussion of the 2021 formula rate plan filing.

Interest expense increased primarily due to the issuance 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.

Income Taxes

The effective income tax rate was 22.9% for the third quarter 2021 and 22.4% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 23.2% for the third quarter 2020. The difference in the effective income tax rate for the third quarter 2020 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 20.5% for the nine months ended September 30, 2020. The difference in the effective income tax rate for the nine months ended September 30, 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:


	2021	2020
	(In Thousands)
Cash and cash equivalents at beginning of period	$18	$51,601

Cash flow provided by (used in):
Operating activities	249,768	200,273
Investing activities	(468,198)	(374,978)
Financing activities	218,440	166,142
Net increase (decrease) in cash and cash equivalents	10	(8,563)

Cash and cash equivalents at end of period	$28	$43,038

Operating Activities

Net cash flow provided by operating activities increased $49.5 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the timing of collections of receivables from customers. The increase was partially offset by increased fuel costs, including those related to Winter Storm Uri, the timing of payments to vendors, and an increase of approximately $13.3 million in storm spending in 2021, primarily due to Winter Storm Uri. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery.

Investing Activities

Net cash flow used in investing activities increased $93.2 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

an increase of $94.5 million in distribution construction expenditures primarily due to increased spending on the reliability and infrastructure of Entergy Mississippi’s distribution system and storm spending in 2021; and
money pool activity.

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

The increase was partially offset by $24.6 million in plant upgrades for Choctaw Generating Station in March 2020.

Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased by $41 million for the nine months ended September 30, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility’s subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $52.3 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the issuance of $200 million of 3.50% Series mortgage bonds in March 2021 and money pool activity, partially offset by the issuance of $170 million of 3.50% Series mortgage bonds in May 2020. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow and Entergy Mississippi’s payable to the money pool increased $18.1 million for the nine months ended September 30, 2021.

Capital Structure

Entergy Mississippi’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Mississippi is primarily due to the issuance of $200 million of mortgage bonds in March 2021.


	September 30, 2021		December 31, 2020
Debt to capital	52.3	%	51.7	%
Effect of subtracting cash	—	%	—	%
Net debt to net capital	52.3	%	51.7	%

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.

Entergy Mississippi is developing its capital investment plan for 2022 through 2024 and currently anticipates making $1.5 billion in capital investments during that period. The preliminary estimate includes generation projects to modernize, decarbonize, and diversify Entergy Mississippi’s portfolio, such as the Sunflower Solar Facility; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience and support customers’ sustainability goals for renewable expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance,

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:


September 30, 2021	December 31, 2020	September 30, 2020	December 31, 2019
(In Thousands)
($34,603)	($16,516)	$3,721	$44,693

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Mississippi has three separate credit facilities in the aggregate amount of $82.5 million scheduled to expire in April 2022. No borrowings were outstanding under the credit facilities as of September 30, 2021. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility primarily as a means to post collateral to support its obligations to MISO. As of September 30, 2021, $2.3 million of MISO letters of credit and $1 million of non-MISO letters of credit were outstanding under this facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Entergy Mississippi has $33.2 million in its storm reserve escrow account at September 30, 2021.

Sunflower Solar Facility

As discussed in the Form 10-K, 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 project is being built by Sunflower County Solar Project, LLC, an indirect subsidiary of Recurrent Energy, LLC. 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 non-fuel related costs of additional owned capacity owned by Entergy Mississippi, including the annual ownership costs of the Sunflower Solar Facility. Recovery through the interim capacity rate adjustment requires MPSC approval for each new resource. 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 second quarter 2022.

State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of the formula rate plan and fuel and purchased power cost recovery. The following are updates to that discussion.

2021 Formula Rate Plan Filing

In March 2021, Entergy Mississippi submitted its formula rate plan 2021 test year filing and 2020 look-back filing showing Entergy Mississippi’s earned return for the historical 2020 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2021 calendar year to be below the formula rate plan bandwidth. The 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,

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

within the formula rate plan bandwidth. The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $44.3 million. The 2021 evaluation report also includes $3.9 million in demand side management costs for which the MPSC approved realignment of recovery from the energy efficiency rider to the formula rate plan. These costs are not subject to the 4% cap and result in a total change in formula rate plan revenues of $48.2 million. The 2020 look-back filing compares actual 2020 results to the approved benchmark return on rate base and reflects the need for a $16.8 million interim increase in formula rate plan revenues. In addition, the 2020 look-back filing includes an interim capacity adjustment true-up for the Choctaw Generating Station, which increases the look-back interim rate adjustment by $1.7 million. These interim rate adjustments total $18.5 million. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $22.1 million interim rate increase, reflecting a cap equal to 2% of 2020 retail revenues, effective with the April 2021 billing cycle, subject to refund, pending a final MPSC order. The $3.9 million of demand side management costs and the Choctaw Generating Station true-up of $1.7 million, which are not subject to the 2% cap of 2020 retail revenues, were included in the April 2021 rate adjustments.

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 May 2021. 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.

COVID-19 Orders

As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 pandemic compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses. In December 2020, Entergy Mississippi resumed disconnections for commercial, industrial, and governmental customers with past-due balances that have not made payment arrangements. In January 2021, Entergy Mississippi resumed disconnecting service for residential customers with past-due balances that have not made payment arrangements. 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 will include 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 September 30, 2021, Entergy Mississippi had a regulatory asset of $18.2 million for costs associated with the COVID-19 pandemic.

Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.

Nuclear Matters

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

Entergy Mississippi, LLC

Management's Financial Discussion and Analysis

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


ENTERGY MISSISSIPPI, LLC
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Three Months Ended		Nine Months Ended
	2021	2020	2021	2020
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$420,319	$356,496	$1,105,978	$948,372

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	54,505	41,771	180,315	143,798
Purchased power	85,247	68,296	217,730	177,618
Other operation and maintenance	72,523	74,891	214,253	203,571

Taxes other than income taxes	25,911	24,638	78,886	74,525
Depreciation and amortization	57,130	52,486	168,324	155,937
Other regulatory charges (credits) - net	25,810	571	12,309	(9,806)
TOTAL	321,126	262,653	871,817	745,643

OPERATING INCOME	99,193	93,843	234,161	202,729

OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction	2,006	1,793	5,703	4,820
Interest and investment income	1	13	50	268
Miscellaneous - net	(1,844)	(2,497)	(6,362)	(7,382)
TOTAL	163	(691)	(609)	(2,294)

INTEREST EXPENSE
Interest expense	19,024	17,650	55,559	51,425
Allowance for borrowed funds used during construction	(849)	(773)	(2,378)	(1,958)
TOTAL	18,175	16,877	53,181	49,467

INCOME BEFORE INCOME TAXES	81,181	76,275	180,371	150,968

Income taxes	18,586	17,686	40,388	30,960

NET INCOME	$62,595	$58,589	$139,983	$120,008





See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	2021	2020
	(In Thousands)
OPERATING ACTIVITIES
Net income	$139,983	$120,008
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	168,324	155,937
Deferred income taxes, investment tax credits, and non-current taxes accrued	53,629	34,848
Changes in assets and liabilities:
Receivables	(36,754)	(21,376)
Fuel inventory	5,564	(359)
Accounts payable	48,413	5,863
Taxes accrued	(30,881)	(10,366)
Interest accrued	4,632	9,075
Deferred fuel costs	(95,310)	(45,998)
Other working capital accounts	(40,911)	(7,372)
Provisions for estimated losses	(8,087)	(28)
Other regulatory assets	(15,366)	(31,987)
Other regulatory liabilities	49,036	(10,592)
Pension and other postretirement liabilities	(17,454)	(11,451)
Other assets and liabilities	24,950	14,071
Net cash flow provided by operating activities	249,768	200,273

INVESTING ACTIVITIES
Construction expenditures	(473,956)	(393,887)
Allowance for equity funds used during construction	5,703	4,820

Change in money pool receivable - net	—	40,972
Payment for the purchase of plant or assets	—	(28,612)

Other	55	1,729
Net cash flow used in investing activities	(468,198)	(374,978)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	200,539	165,399


Change in money pool payable - net	18,087	—

Common equity distributions paid	—	(7,500)

Other	(186)	8,243
Net cash flow provided by financing activities	218,440	166,142

Net increase (decrease) in cash and cash equivalents	10	(8,563)
Cash and cash equivalents at beginning of period	18	51,601
Cash and cash equivalents at end of period	$28	$43,038

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized	$49,080	$40,551
Income taxes	($8,045)	$—

See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC
BALANCE SHEETS
ASSETS
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$26	$11
Temporary cash investments	2	7
Total cash and cash equivalents	28	18
Accounts receivable:
Customer	115,831	105,732
Allowance for doubtful accounts	(11,350)	(19,527)
Associated companies	12,111	2,740
Other	13,689	11,821
Accrued unbilled revenues	66,753	59,514
Total accounts receivable	197,034	160,280
Deferred fuel costs	80,619	—

Fuel inventory - at average cost	11,553	17,117
Materials and supplies - at average cost	72,082	59,542

Prepayments and other	28,940	4,876
TOTAL	390,256	241,833

OTHER PROPERTY AND INVESTMENTS
Non-utility property - at cost (less accumulated depreciation)	4,531	4,543
Escrow accounts	48,884	64,635
TOTAL	53,415	69,178

UTILITY PLANT
Electric	6,377,803	6,084,730


Construction work in progress	202,495	134,854
TOTAL UTILITY PLANT	6,580,298	6,219,584
Less - accumulated depreciation and amortization	2,102,072	2,005,087
UTILITY PLANT - NET	4,478,226	4,214,497

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	482,707	467,341
Other	17,927	14,413
TOTAL	500,634	481,754

TOTAL ASSETS	$5,422,531	$5,007,262

See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT LIABILITIES


Accounts payable:
Associated companies	$80,597	$61,727
Other	148,077	117,629
Customer deposits	85,997	86,200
Taxes accrued	77,203	108,084

Interest accrued	25,521	20,889
Deferred fuel costs	—	14,691



Other	22,591	34,270
TOTAL	439,986	443,490

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	704,405	646,674
Accumulated deferred investment tax credits	10,969	9,062

Regulatory liability for income taxes - net	216,620	224,000

Other regulatory liabilities	72,244	15,828
Asset retirement cost liabilities	10,174	9,762
Accumulated provisions	38,417	46,504
Pension and other postretirement liabilities	93,275	110,901
Long-term debt	1,981,945	1,780,577
Other	41,779	47,730
TOTAL	3,169,828	2,891,038

Commitments and Contingencies



EQUITY
Member's equity	1,812,717	1,672,734
TOTAL	1,812,717	1,672,734

TOTAL LIABILITIES AND EQUITY	$5,422,531	$5,007,262

See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC
STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)


						Member's Equity
						(In Thousands)

Balance at December 31, 2019						$1,542,151

Net income						22,526
Common equity distributions						(2,500)
Balance at March 31, 2020						$1,562,177

Net income						38,893

Balance at June 30, 2020						$1,601,070

Net income						58,589
Common equity distributions						(5,000)
Balance at September 30, 2020						$1,654,659


Balance at December 31, 2020						$1,672,734

Net income						25,972

Balance at March 31, 2021						$1,698,706

Net income						51,416

Balance at June 30, 2021						$1,750,122

Net income						62,595

Balance at September 30, 2021						$1,812,717

See Notes to Financial Statements.

ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

Hurricane Ida

In August 2021, Hurricane Ida caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid. The storm resulted in widespread power outages, including the loss of 100% of Entergy New Orleans’s load, and significant damage to distribution and transmission infrastructure, including the loss of connectivity to the eastern interconnection. Total restoration costs for the repair and/or replacement of the electrical system damaged by Hurricane Ida are currently estimated to be in the range of $120 million to $150 million. Also, Entergy New Orleans’s revenues in 2021 were adversely affected by extended power outages resulting from the hurricane.

Entergy New Orleans has recorded accounts payable for the estimated costs incurred that were necessary to return customers to service. Entergy New Orleans recorded corresponding regulatory assets of approximately $45 million and construction work in progress of approximately $75 million. Entergy New Orleans 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.

Entergy New Orleans is considering all available avenues to recover storm-related costs from Hurricane Ida, including federal government assistance and securitization financing. In September 2021, Entergy New Orleans withdrew $39 million from its funded storm reserves. Entergy New Orleans believes its liquidity is sufficient to meet its current obligations. As of September 30, 2021, Entergy New Orleans has $26.4 million of cash and cash equivalents and the ability to borrow up to $150 million from the Entergy System money pool.

In September 2021 the City Council issued a number of resolutions associated with Hurricane Ida including: (1) a resolution initiating an investigation of Entergy New Orleans’s preparation for and response to Hurricane Ida and a statement that the City Council opposes recovery of Hurricane Ida costs unless it is demonstrated that any such restoration costs are unrelated to deficient maintenance practices; and (2) resolutions requesting that the LPSC and the FERC study the prudence of Entergy Louisiana’s transmission planning. Entergy New Orleans will oppose any attempt by the City Council to alter the legal standard in Louisiana that allows Entergy New Orleans to recover its prudently incurred hurricane restoration costs. Because storm cost recovery or financing will be subject to review by applicable regulatory authorities and Entergy New Orleans has not gone through the regulatory process regarding Hurricane Ida 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 and incremental losses it may ultimately recover, or the timing of such recovery.

Hurricane Zeta

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Zeta” in the Form 10-K for a discussion of Hurricane Zeta, which caused significant damage to Entergy New Orleans’s service area. In March 2021, Entergy New Orleans withdrew $44 million from its funded storm reserves. See Note 2 to the financial statements herein for discussion of the storm cost certification filing made in 2021 by Entergy New Orleans.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Winter Storm Uri

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy New Orleans’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy New Orleans were approximately $35 million in February 2021 compared to approximately $25 million in February 2020. See Note 2 to the financial statements in the Form 10-K for discussion of fuel cost recovery at Entergy New Orleans. See “Load Shed Investigation” below for discussion of the investigation initiated by the City Council in February 2021.

Results of Operations

Net Income

Third Quarter 2021 Compared to Third Quarter 2020

Net income decreased $3.5 million primarily due to lower volume/weather and higher depreciation and amortization expenses, partially offset by higher retail electric price.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net income decreased $13.2 million primarily due to higher other operation and maintenance expenses, higher depreciation and amortization expenses, lower volume/weather, lower other income, and a higher effective income tax rate. The decrease was partially offset by higher retail electric price.

Operating Revenues

Third Quarter 2021 Compared to Third Quarter 2020

Following is an analysis of the change in operating revenues comparing third quarter 2021 to third quarter 2020:


			Amount
			(In Millions)
2020 operating revenues			$182.1
Fuel, rider, and other revenues that do not significantly affect net income			29.0
Retail electric price			11.6
Volume/weather			(11.5)
2021 operating revenues			$211.2

Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to an interim increase in formula rate plan revenues resulting from the recovery of New Orleans Power Station costs, effective November 2020. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case resolution.

The volume/weather variance is primarily due to a decrease of 85 GWh, or 5%, in billed electricity usage,

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

primarily due to decreased residential usage resulting from the effect of Hurricane Ida in the third quarter 2021 and the effect of less favorable weather on residential and commercial sales. See “Hurricane Ida” above for further discussion of the effects of Hurricane Ida.

Billed electric energy sales for Entergy New Orleans for the three months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	699	773	(10)
Commercial	554	564	(2)
Industrial	118	120	(2)
Governmental	212	211	—
Total retail	1,583	1,668	(5)
Sales for resale:
Non-associated companies	653	588	11
Total	2,236	2,256	(1)

See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020:


			Amount
			(In Millions)
2020 operating revenues			$478.7
Fuel, rider, and other revenues that do not significantly affect net income			54.5
Retail electric price			31.2
Volume/weather			(5.1)
2021 operating revenues			$559.3

The volume/weather variance is primarily due to a decrease of 31 GWh, or 1%, in billed electricity usage primarily due to decreased usage in the residential and industrial sectors, including the effect of Hurricane Ida in the third quarter 2021, partially offset by the effect of more favorable weather on residential sales. See “Hurricane Ida” above for further discussion of the effects of Hurricane Ida.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Billed electric energy sales for Entergy New Orleans for the nine months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	1,786	1,794	—
Commercial	1,487	1,500	(1)
Industrial	317	328	(3)
Governmental	573	572	—
Total retail	4,163	4,194	(1)
Sales for resale:
Non-associated companies	1,271	1,662	(24)
Total	5,434	5,856	(7)

See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.

Other Income Statement Variances

Third Quarter 2021 Compared to Third Quarter 2020

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Other operation and maintenance expenses increased primarily due to:

an increase of $6.2 million in non-nuclear generation expenses primarily due to the timing of the scope of work performed during plant outages in 2021 as compared to the same period in 2020 and the New Orleans Power Station, which was placed in service in May 2020;
an increase of $5.6 million in energy efficiency expenses due to the timing of recovery from customers;
an increase of $2.5 million in distribution operations expenses primarily due to higher vegetation maintenance costs and higher distribution reliability costs; and
several individually insignificant items.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the New Orleans Power Station, which was placed in service in May 2020.

Other regulatory charges (credits) - net includes regulatory credits recorded in first quarter 2020 to reflect compliance with terms of the 2018 combined rate case resolution approved by the City Council in February 2020. See Note 2 to the financial statements in the Form 10-K for discussion of the rate case resolution.

Other income decreased primarily due to a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the New Orleans Power Station project.

Income Taxes

The effective income tax rate was 26% for third quarter 2021 and 27.1% for the nine months ended September 30, 2021. The difference in the effective income tax rates for third quarter 2021 and the nine months

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to state income taxes and the provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 23.9% for the third quarter 2020. The difference in the effective income tax rate for the third quarter 2020 versus the federal statutory rate of 21% was primarily due to state income taxes and the provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items and the amortization of excess accumulated deferred income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 4.4% for the nine months ended September 30, 2020. The difference in the effective income tax rate for the nine months ended September 30, 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, book and tax differences related to the allowance for equity funds used during construction, and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes and the provision for uncertain tax positions. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of the income tax deductions for stock-based compensation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:


	2021	2020
	(In Thousands)
Cash and cash equivalents at beginning of period	$26	$6,017

Cash flow provided by (used in):
Operating activities	77,450	46,097
Investing activities	(59,423)	(169,565)
Financing activities	8,335	117,483
Net increase (decrease) in cash and cash equivalents	26,362	(5,985)

Cash and cash equivalents at end of period	$26,388	$32

Operating Activities

Net cash flow provided by operating activities increased $31.4 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the timing of payments to vendors and the timing of recovery of fuel and purchased power costs. The increase was partially offset by the timing of receivables from customers and an increase of $7.3 million in storm spending in 2021, primarily due to Hurricane Zeta and Hurricane Ida restoration efforts. See “Hurricane Zeta” and “Hurricane Ida” above for discussion of hurricane restoration efforts.

Investing Activities

Net cash flows used in investing activities decreased $110.1 million for the nine months ended

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

$83 million in receipts from storm reserve escrow accounts in 2021;
a decrease of $48.3 million in non-nuclear generation construction expenditures primarily due to lower spending in 2021 on the New Orleans Power Station and the New Orleans Solar Station projects; and
a decrease of $18.1 million in distribution construction expenditures primarily due to lower spending in 2021 on advanced metering infrastructure.

The decrease in distribution construction expenditures was partially offset by an increase of $29.2 million in storm spending in 2021. See “Hurricane Zeta” and “Hurricane Ida” above for discussion of hurricane restoration efforts.

Financing Activities

Net cash flow provided by financing activities decreased $109.1 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the issuance of $78 million of 3.00% Series mortgage bonds and the issuance of $62 million of 3.75% Series mortgage bonds, each in March 2020, and money pool activity. The decrease was partially offset by long-term credit borrowings of $25 million in 2021 compared to repayments of long-term credit borrowings of $20 million in 2020.

Decreases in Entergy New Orleans’s payable to the money pool are a use of cash flow, and Entergy New Orleans’s payable to the money pool decreased $10.2 million for the nine months ended September 30, 2021 compared to increasing by $5.1 million for the nine months ended September 30, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Capital Structure

Entergy New Orleans’s debt to capital ratio is shown in the following table.


	September 30, 2021		December 31, 2020
Debt to capital	51.4	%	51.5	%
Effect of excluding securitization bonds	(1.4	%)	(1.6	%)
Debt to capital, excluding securitization bonds (a)	50.0	%	49.9	%
Effect of subtracting cash	(1.0	%)	—	%
Net debt to net capital, excluding securitization bonds (a)	49.0	%	49.9	%

(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance lease obligations, long-term debt, including the currently maturing portion, and the long-term payable due to an associated company. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.

Entergy New Orleans is developing its capital investment plan for 2022 through 2024 and currently anticipates making $510 million in capital investments during that period, excluding capital spending as a result of Hurricane Ida. The preliminary estimate includes generation projects to modernize, decarbonize, and diversify Entergy New Orleans’s portfolio; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience and support customers’ sustainability goals for renewable expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:


September 30, 2021	December 31, 2020	September 30, 2020	December 31, 2019
(In Thousands)
$1,995	($10,190)	($5,089)	$5,191

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in June 2024. The credit facility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of September 30, 2021, $25 million in cash borrowings and no letters of credit were outstanding under the facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2021, a $1 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Renewables

As discussed in the Form 10-K, in July 2019, the City Council approved the stipulated settlement related to Entergy New Orleans’s application for three utility-scale solar projects totaling 90 MW. Commercial operation of the 20 MW New Orleans Solar Station commenced in December 2020. Due to a delay resulting from Hurricane Ida, Entergy New Orleans now expects to begin receiving power under the 50 MW Iris Solar and the 20 MW St. James Solar power purchase agreements in 2022.

State and Local Rate Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Retail Rates

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. Resulting rates will be effective with the first billing cycle of November 2021 pursuant to the formula rate plan tariff. 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. Other parties filed reports arguing that no rate should be implemented until the completion of a management audit of Entergy New Orleans. 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 will be $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.

COVID-19 Orders

As discussed in the Form 10-K, in June 2020 the City Council established the City Council Cares Program and directed Entergy New Orleans to use the approximately $7 million refund received from the Entergy Arkansas opportunity sales FERC proceeding and approximately $15 million of non-securitized storm reserves to fund this program, which was intended to provide temporary bill relief to customers who became unemployed during the COVID-19 pandemic. The program was effective from July 1, 2020 through December 31, 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.

Additionally, as discussed in the Form 10-K, in February 2021 the City Council adopted a resolution suspending residential customer disconnections for non-payment of utility bills and suspending the assessment and accumulation of late fees on residential customers with past-due balances through May 15, 2021, which was not extended by the City Council. As of September 30, 2021, Entergy New Orleans had a regulatory asset of $12.7 million for costs associated with the COVID-19 pandemic.

Storm Cost Filings

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,

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

were reasonable and necessary to enable Entergy New Orleans to restore electric service to its customers and Entergy New Orleans’s electric utility infrastructure. Additionally, Entergy New Orleans plans to make a separate filing at an appropriate time to the City Council requesting replenishment of its storm reserves.

Renewable Portfolio Standard Rulemaking

As discussed in the Form 10-K, in March 2019 the City Council initiated a rulemaking proceeding to consider whether to establish a renewable portfolio standard. The rulemaking considered, among other issues, whether to adopt a renewable portfolio standard, whether such standard should be voluntary or mandatory, what kinds of technologies should qualify for inclusion in the rules, what level, if any, of renewable generation should be required, and whether penalties are an appropriate component of the proposed rules. In August 2020 the City Council advisors issued a final draft of the rules for review and comment from the parties before final rules are proposed for consideration by the City Council. Entergy New Orleans filed comments in September and October 2020. In February 2021 the City Council amended the proposed draft rules to exclude beneficial electrification and carbon capture from the technologies eligible for credit under the Renewable and Clean Portfolio Standard and opened a 30-day comment period regarding the proposed amendments. Under the rule, however, these technologies can be approved by the City Council as a “qualified measure” on a case-by-case basis. The City Council approved the draft rule, as amended, in May 2021.

Load Shed Investigation

On February 16, 2021, due to high customer demand and limited generation, MISO issued an order requiring load-serving entities throughout its southern region to shed load to protect the integrity of the bulk electric system. Entergy New Orleans was required to shed load of at least 26 MW, but due to certain complications with its automated load shed program and certain load measurement issues, it inadvertently shed approximately 105 MW of load in its service area. The maximum time any customer was without power due to the load shed event was one hour and forty minutes. In late February 2021 the City Council ordered its advisors to conduct an investigation into the load shed event and to issue a report, which was completed and filed in April 2021. The report recommended that the City Council open an additional docket to determine whether any of Entergy New Orleans’s actions were imprudent. In May 2021 the City Council opened a docket directing its advisors to conduct a prudence investigation and determine whether financial and/or other penalties should be imposed by the City Council. In June 2021, Entergy New Orleans filed a response to the show cause docket that outlined how its response to Winter Storm Uri was reasonable under the circumstances. In November 2021 the City Council’s Advisors issued a report that criticized Entergy’s response to the winter storm, including the inadvertent shedding of 105MW of load and communications with customers. The Advisors’ Report, however, did not find that Entergy New Orleans was imprudent and did not recommend a fine under the circumstances. A City Council decision is expected in the first quarter 2022 based on the procedural schedule in the show cause docket. Entergy New Orleans would oppose any attempt to levy a fine under the circumstances presented.

Management Audit

In September 2021 the City Council issued a resolution initiating a management audit of Entergy New Orleans that has been proposed by certain solar advocates. The advocates have proposed a broad scope audit including, but not limited to, ensuring the corporate culture embraces climate solutions, employee salaries, expenses, and capital spending, but the City Council has not yet determined the full scope of the proposed audit. In September 2021 the City Council passed a resolution directing its staff to issue a request for qualifications for firms interested in conducting the audit.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Utility Alternative Investigation

In September 2021 the City Council issued a resolution directing its staff to initiate a request for qualifications for a third-party firm to study alternatives to Entergy New Orleans as the electric service provider for New Orleans. Entergy responded to the City Council and issued a press release stating that it stands ready to work with the City Council to quickly implement any action taken by the City Council in response to the study. In the press release, Entergy proposed four preliminary options for consideration by the City Council: merger of Entergy New Orleans with Entergy Louisiana, sale of Entergy New Orleans, spinoff of Entergy New Orleans to establish a standalone company, or municipalization of the assets of Entergy New Orleans by the City of New Orleans.

Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.

Nuclear Matters

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for further discussion of nuclear matters.

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Three Months Ended		Nine Months Ended
	2021	2020	2021	2020
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$192,946	$169,512	$491,855	$427,842
Natural gas	18,283	12,552	67,449	50,867
TOTAL	211,229	182,064	559,304	478,709

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	34,940	15,051	88,462	59,382
Purchased power	75,360	66,868	201,207	181,320
Other operation and maintenance	34,483	34,872	113,638	94,702
Taxes other than income taxes	15,530	15,455	40,380	44,303
Depreciation and amortization	18,444	16,134	54,758	46,835
Other regulatory charges (credits) - net	4,126	1,362	9,831	152
TOTAL	182,883	149,742	508,276	426,694

OPERATING INCOME	28,346	32,322	51,028	52,015

OTHER INCOME
Allowance for equity funds used during construction	433	910	1,067	5,443
Interest and investment income	18	13	32	109
Miscellaneous - net	(205)	(600)	(711)	(1,170)
TOTAL	246	323	388	4,382

INTEREST EXPENSE
Interest expense	7,158	7,529	21,149	21,804
Allowance for borrowed funds used during construction	(192)	(438)	(475)	(2,618)
TOTAL	6,966	7,091	20,674	19,186

INCOME BEFORE INCOME TAXES	21,626	25,554	30,742	37,211

Income taxes	5,631	6,104	8,345	1,646

NET INCOME	$15,995	$19,450	$22,397	$35,565

See Notes to Financial Statements.

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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	2021	2020
	(In Thousands)
OPERATING ACTIVITIES
Net income	$22,397	$35,565
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	54,758	46,835
Deferred income taxes, investment tax credits, and non-current taxes accrued	11,261	10,382
Changes in assets and liabilities:
Receivables	(24,959)	(10,892)
Fuel inventory	79	190
Accounts payable	22,863	1,841
Taxes accrued	(1,699)	(2,283)
Interest accrued	(2,796)	(335)
Deferred fuel costs	4,280	(5,629)
Other working capital accounts	(7,025)	(14,122)
Provisions for estimated losses	(62,293)	1,356
Other regulatory assets	18,412	2,196
Other regulatory liabilities	11,757	(13,389)
Pension and other postretirement liabilities	(11,220)	(10,373)
Other assets and liabilities	41,635	4,755
Net cash flow provided by operating activities	77,450	46,097

INVESTING ACTIVITIES
Construction expenditures	(139,153)	(174,011)
Allowance for equity funds used during construction	1,067	5,443
Payment for purchase of assets	—	(1,584)

Changes in money pool receivable - net	(1,995)	5,191
Receipts from storm reserve escrow account	83,045	—
Payments to storm reserve escrow account	(7)	(428)
Changes in securitization account	(2,380)	(4,176)

Net cash flow used in investing activities	(59,423)	(169,565)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—	138,930
Retirement of long-term debt	19,251	(25,616)



Changes in money pool payable - net	(10,190)	5,089


Other	(726)	(920)
Net cash flow provided by financing activities	8,335	117,483

Net increase (decrease) in cash and cash equivalents	26,362	(5,985)
Cash and cash equivalents at beginning of period	26	6,017
Cash and cash equivalents at end of period	$26,388	$32

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$23,015	$21,203
Income taxes	$324	$3,332

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$26	$26
Temporary cash investments	26,362	—
Total cash and cash equivalents	26,388	26
Securitization recovery trust account	5,744	3,364
Accounts receivable:
Customer	96,185	70,694
Allowance for doubtful accounts	(18,625)	(17,430)
Associated companies	4,288	2,381
Other	10,457	4,248
Accrued unbilled revenues	25,611	31,069
Total accounts receivable	117,916	90,962
Deferred fuel costs	—	2,130
Fuel inventory - at average cost	1,899	1,978
Materials and supplies - at average cost	16,392	16,550
Prepayments and other	11,438	3,715
TOTAL	179,777	118,725

OTHER PROPERTY AND INVESTMENTS
Non-utility property at cost (less accumulated depreciation)	1,016	1,016
Storm reserve escrow account	—	83,038

TOTAL	1,016	84,054

UTILITY PLANT
Electric	1,834,801	1,821,638
Natural gas	365,544	348,024
Construction work in progress	108,818	12,460
TOTAL UTILITY PLANT	2,309,163	2,182,122
Less - accumulated depreciation and amortization	764,178	740,796
UTILITY PLANT - NET	1,544,985	1,441,326

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Deferred fuel costs	4,080	4,080
Other regulatory assets (includes securitization property of $27,995 as of September 30, 2021 and $35,559 as of December 31, 2020)	248,378	266,790
Other	37,254	23,931
TOTAL	289,712	294,801

TOTAL ASSETS	$2,015,490	$1,938,906

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$70,000	$—
Payable due to associated company	1,618	1,618
Accounts payable:
Associated companies	51,071	54,234
Other	137,011	60,766
Customer deposits	27,933	27,912
Taxes accrued	3,001	4,700
Interest accrued	5,299	8,095
Deferred fuel costs	2,150	—
Current portion of unprotected excess accumulated deferred income taxes	3,177	3,296
Other	6,094	5,462
TOTAL	307,354	166,083

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	351,119	338,714
Accumulated deferred investment tax credits	16,053	16,095
Regulatory liability for income taxes - net	53,688	55,675
Asset retirement cost liabilities	3,964	3,768
Accumulated provisions	27,605	89,898

Long-term debt (includes securitization bonds of $35,724 as of September 30, 2021 and $41,291 as of December 31, 2020)	579,550	629,704
Long-term payable due to associated company	10,911	10,911
Other	35,932	21,141
TOTAL	1,078,822	1,165,906

Commitments and Contingencies

EQUITY
Member's equity	629,314	606,917
TOTAL	629,314	606,917

TOTAL LIABILITIES AND EQUITY	$2,015,490	$1,938,906

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)


			Member's Equity
			(In Thousands)

Balance at December 31, 2019			$497,579

Net income			11,186

Balance at March 31, 2020			$508,765

Net income			4,929

Balance at June 30, 2020			$513,694

Net income			19,450

Balance at September 30, 2020			$533,144


Balance at December 31, 2020			$606,917

Net income			1,771

Balance at March 31, 2021			$608,688

Net income			4,631

Balance at June 30, 2021			$613,319

Net income			15,995

Balance at September 30, 2021			$629,314

See Notes to Financial Statements.

ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

The COVID-19 Pandemic

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

Hurricane Laura and Hurricane Delta

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Laura and Hurricane Delta” in the Form 10-K for a discussion of Hurricane Laura and Hurricane Delta, which caused significant damage to portions of Entergy Texas’s service territory. See Note 2 to the financial statements herein for discussion of storm cost filings made in 2021 by Entergy Texas.

Winter Storm Uri

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - February 2021 Winter Storms” in the Form 10-K for a discussion of the winter storms and extreme cold temperatures experienced in the United States, including Entergy Texas’s service area, in February 2021 (Winter Storm Uri). Fuel and purchased power costs for Entergy Texas were approximately $185 million in February 2021 compared to approximately $50 million in February 2020. See Note 2 to the financial statements herein for discussion of storm cost filings made in 2021 by Entergy Texas. See Note 2 to the financial statements herein and in the Form 10-K for discussion of fuel cost recovery at Entergy Texas.

Results of Operations

Net Income

Third Quarter 2021 Compared to Third Quarter 2020

Net income increased $2.7 million primarily due to higher retail electric price and higher volume/weather. The increase was partially offset by higher taxes other than income taxes, lower other income, higher depreciation and amortization expenses, and higher other operation and maintenance expenses.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net income increased $18 million primarily due to higher retail electric price and higher volume/weather. The increase was partially offset by lower other income, higher depreciation and amortization expenses, higher other operation and maintenance expenses, higher taxes other than income taxes, and a higher effective income tax rate.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Operating Revenues

Third Quarter 2021 Compared to Third Quarter 2020

Following is an analysis of the change in operating revenues comparing the third quarter 2021 to the third quarter 2020:


			Amount
			(In Millions)
2020 operating revenues			$494.9
Fuel, rider, and other revenues that do not significantly affect net income			0.3
Retail electric price			41.6
Volume/weather			4.8
2021 operating revenues			$541.6

Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to the implementation of the generation cost recovery rider, 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 increases in the distribution cost recovery factor rider effective October 2020 and March 2021. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the generation cost recovery rider and transmission and distribution cost recovery factor rider filings.

The volume/weather variance is primarily due to an increase in usage during the unbilled sales period and an increase of 287 GWh, or 5%, in billed electricity usage, including an increase in industrial usage partially offset by the effect of less favorable weather on residential sales. The increase in industrial usage is primarily due to an increase in demand from expansion projects, primarily in the transportation and chemicals industries, and an increase in demand from mid-to-small and cogeneration customers.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Billed electric energy sales for Entergy Texas for the three months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	2,019	2,070	(2)
Commercial	1,290	1,276	1
Industrial	2,388	2,060	16
Governmental	65	69	(6)
Total retail	5,762	5,475	5
Sales for resale:
Associated companies	324	331	(2)
Non-associated companies	191	407	(53)
Total	6,277	6,213	1

See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2021 to the nine months ended September 30, 2020:


			Amount
			(In Millions)
2020 operating revenues			$1,206.5
Fuel, rider, and other revenues that do not significantly affect net income			137.6
Retail electric price			92.0
Volume/weather			16.2
2021 operating revenues			$1,452.3

The retail electric price variance is primarily due to 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. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the generation cost recovery rider and transmission and distribution cost recovery factor rider filings.

The volume/weather variance is primarily due to an increase of 713 GWh, or 5%, in billed electricity usage, including an increase in industrial and commercial usage and the effect of more favorable weather on residential sales. The increase in industrial usage is primarily due to an increase in demand from expansion projects, primarily in the transportation and chemicals industries, and an increase in demand from cogeneration customers. The increase in commercial usage is primarily due to the effects of Hurricane Laura in the third quarter of 2020. The

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

increase is partially offset by a decrease in usage from residential customers primarily due to the impact that the COVID-19 pandemic had on prior year usage. See “Hurricane Laura and Hurricane Delta” above for discussion of the impacts from Hurricane Laura. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - The COVID-19 Pandemic” in the Form 10-K for a discussion of the COVID-19 pandemic.

Billed electric energy sales for Entergy Texas for the nine months ended September 30, 2021 and 2020 are as follows:


	2021	2020	% Change
	(GWh)
Residential	4,876	4,782	2
Commercial	3,375	3,309	2
Industrial	6,530	5,970	9
Governmental	188	195	(4)
Total retail	14,969	14,256	5
Sales for resale:
Associated companies	983	895	10
Non-associated companies	824	717	15
Total	16,776	15,868	6

See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.

Other Income Statement Variances

Third Quarter 2021 Compared to Third Quarter 2020

Other operation and maintenance expenses increased primarily due to:

an increase of $5.6 million in non-nuclear generation expenses primarily due to higher long-term service agreement expenses and other expenses associated with the Montgomery County Power Station, which began commercial operation in January 2021, and a higher scope of work performed in 2021 as compared to the same period in 2020;
an increase of $1.6 million in transmission expenses primarily due to a higher scope of contract work, including vegetation maintenance; and
an increase of $1.1 million in distribution operations expenses primarily due to higher contactor costs, partially offset by lower vegetation maintenance costs.

The increase was partially offset by a decrease of $1.8 million in meter reading expenses as a result of the deployment of advanced metering systems.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes, a sales tax audit assessment in the third quarter of 2021, and an increase in local franchise taxes. Ad valorem taxes increased as a result of higher assessments, primarily due to the addition of the Montgomery County Power Station.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Montgomery County Power Station, which was placed in service in January 2021.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Other income decreased primarily due to a decrease in the allowance for equity funds used during construction due to higher construction work in progress in 2020, including the Montgomery County Power Station project, as compared to the same period in 2021.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Other operation and maintenance expenses increased primarily due to:

an increase of $11.8 million in non-nuclear generation expenses primarily due to higher long-term service agreement expenses and other expenses associated with the Montgomery County Power Station, which began commercial operation in January 2021, and a higher scope of work performed in 2021 as compared to the same period in 2020;
an increase of $3.1 million in distribution operations expenses primarily due to higher contractor costs and higher vegetation maintenance costs;
an increase of $2.9 million in customer service costs primarily due to an increase in contract work in 2021 as compared to the same period in 2020;
an increase of $2.1 million as a result of the amount of transmission costs allocated by MISO; and
an increase of $2.1 million in compensation and benefits costs in 2021 primarily due to 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 “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefit costs.

The increase was partially offset by a decrease of $4.3 million in meter reading expenses as a result of the deployment of advanced metering systems.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Montgomery County Power Station, which was placed in service in January 2021.

Interest expense increased primarily due to a decrease in the allowance for borrowed funds used during construction due to higher construction work in progress in 2020, including the Montgomery County Power Station project, as compared to the same period in 2021.

Income Taxes

The effective income tax rate was 13.7% for the third quarter 2021 and 11.3% for the nine months ended September 30, 2021. The differences in the effective income tax rates for the third quarter 2021 and the nine months ended September 30, 2021 versus the federal statutory rate of 21% were primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

The effective income tax rate was 10.9% for the third quarter 2020. The difference in the effective income tax rate for the third quarter 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and book and tax differences related to the allowance for equity funds used during construction. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 5.3% for the nine months ended September 30, 2020. The difference in the effective income tax rate for the nine months ended September 30, 2020 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, book and tax differences related to the allowance for equity funds used during construction, permanent differences related to income tax deductions for stock-based compensation, and certain book and tax differences related to utility plant items. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:


	2021	2020
	(In Thousands)
Cash and cash equivalents at beginning of period	$248,596	$12,929

Cash flow provided by (used in):
Operating activities	254,980	294,253
Investing activities	(479,166)	(657,427)
Financing activities	(24,385)	350,279
Net decrease in cash and cash equivalents	(248,571)	(12,895)

Cash and cash equivalents at end of period	$25	$34

Operating Activities

Net cash flow provided by operating activities decreased $39.3 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

increased fuel costs, including those related to Winter Storm Uri. See “Winter Storm Uri” above for discussion of the incremental fuel and purchased power costs incurred. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
the timing of payments to vendors; and
an increase of approximately $18.9 million in storm spending in 2021, primarily due to Hurricane Laura and Hurricane Delta restoration efforts. See “Hurricane Laura and Hurricane Delta” above for discussion of hurricane restoration efforts.

The decrease was partially offset by the timing of collections of receivables from customers.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Investing Activities

Net cash flow used in investing activities decreased $178.3 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

a decrease of $136.4 million in non-nuclear generation construction expenditures primarily due to higher spending in 2020 on the Montgomery County Power Station project;
a decrease of $80.4 million in transmission construction expenditures primarily due to a lower scope of work on projects performed in 2021 as compared to 2020; and
the sale of a 7.56% partial interest in the Montgomery County Power Station in June 2021 for approximately $67.9 million. See Note 14 to the financial statements herein for further discussion of the transaction.

The decrease was partially offset by:

an increase of $56.7 million in distribution construction expenditures primarily due to storm spending in 2021, partially offset by lower spending in 2021 on advanced metering infrastructure. See “Hurricane Laura and Hurricane Delta” above for discussion of hurricane restoration efforts; and
the purchase of the Hardin County Peaking Facility in June 2021 for approximately $36.7 million. See Note 14 to the financial statements herein for further discussion of the Hardin County Peaking Facility purchase.

Financing Activities

Entergy Texas’s financing activities used $24.4 million of cash for the nine months ended September 30, 2021 compared to providing $350.3 million for the nine months ended September 30, 2020 primarily due to the following activity:

the repayment, prior to maturity, of $125 million of 2.55% Series mortgage bonds in May 2021 and the repayment, at maturity, of $75 million of 4.10% Series mortgage bonds in September 2021;
a capital contribution of $85 million received from Entergy Corporation in April 2021 in order to maintain Entergy Texas’s capital structure and in anticipation of various upcoming capital expenditures as compared to a capital contribution of $175 million received from Entergy Corporation in March 2020 in anticipation of upcoming expenditures, including Montgomery County Power Station;
the issuance of $130 million of 1.50% Series mortgage bonds in August 2021 as compared to the issuance of $175 million of 3.55% Series mortgage bonds in March 2020; and
money pool activity.

Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $20.1 million for the nine months ended September 30, 2021 compared to increasing by $54.2 million for the nine months ended September 30, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Capital Structure

Entergy Texas’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to the net repayment of long-term debt in 2021 and the $85 million capital contribution received from Entergy Corporation in April 2021.


	September 30, 2021		December 31, 2020
Debt to capital	49.3	%	53.7	%
Effect of excluding the securitization bonds	(0.6	%)	(1.3	%)
Debt to capital, excluding securitization bonds (a)	48.7	%	52.4	%
Effect of subtracting cash	—	%	(2.7	%)
Net debt to net capital, excluding securitization bonds (a)	48.7	%	49.7	%

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

Net debt consists of debt less cash and cash equivalents. Debt consists of finance lease obligations and long-term debt, including the currently maturing portion. Capital consists of debt and equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. Following are updates to information provided in the Form 10-K.

Entergy Texas is developing its capital investment plan for 2022 through 2024 and currently anticipates making $2.5 billion in capital investments during that period. The preliminary estimate includes generation projects to modernize, decarbonize, and diversify Entergy Texas’s portfolio, such as the Orange County Advanced Power Station; distribution and Utility support spending to deliver reliability, resilience, and customer experience; transmission spending to drive reliability and resilience and support customers’ sustainability goals for renewable expansion; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Texas’s receivables from or (payables to) the money pool were as follows:


September 30, 2021	December 31, 2020	September 30, 2020	December 31, 2019
(In Thousands)
($20,075)	$4,601	($54,229)	$11,181

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in June 2026. The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of September 30, 2021, there were no cash borrowings and $1.3 million of letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2021, $12 million in letters of credit were outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Liberty County Solar Facility

In September 2020, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to acquire the 100 MW Liberty County Solar Facility and a determination that Entergy Texas’s acquisition of the facility through a tax equity partnership is in the public interest. In its preliminary order, the PUCT determined that, in considering Entergy Texas’s application, it would not specifically address whether Entergy Texas’s use of a tax equity partnership is in the public interest. In March 2021 intervenors and PUCT staff filed testimony, and Entergy Texas filed rebuttal testimony in April 2021. A hearing on the merits was held in April 2021. In July 2021 the presiding ALJs issued a proposal for decision recommending that the PUCT deny the certification requested in the application. In October 2021 the PUCT issued an order adopting the ALJs’ proposal for decision and denying Entergy Texas’s application. Entergy Texas is reviewing the order and evaluating its options.

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 $1.19 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. Subject to receipt of required regulatory approvals and other conditions, the facility is expected to be in-service by May 2026.

State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.

Distribution Cost Recovery Factor (DCRF) Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $26.3 million annually, or $6.8 million in incremental annual revenues beyond Entergy Texas’s 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. A procedural schedule was established with a

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

hearing scheduled in December 2021.

Transmission Cost Recovery Factor (TCRF) Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $51 million annually, or $31.6 million in incremental annual revenues beyond Entergy Texas’s 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 this 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.

Generation Cost Recovery Rider

As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider with an initial annual revenue requirement of approximately $91 million to begin recovering a return of and on its capital investment in the Montgomery County Power Station through August 31, 2020. In December 2020, Entergy Texas filed an unopposed settlement supporting a generation cost recovery rider with an annual revenue requirement of approximately $86 million, with the ability to seek recovery of a majority of the remaining requested costs in a subsequent rate case. 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 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 its 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 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 represent no change from the generation cost recovery rider rates to be established in Entergy Texas’s 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 for

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

further processing. See Note 14 to the financial statements herein for further discussion of the Hardin County Peaking Facility purchase.

COVID-19 Orders

As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. In March 2020 the PUCT ordered a moratorium on disconnections for nonpayment for all customer classes, but, in April 2020, revised the disconnect moratorium to apply only to residential customers. The PUCT allowed the moratorium to expire on June 13, 2020, but on July 17, 2020, the PUCT re-established the disconnect moratorium for residential customers until August 31, 2020. In January 2021, Entergy Texas resumed disconnections for customers with past-due balances that have not made payment arrangements. As of September 30, 2021, Entergy Texas had a regulatory asset of $12.8 million for costs associated with the COVID-19 pandemic.

Fuel and purchased power recovery

In February 2021, Entergy Texas filed an application to implement a fuel refund for a cumulative over-recovery of approximately $75 million that is primarily attributable to settlements received by Entergy Texas from MISO related to Hurricane Laura. Entergy Texas planned to issue the refund over the period of March through August 2021. On February 22, 2021, Entergy Texas filed a motion to abate its fuel refund proceeding to assess how the February 2021 winter storm impacted Entergy Texas’s fuel over-recovery position. In March 2021, Entergy Texas withdrew its application to implement the fuel refund. Entergy Texas is continuing to evaluate its fuel balance and will file a subsequent refund or surcharge application consistent with the requirements of the PUCT’s rules.

Storm Cost Filings

Hurricane Laura, Hurricane Delta, and Winter Storm Uri

In August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In April 2021, Entergy Texas filed an application with the PUCT requesting a determination that its system restoration costs associated with Hurricane Laura, Hurricane Delta, and Winter Storm Uri of approximately $250 million, including approximately $200 million in capital costs and approximately $50 million in non-capital costs were reasonable and necessary to enable Entergy Texas to restore electric service to its customers and Entergy Texas’s electric utility infrastructure. The filing included only a portion of the Winter Storm Uri costs. The filing also included the projected balance of $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, if approved, Entergy Texas would remove from the amount it proposed to securitize approximately $4.3 million that would 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 $300 thousand related to attestation costs.

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. A procedural schedule was established with a deadline to file a settlement agreement or status update by November 11, 2021 and a supplemental procedural schedule if no settlement is filed within seven days of a PUCT final order in Entergy Texas’s system restoration cost proceeding.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.

Nuclear Matters

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

Industrial and Commercial Customers

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Three Months Ended		Nine Months Ended
	2021	2020	2021	2020
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$541,632	$494,922	$1,452,286	$1,206,452

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	92,843	96,902	269,270	186,038

Purchased power	155,723	139,204	425,784	383,346
Other operation and maintenance	68,973	60,423	202,743	179,883

Taxes other than income taxes	30,479	15,642	73,025	55,438
Depreciation and amortization	54,711	45,195	159,234	131,596
Other regulatory charges (credits) - net	10,029	29,250	51,122	69,342
TOTAL	412,758	386,616	1,181,178	1,005,643

OPERATING INCOME	128,874	108,306	271,108	200,809

OTHER INCOME
Allowance for equity funds used during construction	1,836	10,875	6,951	33,117
Interest and investment income	204	203	632	975
Miscellaneous - net	(507)	2,061	(1,457)	924
TOTAL	1,533	13,139	6,126	35,016

INTEREST EXPENSE
Interest expense	21,220	22,648	66,157	68,643
Allowance for borrowed funds used during construction	(738)	(4,673)	(2,797)	(14,231)
TOTAL	20,482	17,975	63,360	54,412

INCOME BEFORE INCOME TAXES	109,925	103,470	213,874	181,413

Income taxes	15,084	11,306	24,185	9,674

NET INCOME	94,841	92,164	189,689	171,739

Preferred dividend requirements	470	470	1,411	1,411

EARNINGS APPLICABLE TO COMMON STOCK	$94,371	$91,694	$188,278	$170,328

See Notes to Financial Statements.

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	2021	2020
	(In Thousands)
OPERATING ACTIVITIES
Net income	$189,689	$171,739
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	159,234	131,596
Deferred income taxes, investment tax credits, and non-current taxes accrued	31,518	37,072
Changes in assets and liabilities:
Receivables	(50,538)	(55,059)
Fuel inventory	7,232	(1,726)
Accounts payable	20,506	15,542
Taxes accrued	6,003	(12,623)
Interest accrued	(12,808)	(7,855)
Deferred fuel costs	(103,013)	61,995
Other working capital accounts	(19,522)	(8,382)
Provisions for estimated losses	67	(69)
Other regulatory assets	72,760	42,904
Other regulatory liabilities	(21,469)	(39,791)
Pension and other postretirement liabilities	(16,489)	(18,179)
Other assets and liabilities	(8,190)	(22,911)
Net cash flow provided by operating activities	254,980	294,253

INVESTING ACTIVITIES
Construction expenditures	(541,161)	(703,650)
Allowance for equity funds used during construction	6,951	33,117
Proceeds from sale of assets	67,920	—

Payment for purchase of assets	(36,534)	(4,931)
Changes in money pool receivable - net	4,601	11,181
Changes in securitization account	19,057	6,856

Net cash flow used in investing activities	(479,166)	(657,427)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	127,931	344,110
Retirement of long-term debt	(269,435)	(216,266)
Capital contribution from parent	85,000	175,000

Changes in money pool payable - net	20,075	54,229


Preferred stock dividends paid	(1,411)	(1,594)
Other	13,455	(5,200)
Net cash flow provided by (used in) financing activities	(24,385)	350,279

Net decrease in cash and cash equivalents	(248,571)	(12,895)
Cash and cash equivalents at beginning of period	248,596	12,929
Cash and cash equivalents at end of period	$25	$34

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$77,110	$75,129
Income taxes	$11,710	$8,331

See Notes to Financial Statements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$25	$26
Temporary cash investments	—	248,570
Total cash and cash equivalents	25	248,596
Securitization recovery trust account	17,176	36,233
Accounts receivable:
Customer	115,016	103,221
Allowance for doubtful accounts	(9,013)	(16,810)
Associated companies	23,175	18,892
Other	20,383	11,780
Accrued unbilled revenues	69,870	56,411
Total accounts receivable	219,431	173,494
Deferred fuel costs	17,657	—
Fuel inventory - at average cost	46,299	53,531
Materials and supplies - at average cost	75,584	56,227


Prepayments and other	23,736	20,165
TOTAL	399,908	588,246

OTHER PROPERTY AND INVESTMENTS
Investments in affiliates - at equity	312	349
Non-utility property - at cost (less accumulated depreciation)	376	376
Other	17,936	19,889
TOTAL	18,624	20,614

UTILITY PLANT
Electric	7,044,218	6,007,687
Construction work in progress	158,458	879,908
TOTAL UTILITY PLANT	7,202,676	6,887,595
Less - accumulated depreciation and amortization	2,017,029	1,864,494
UTILITY PLANT - NET	5,185,647	5,023,101

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets (includes securitization property of $35,886 as of September 30, 2021 and $78,590 as of December 31, 2020)	451,953	524,713

Other	85,261	70,397
TOTAL	537,214	595,110

TOTAL ASSETS	$6,141,393	$6,227,071

See Notes to Financial Statements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$—	$200,000
Accounts payable:
Associated companies	70,050	55,944
Other	173,719	350,947
Customer deposits	34,092	36,282
Taxes accrued	58,441	52,438
Interest accrued	8,048	20,856
Current portion of unprotected excess accumulated deferred income taxes	33,192	29,249
Deferred fuel costs	—	85,356


Other	18,201	12,370
TOTAL	395,743	843,442

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	676,521	639,422
Accumulated deferred investment tax credits	9,479	9,942
Regulatory liability for income taxes - net	142,539	175,594
Other regulatory liabilities	39,940	32,297
Asset retirement cost liabilities	8,403	8,063
Accumulated provisions	8,449	8,382

Long-term debt (includes securitization bonds of $53,941 as of September 30, 2021 and $123,066 as of December 31, 2020)	2,353,742	2,293,708
Other	75,721	58,643
TOTAL	3,314,794	3,226,051

Commitments and Contingencies

EQUITY
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2021 and 2020	49,452	49,452
Paid-in capital	1,040,162	955,162
Retained earnings	1,306,242	1,117,964
Total common shareholder's equity	2,395,856	2,122,578
Preferred stock without sinking fund	35,000	35,000
TOTAL	2,430,856	2,157,578

TOTAL LIABILITIES AND EQUITY	$6,141,393	$6,227,071

See Notes to Financial Statements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)

		Common Equity
	Preferred Stock	Common Stock	Paid-in Capital	Retained Earnings	Total
	(In Thousands)

Balance at December 31, 2019	$35,000	$49,452	$780,182	$934,773	$1,799,407

Net income	—	—	—	32,707	32,707
Capital contribution from parent	—	—	175,000	—	175,000
Preferred stock dividends	—	—	—	(470)	(470)
Balance at March 31, 2020	$35,000	$49,452	$955,182	$967,010	$2,006,644

Net income	—	—	—	46,868	46,868
Preferred stock dividends	—	—	—	(471)	(471)
Other	—	—	(10)	—	(10)
Balance at June 30, 2020	$35,000	$49,452	$955,172	$1,013,407	$2,053,031

Net income	—	—	—	92,164	92,164


Preferred stock dividends	—	—	—	(470)	(470)
Other	—	—	(10)	—	(10)
Balance at September 30, 2020	$35,000	$49,452	$955,162	$1,105,101	$2,144,715


Balance at December 31, 2020	$35,000	$49,452	$955,162	$1,117,964	$2,157,578

Net income	—	—	—	50,058	50,058


Preferred stock dividends	—	—	—	(470)	(470)
Balance at March 31, 2021	$35,000	$49,452	$955,162	$1,167,552	$2,207,166

Net income	—	—	—	44,790	44,790
Capital contribution from parent	—	—	85,000	—	85,000
Preferred stock dividends	—	—	—	(471)	(471)

Balance at June 30, 2021	$35,000	$49,452	$1,040,162	$1,211,871	$2,336,485

Net income	—	—	—	94,841	94,841
Preferred stock dividends	—	—	—	(470)	(470)

Balance at September 30, 2021	$35,000	$49,452	$1,040,162	$1,306,242	$2,430,856

See Notes to Financial Statements.

SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.

Results of Operations

Net Income

Third Quarter 2021 Compared to Third Quarter 2020

Net income decreased $3.6 million primarily due to the decrease in operating revenues resulting from changes in rate base.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Net income decreased $6.9 million primarily due to the decrease in operating income resulting from changes in rate base.

Income Taxes

The effective income tax rate was 23.5% for the third quarter 2021. The difference in the effective income tax rate for the third quarter 2021 versus the federal statutory rate of 21% was primarily due to state income taxes.

The effective income tax rate was 7.7% for the nine months ended September 30, 2021. The difference in the effective income tax rate for the nine months ended September 30, 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 22.1% for the third quarter 2020. The difference in the effective income tax rate for the third quarter 2020 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 19.7% for the nine months ended September 30, 2020. The difference in the effective income tax rate for the nine months ended September 30, 2020 versus the federal statutory rate of 21% was primarily due to certain book and tax differences related to utility plant items, book and tax differences related to the allowance for equity funds used during construction, and permanent differences related to income tax deductions for stock-based compensation, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for discussion of the income tax deductions for stock-based compensation.

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

Liquidity and Capital Resources

Cash Flow

Cash flows for the nine months ended September 30, 2021 and 2020 were as follows:


	2021	2020
	(In Thousands)
Cash and cash equivalents at beginning of period	$242,469	$68,534

Cash flow provided by (used in):
Operating activities	130,676	159,300
Investing activities	(75,603)	(179,267)
Financing activities	(134,400)	(36,636)
Net decrease in cash and cash equivalents	(79,327)	(56,603)

Cash and cash equivalents at end of period	$163,142	$11,931

Operating Activities

Net cash flow provided by operating activities decreased $28.6 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to income tax payments of $39.1 million in 2021 and timing of collections of receivables, partially offset by a decrease in spending of $37.2 million on nuclear refueling outages in 2021 as compared to the same period in 2020 and timing of payments to vendors. System Energy had income tax payments in 2021 as a result of the amended Mississippi tax returns filed based on federal adjustments related to the resolution of the 2014-2015 IRS audit, as well as a portion of the payments made in accordance with an intercompany income tax allocation agreement. See Note 3 to the financial statements in the Form 10-K for discussion of the 2014-2015 IRS audit.

Investing Activities

Net cash flow used in investing activities decreased $103.7 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to:

a decrease of $109.1 million in nuclear construction expenditures as a result of spending in 2020 on Grand Gulf outage projects and upgrades; and
an increase of $59.7 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.

The decrease was partially offset by money pool activity.

Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased by $8.3 million for the nine months ended September 30, 2021 compared to decreasing by $58.3 million for the nine months ended September 30, 2020. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

Financing Activities

Net cash flow used by financing activities increased $97.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to the repayment in February 2021 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity.

See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Capital Structure

System Energy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to the net repayment of long-term debt in 2021.


	September 30, 2021		December 31, 2020
Debt to capital	40.7	%	42.7	%
Effect of subtracting cash	(5.8	%)	(8.5	%)
Net debt to net capital	34.9	%	34.2	%

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.

System Energy is developing its capital investment plan for 2022 through 2024 and currently anticipates making $510 million in capital investments during that period. The preliminary estimate includes amounts associated with Grand Gulf investments and initiatives.

System Energy’s receivables from the money pool were as follows:


September 30, 2021	December 31, 2020	September 30, 2020	December 31, 2019
(In Thousands)
$12,338	$4,004	$1,021	$59,298

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in June 2024. As of September 30, 2021, $40.7 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

Federal Regulation

See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.

Complaints Against System Energy

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in May 2020 the FERC issued an order on rehearing of Opinion No. 569 (Opinion No. 569-A). In June 2020 the procedural schedule in the System Energy proceeding was further revised in order to allow parties to address the Opinion No. 569-A methodology. The parties and FERC trial staff filed final rounds of testimony in August 2020. The hearing before a FERC ALJ occurred in late-September through early-October 2020, post-hearing briefing took place in November and December 2020.

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 September 30, 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 a provision recorded of $37 million, including interest, as of September 30, 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.

Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things, the ALJ determined that

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

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 September 30, 2021, is approximately $422 million, plus interest, which is approximately $123 million through September 30, 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 September 30, 2021.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. The ALJ in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending before the FERC, which will review the case and issue an order on the proceeding, and the FERC may accept, reject, or modify the ALJ’s initial decision in whole or in part. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

Also as discussed in the Form 10-K, in November 2020 the IRS issued a Revenue Agent’s Report (RAR) for the 2014/2015 tax year and in December 2020 Entergy executed it. The RAR contained an adjustment to System Energy’s uncertain nuclear decommissioning tax position. As a result of the RAR, in December 2020, System Energy filed amendments to its new Federal Power Act section 205 filings to establish an ongoing rate base credit for the accumulated deferred income taxes resulting from the decommissioning uncertain tax position and to credit excess accumulated deferred income taxes arising from the successful portion of the decommissioning uncertain tax position. The amendments both propose the inclusion of the RAR as support for the filings. In December 2020 the LPSC, APSC, and City Council filed a protest in response to the amendments, reiterating their prior objections to the filings. In February 2021 the FERC issued an order accepting System Energy’s Federal Power Act section 205 filings subject to refund, setting them for hearing, and holding the hearing in abeyance.

In December 2020, System Energy filed a new Federal Power Act section 205 filing to provide a one-time, historical credit to customers of $25.2 million for the accumulated deferred income taxes that would have been created by the decommissioning uncertain tax position if the IRS’s decision had been known in 2016. In January 2021 the LPSC, APSC, MPSC, and City Council filed a protest to the filing. In February 2021 the FERC issued an order accepting System Energy’s Federal Power Act section 205 filing subject to refund, setting it for hearing, and holding the hearing in abeyance. The one-time credit was made during the first quarter 2021.

LPSC Authorization of Additional Complaints

As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at 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

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

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 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 first 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. 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 the 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 the FERC’s decision as related to matters set for hearing that were beyond the scope of the FERC’s jurisdiction or authority. The complainants sought rehearing of the 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 the 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 has expired.

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 reopener, 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.

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 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

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

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.

Nuclear Matters

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. Following is an update to that discussion

NRC Reactor Oversight Process

As discussed in the Form 10-K, the NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and “multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs.

In March 2021 the NRC placed Grand Gulf in Column 3 based on the incidence of five unplanned plant scrams during calendar year 2020, some of which were related to upgrades made to the plant’s turbine control system during the spring 2020 refueling outage. The NRC 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. A formal report on the inspection is expected in late 2021.

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.


SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Three Months Ended		Nine Months Ended
	2021	2020	2021	2020
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$154,319	$148,517	$433,378	$405,230

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	15,279	13,620	46,211	32,771
Nuclear refueling outage expenses	6,867	6,942	20,377	20,880
Other operation and maintenance	54,709	48,902	154,716	132,175
Decommissioning	9,721	9,341	28,875	27,746
Taxes other than income taxes	7,268	7,203	21,061	22,281
Depreciation and amortization	25,991	28,006	79,953	82,406
Other regulatory charges (credits) - net	(1,707)	(14,393)	(7,707)	(28,470)
TOTAL	118,128	99,621	343,486	289,789

OPERATING INCOME	36,191	48,896	89,892	115,441

OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction	1,546	1,206	4,012	7,990
Interest and investment income	11,839	1,303	36,871	18,749
Miscellaneous - net	(4,372)	(3,354)	(14,282)	(7,971)
TOTAL	9,013	(845)	26,601	18,768

INTEREST EXPENSE
Interest expense	9,513	8,427	28,627	25,501
Allowance for borrowed funds used during construction	(261)	(240)	(678)	(1,585)
TOTAL	9,252	8,187	27,949	23,916

INCOME BEFORE INCOME TAXES	35,952	39,864	88,544	110,293

Income taxes	8,453	8,800	6,851	21,725

NET INCOME	$27,499	$31,064	$81,693	$88,568

See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
	2021	2020
	(In Thousands)
OPERATING ACTIVITIES
Net income	$81,693	$88,568
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	151,345	137,201
Deferred income taxes, investment tax credits, and non-current taxes accrued	17,233	(272,383)
Changes in assets and liabilities:
Receivables	(5,216)	15,637
Accounts payable	(4,292)	(19,775)
Taxes accrued	(35,063)	431,677
Interest accrued	(1,557)	(188)
Other working capital accounts	5,133	(40,566)
Other regulatory assets	71,486	(25,956)
Other regulatory liabilities	31,909	45,657
Pension and other postretirement liabilities	(20,721)	(11,033)
Other assets and liabilities	(161,274)	(189,539)
Net cash flow provided by operating activities	130,676	159,300

INVESTING ACTIVITIES
Construction expenditures	(64,196)	(169,475)
Allowance for equity funds used during construction	4,012	7,990
Nuclear fuel purchases	(27,958)	(85,483)
Proceeds from the sale of nuclear fuel	21,657	19,444

Proceeds from nuclear decommissioning trust fund sales	769,979	322,982
Investment in nuclear decommissioning trust funds	(770,763)	(333,002)
Changes in money pool receivable - net	(8,334)	58,277

Net cash flow used in investing activities	(75,603)	(179,267)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	565,610	859,727
Retirement of long-term debt	(626,010)	(815,710)



Common stock dividends and distributions paid	(74,000)	(80,653)

Net cash flow used in financing activities	(134,400)	(36,636)

Net decrease in cash and cash equivalents	(79,327)	(56,603)
Cash and cash equivalents at beginning of period	242,469	68,534
Cash and cash equivalents at end of period	$163,142	$11,931

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized	$30,335	$17,178
Income taxes	$39,085	($4,000)

See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$106	$26,086
Temporary cash investments	163,036	216,383
Total cash and cash equivalents	163,142	242,469
Accounts receivable:
Associated companies	68,737	57,743
Other	5,106	2,550
Total accounts receivable	73,843	60,293

Materials and supplies - at average cost	139,702	123,006
Deferred nuclear refueling outage costs	15,289	34,459

Prepayments and other	4,200	6,864
TOTAL	396,176	467,091

OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds	1,310,462	1,215,868
TOTAL	1,310,462	1,215,868

UTILITY PLANT
Electric	5,324,544	5,309,458

Construction work in progress	97,655	59,831
Nuclear fuel	134,880	175,005
TOTAL UTILITY PLANT	5,557,079	5,544,294
Less - accumulated depreciation and amortization	3,374,953	3,355,367
UTILITY PLANT - NET	2,182,126	2,188,927

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	467,477	538,963

Other	2,183	3,119
TOTAL	469,660	542,082

TOTAL ASSETS	$4,358,424	$4,413,968

See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
September 30, 2021 and December 31, 2020
(Unaudited)
	2021	2020
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$50,329	$100,015

Accounts payable:
Associated companies	17,011	15,309
Other	40,780	41,313
Taxes accrued	47,914	82,977

Interest accrued	11,165	12,722

Other	4,243	4,248
TOTAL	171,442	256,584

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	371,438	359,835
Accumulated deferred investment tax credits	43,323	38,902
Regulatory liability for income taxes - net	131,176	151,829
Other regulatory liabilities	717,958	665,396
Decommissioning	997,785	968,910
Pension and other postretirement liabilities	104,691	125,412
Long-term debt	695,443	705,259
Other	36,929	61,295
TOTAL	3,098,743	3,076,838

Commitments and Contingencies

COMMON EQUITY
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2021 and 2020	951,850	951,850
Retained earnings	136,389	128,696
TOTAL	1,088,239	1,080,546

TOTAL LIABILITIES AND EQUITY	$4,358,424	$4,413,968

See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)

	Common Equity
	Common Stock	Retained Earnings	Total
	(In Thousands)

Balance at December 31, 2019	$601,850	$110,218	$712,068

Net income	—	28,513	28,513
Common stock dividends and distributions	—	(13,653)	(13,653)
Balance at March 31, 2020	$601,850	$125,078	$726,928

Net income	—	28,991	28,991
Common stock dividends and distributions	—	(46,000)	(46,000)
Balance at June 30, 2020	$601,850	$108,069	$709,919

Net income	—	31,064	31,064
Common stock dividends and distributions	—	(21,000)	(21,000)
Balance at September 30, 2020	$601,850	$118,133	$719,983


Balance at December 31, 2020	$951,850	$128,696	$1,080,546

Net income	—	23,864	23,864
Common stock dividends and distributions	—	(21,000)	(21,000)
Balance at March 31, 2021	$951,850	$131,560	$1,083,410

Net income	—	30,330	30,330
Common stock dividends and distributions	—	(5,000)	(5,000)
Balance at June 30, 2021	$951,850	$156,890	$1,108,740

Net income	—	27,499	27,499
Common stock dividends and distributions	—	(48,000)	(48,000)
Balance at September 30, 2021	$951,850	$136,389	$1,088,239

See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES

PART II. OTHER INFORMATION

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