Item 4. Controls and Procedures

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2023, 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 (each individually a “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 Control over Financial Reporting

Under the supervision and with the participation of each Registrant’s management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended June 30, 2023 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

Results of Operations

Net Income

Second Quarter 2023 Compared to Second Quarter 2022

Net income increased $3.8 million primarily due to higher retail electric price and lower other operation and maintenance expenses, partially offset by lower volume/weather, higher interest expense, and higher depreciation and amortization expenses.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net income decreased $2.3 million primarily due to lower volume/weather, higher interest expense, and higher depreciation and amortization expenses, partially offset by higher retail electric price, lower other operation and maintenance expenses, and higher other income.

Operating Revenues

Second Quarter 2023 Compared to Second Quarter 2022

Following is an analysis of the change in operating revenues comparing the second quarter 2023 to the second quarter 2022:


			Amount
			(In Millions)
2022 operating revenues			$696.9
Fuel, rider, and other revenues that do not significantly affect net income			(90.6)
Volume/weather			(8.6)
Retail electric price			18.6

2023 operating revenues			$616.3

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 the effect of less favorable weather on residential sales.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective January 2023. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2022 formula rate plan filing.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy Arkansas for the three months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	1,767	1,820	(3)
Commercial	1,374	1,383	(1)
Industrial	2,226	2,135	4
Governmental	49	56	(13)
Total retail	5,416	5,394	—
Sales for resale:
Associated companies	512	450	14
Non-associated companies	811	2,010	(60)
Total	6,739	7,854	(14)

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2023 to the six months ended June 30, 2022:


			Amount
			(In Millions)
2022 operating revenues			$1,255.9
Fuel, rider, and other revenues that do not significantly affect net income			(64.8)
Volume/weather			(30.0)
Retail electric price			38.0

2023 operating revenues			$1,199.1

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy Arkansas for the six months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	3,569	3,912	(9)
Commercial	2,613	2,690	(3)
Industrial	4,276	4,106	4
Governmental	95	111	(14)
Total retail	10,553	10,819	(2)
Sales for resale:
Associated companies	1,075	936	15
Non-associated companies	2,379	3,401	(30)
Total	14,007	15,156	(8)

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

Other Income Statement Variances

Second Quarter 2023 Compared to Second Quarter 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $5.6 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits 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 benefits costs;
a decrease of $4.6 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to prior year; and
a decrease of $3.4 million in transmission costs allocated by MISO.

The decrease was partially offset by an increase of $3.4 million in power delivery expenses primarily due to higher vegetation maintenance costs.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in local franchise taxes.

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 and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2023.

Interest expense increased primarily due to the issuance of $425 million of 5.15% Series mortgage bonds in January 2023.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Other operation and maintenance expenses decreased primarily due to:

the effects of recording a final judgment in first quarter 2023 to resolve claims in the ANO damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $10.3 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation;
a decrease of $10.3 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023, a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first quarter 2023. 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 benefits costs;
a decrease of $5.8 million in transmission costs allocated by MISO; and
a decrease of $4.4 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to prior year.

The decrease was partially offset by an increase of $10 million in power delivery expenses primarily due to higher vegetation maintenance costs and higher reliability costs and an increase of $7.8 million in insurance expenses primarily due to lower nuclear insurance refunds received in 2023.

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

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2023 and higher interest earned on money pool investments.

Interest expense increased primarily due to the issuance of $425 million of 5.15% Series mortgage bonds in January 2023.

Income Taxes

The effective income tax rate was 22.9% for the second quarter 2023. The difference in the effective income tax rate for the second quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 19.4% for the six months ended June 30, 2023. The difference in the effective income tax rate for the six months ended June 30, 2023 versus the federal statutory rate of 21% was primarily due to the amortization of state accumulated deferred income taxes as a result of tax rate changes and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes.

The effective income tax rates were 21.9% for the second quarter 2022 and 22.3% for the six months ended June 30, 2022. The differences in the effective income tax rates for the second quarter 2022 and the six months ended June 30, 2022 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Income Tax Legislation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the Inflation Reduction Act of 2022. See the “Income Tax Legislation and Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of income tax legislation and regulation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2023 and 2022 were as follows:


	2023	2022
	(In Thousands)
Cash and cash equivalents at beginning of period	$5,278	$12,915

Net cash provided by (used in):
Operating activities	407,699	386,522
Investing activities	(563,854)	(376,810)
Financing activities	155,090	35,642
Net increase (decrease) in cash and cash equivalents	(1,065)	45,354

Cash and cash equivalents at end of period	$4,213	$58,269

Operating Activities

Net cash flow provided by operating activities increased $21.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

higher collections from customers;
lower fuel costs and the timing of recovery of fuel and purchased power costs. 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 refund of $41.7 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. The refund was subsequently applied to the under-recovered deferred fuel balance. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refunds and the related proceedings; and
$23.2 million in proceeds received from the DOE in April 2023 resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.

The increase was partially offset by the timing of payments to vendors and an increase in spending of $26.2 million on nuclear refueling outages in 2023.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Investing Activities

Net cash flow used in investing activities increased $187 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

an increase of $80.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2023 and increased investment in the reliability and infrastructure of Entergy Arkansas’s distribution system;
an increase of $57.8 million in transmission construction expenditures primarily due to increased investment in the reliability and infrastructure of Entergy Arkansas’s transmission system;
an increase of $40.2 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 $31 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2023.

The increase was partially offset by $17.9 million in proceeds received from the DOE in April 2023 resulting from litigation regarding spent nuclear fuel storage costs that were previously recorded as plant. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.

Financing Activities

Net cash flow provided by financing activities increased $119.4 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

the issuance of $425 million of 5.15% Series mortgage bonds in January 2023;
net borrowings of $97.5 million in 2023 compared to net borrowings of $7.2 million in 2022 on the nuclear fuel company variable interest entity’s credit facility; and
money pool activity.

The increase was partially offset by:

the repayment, at maturity, of $250 million of 3.05% Series mortgage bonds in June 2023;
the issuance of $200 million of 4.20% Series mortgage bonds in March 2022; and
an increase of $53 million in common equity distributions paid in 2023 in order to maintain Entergy Arkansas’s capital structure.

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 $28.5 million for the six months ended June 30, 2023 compared to decreasing by $139.9 million for the six months ended June 30, 2022. The money pool is an intercompany 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 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 increase in the debt to capital ratio for Entergy Arkansas is primarily due to the net issuance of long-term debt in 2023.


	June 30, 2023		December 31, 2022
Debt to capital	53.8	%	52.5	%
Effect of subtracting cash	—	%	—	%
Net debt to net capital (non-GAAP)	53.8	%	52.5	%

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 it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition. The net debt to net capital ratio is a non-GAAP measure. 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’s receivables from or (payables to) the money pool were as follows:


June 30, 2023	December 31, 2022	June 30, 2022	December 31, 2021
(In Thousands)
($152,327)	($180,795)	$6,216	($139,904)

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

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in June 2028. Entergy Arkansas also has a $25 million credit facility scheduled to expire in April 2024. 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 June 30, 2023, there were $75 million in cash borrowings outstanding under the $150 million credit facility and no letters of credit 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 June 30, 2023, $11.6 million in letters of credit were outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for further discussion of the credit facilities.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in June 2025. As of June 30, 2023, $22.5 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 further discussion of the nuclear fuel company variable interest entity credit facility.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Walnut Bend Solar

As discussed in the Form 10-K, in July 2021, the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the purpose of acquiring the Walnut Bend Solar facility. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. The counter-party notified Entergy Arkansas that it was terminating the project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations were conducted, including with respect to cost and schedule and to updates arising as a result of the Inflation Reduction Act of 2022. In April 2023, Entergy Arkansas filed an application for an amended certificate of environmental compatibility and public need with the APSC seeking approval by June 2023 for the updates to the cost and schedule that were previously approved by the APSC. In June 2023, Entergy Arkansas, the APSC general staff, and the Arkansas Attorney General filed a unanimous settlement supporting that the approval of the Walnut Bend Solar facility is in the public interest based on the terms in the settlement, which relate in part to certain treatment for the production tax credits associated with the facility. In July 2023, after requesting further testimony and purporting to modify several terms in the settlement and upon rehearing, the APSC approved the settlement largely on the terms submitted, including a 30-year amortization period for the production tax credits. The project is currently expected to achieve commercial operation in 2024.

West Memphis Solar

As discussed in the Form 10-K, in October 2021 the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the purpose of acquiring the West Memphis Solar facility. In April 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in 2023. In March 2022 the counter-party notified Entergy Arkansas that it was seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. In January 2023, Entergy Arkansas filed a supplemental application with the APSC seeking approval for a change in the transmission route and updates to the cost and schedule that were previously approved by the APSC. In March 2023 the APSC approved Entergy Arkansas’s supplemental application. The project is currently expected to achieve commercial operation in 2024.

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.

Retail Rates

2023 Formula Rate Plan Filing

In July 2023, Entergy Arkansas filed with the APSC its 2023 formula rate plan filing to set its formula rate for the 2024 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2024 and a netting adjustment for the historical year 2022. The filing showed that Entergy Arkansas’s earned rate of return on common equity for the 2024 projected year is 8.11% resulting in a revenue deficiency of $80.5 million. The earned rate of return on common equity for the 2022 historical year was 7.29% resulting in a $49.8 million netting adjustment. The total proposed revenue change for the 2024 projected year and 2022 historical year netting adjustment is $130.3 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 $88.6 million.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Energy Cost Recovery Rider

In March 2023, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.01639 per kWh to $0.01883 per kWh. The primary reason for the rate increase is a large under-recovered balance as a result of higher natural gas prices in 2022 and a $32 million deferral related to the 2021 February winter storms consistent with APSC general staff’s request in 2022. The under-recovered balance included in the filing was partially offset by the proceeds of the $41.7 million refund that System Energy made to Entergy Arkansas in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. The redetermined rate of $0.01883 per kWh became effective with the first billing cycle in April 2023 through the normal operation of the tariff. See Note 2 to the financial statements in the Form 10-K for information on the 2021 February winter storm investigation proceeding.

Opportunity Sales Proceeding

See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in January 2023, Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a notice of appeal of the U.S. District Court for the Eastern District of Arkansas’s order denying its motion to intervene to the United States Court of Appeals for the Eighth Circuit and a motion with the district court to stay the proceedings pending the appeal, which was denied. In February 2023, Arkansas Electric Energy Consumers, Inc. filed a motion with the United States Court of Appeals for the Eighth District to stay the proceedings pending the appeal, which also was denied. The trial was held in February 2023. Following the trial, Entergy Arkansas filed a motion with the United States Court of Appeals for the Eighth District to expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The court granted Entergy Arkansas’s request, and oral arguments were held in June 2023. An order from the court is expected in 2023.

Net Metering Legislation

As discussed in the Form 10-K, an Arkansas law was enacted effective July 2019 that, among other things, expands the definition of a “net metering customer” to include two additional types of customers: (1) customers that lease net metering facilities, subject to certain leasing arrangements, and (2) government entities or other entities exempt from state and federal income taxes that enter into a service contract for a net metering facility. The latter provision allows eligible entities, many of whom are small and large general service customers, to purchase renewable energy directly from third party providers and receive bill credits for these purchases. The APSC was given authority under this law to address certain matters, such as cost shifting and the appropriate compensation for net metered energy and initiated proceedings for this purpose. Because of the size and number of customers eligible under this new law, there is a risk of loss of load and the shifting of costs to customers. A hearing was held in December 2019, with utilities, including Entergy Arkansas, cooperatives, the Arkansas Attorney General, and industrial customers advocating the need for establishment of a reasonable rate structure that takes into account impacts to non-net metering customers; an additional hearing was conducted in February 2020 for purposes of public comment only. The APSC issued an order in June 2020, and in July 2020 several parties, including Entergy Arkansas, filed for rehearing on multiple grounds, including for the reasons that it imposes an unreasonable rate structure and allows facilities to net meter that do not meet the statutory definition of net metering facilities. After granting the rehearing requests, the APSC issued an order in September 2020 largely upholding its June 2020 order. In October 2020, Entergy Arkansas and several other parties filed an appeal of the APSC’s September 2020 order. 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 remained before the court. In May 2022 the court issued an order affirming the APSC’s decision in part and reversing in part. In June 2022 the APSC sought rehearing from the court with respect

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

to the court’s ruling on a grid charge, which the court of appeals denied in July 2022. One of the cooperative appellants filed a further appeal to the Arkansas Supreme Court in July 2022, which the court decided not to hear.

In August 2022 the APSC opened a rulemaking concerning proposed amendments to the net metering rules to address the expiration on December 31, 2022 of the automatic grandfathering of the existing net metering rate structure. Entergy Arkansas and other utility parties filed initial briefs and comments setting forth that the statute imposing the expiration of the automatic grandfathering is not ambiguous and that the APSC does not have the authority to extend the grandfathering period, and the hearing was held in October 2022. In December 2022 the APSC issued an order attempting to modify the net metering rules and purporting to allow for the potential for grandfathering after December 31, 2022. More than thirty applicants filed individual net metering applications in December 2022 seeking to be considered under the APSC’s order, although the APSC issued an order in January 2023 holding those applications in abeyance. Several parties, including Entergy Arkansas, sought rehearing, and the Arkansas’s Governor’s executive order limiting new rulemakings calls into question how the APSC’s order to adopt new rules may be effectuated.

Also in September 2022 the APSC opened another proceeding to investigate the issue of potential cost shifting arising as a result of net metering. Investor owned utilities and some cooperatives were required to make and did make filings in October 2022 with supporting documentation as to the amount and extent of cost shifting and the manner in which they would design tariffs to recover those costs on behalf of non-net metering customers. Responses to the utility and cooperative filings were filed in January 2023, and utilities filed their further responses in February 2023.

An Arkansas law was enacted effective March 2023 that revises the billing arrangements for net metering facilities in order to reduce the cost shift to non-net metering customers. The new law also imposes a new limit of 5 MW for future net metering facilities, allows utilities to recover net metering credits in the same manner as fuel, and grandfathers certain net metering facilities that are online or in process to be online by September 2024. Entergy Arkansas joined other utilities in a motion in April 2023 to close the current APSC docket related to potential cost shifting in light of the new law, and the APSC also canceled the remaining procedural schedule in this docket in April 2023. Because of the new law, in May 2023, the APSC also closed the grandfathering rulemaking that it opened in August 2022. Under the new law, the APSC must approve revisions to the utilities’ tariffs to conform to the new law no later than December 2023. The APSC opened a new rulemaking in April 2023 to consider implementation of the new law and tariffs.

COVID-19 Orders

See Note 2 to the financial statements in the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. In its 2023 formula rate plan filing, Entergy Arkansas proposed to amortize the COVID-19 regulatory asset over a ten-year period. As of June 30, 2023, Entergy Arkansas had a regulatory asset of $39 million for costs associated with the COVID-19 pandemic.

Power Through Program

As discussed in the Form 10-K, in August 2021, Entergy Arkansas filed with the APSC an application seeking authority for a Power Through offering to deploy natural gas-fired distributed generation. In December 2021 the APSC general staff requested briefing, which Entergy Arkansas opposed. In January 2022, Entergy Arkansas filed to support the establishment of a procedural schedule with a hearing in April 2022. Also in January 2022, the APSC granted the general staff’s request for briefing but on an expedited schedule; briefing concluded in February 2022. A paper hearing was held in August and September 2022 with Entergy Arkansas responding to several written commissioner questions. In May 2023 the APSC approved the Power Through offering with some modifications, and in June 2023, Entergy Arkansas sought rehearing or clarification of several issues. See “Property and Other Generation Resources - Other Generation Resources - Power Through Programs” in Part I, Item 1 in the Form 10-K for further discussion related to this program.

Entergy Arkansas, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Remaining Useful Lives Review

As discussed in the Form 10-K, in response to 2021 legislation, in December 2021 the APSC opened a proceeding to establish a procedure to evaluate life extensions of all utility generation units and in December 2022 opened a separate docket to evaluate life extensions for White Bluff, Independence, and the Lake Catherine plant. In January 2023, Entergy Arkansas and one other party filed for rehearing of the order in the general proceeding, and Entergy Arkansas moved to dismiss the separate docket. In February 2023 the APSC granted rehearing in the general proceeding. A new law passed in April 2023 changed the requirements for the APSC to perform these evaluations, thus eliminating the need for the current APSC proceedings, and the APSC cancelled the procedural schedule in the separate docket. In June 2023 the APSC also closed the general proceeding because of the new law. See “Regulation of Entergy’s Business - Environmental Regulation - National Ambient Air Quality Standards - Regional Haze” in Part I, Item 1 in the Form 10-K for further discussion related to these plants.

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 Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended
	2023	2022	2023	2022
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$616,347	$696,939	$1,199,096	$1,255,895

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	102,350	202,795	215,859	289,020
Purchased power	57,648	50,209	122,399	107,680
Nuclear refueling outage expenses	15,504	14,210	30,845	28,280
Other operation and maintenance	178,044	187,319	334,863	344,576
Decommissioning	21,667	20,428	43,017	40,557
Taxes other than income taxes	34,743	32,072	67,094	65,274
Depreciation and amortization	99,707	96,548	196,148	192,158
Other regulatory charges (credits) - net	(19,185)	(21,518)	(40,029)	(42,060)
TOTAL	490,478	582,063	970,196	1,025,485

OPERATING INCOME	125,869	114,876	228,900	230,410

OTHER INCOME
Allowance for equity funds used during construction	5,400	3,920	10,243	6,975
Interest and investment income	5,727	2,840	13,206	9,160
Miscellaneous - net	(6,239)	(4,892)	(8,340)	(10,284)
TOTAL	4,888	1,868	15,109	5,851

INTEREST EXPENSE
Interest expense	46,038	37,452	91,405	73,499
Allowance for borrowed funds used during construction	(2,169)	(1,558)	(4,114)	(2,772)
TOTAL	43,869	35,894	87,291	70,727

INCOME BEFORE INCOME TAXES	86,888	80,850	156,718	165,534

Income taxes	19,940	17,740	30,374	36,857

NET INCOME	66,948	63,110	126,344	128,677

Net loss attributable to noncontrolling interest	(1,006)	(529)	(2,635)	(1,916)

EARNINGS APPLICABLE TO MEMBER'S EQUITY	$67,954	$63,639	$128,979	$130,593

See Notes to Financial Statements.

(Page left blank intentionally)


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
	2023	2022
	(In Thousands)
OPERATING ACTIVITIES
Net income	$126,344	$128,677
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	270,098	268,699
Deferred income taxes, investment tax credits, and non-current taxes accrued	33,572	27,814
Changes in assets and liabilities:
Receivables	21,444	(95,608)
Fuel inventory	(6,830)	7,316
Accounts payable	(43,953)	34,321
Taxes accrued	(4,315)	14,824
Interest accrued	10,421	1,585
Deferred fuel costs	123,264	(2,384)
Other working capital accounts	(30,581)	13,458
Provisions for estimated losses	(26,606)	(4,119)
Other regulatory assets	(51,960)	(30,484)
Other regulatory liabilities	97,349	(267,437)

Pension and other postretirement liabilities	(18,948)	(31,762)
Other assets and liabilities	(91,600)	321,622
Net cash flow provided by operating activities	407,699	386,522

INVESTING ACTIVITIES
Construction expenditures	(524,723)	(351,907)
Allowance for equity funds used during construction	10,243	6,975

Nuclear fuel purchases	(73,912)	(53,256)
Proceeds from sale of nuclear fuel	17,614	37,198
Proceeds from nuclear decommissioning trust fund sales	54,469	101,428
Investment in nuclear decommissioning trust funds	(65,584)	(111,032)
Change in money pool receivable - net	—	(6,216)


Litigation proceeds for reimbursement of spent nuclear fuel storage costs	17,933	—

Other	106	—
Net cash flow used in investing activities	(563,854)	(376,810)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	661,923	223,882

Retirement of long-term debt	(394,810)	(7,511)



Changes in money pool payable - net	(28,468)	(139,904)

Common equity distributions paid	(89,000)	(36,000)

Other	5,445	(4,825)
Net cash flow provided by financing activities	155,090	35,642

Net increase (decrease) in cash and cash equivalents	(1,065)	45,354
Cash and cash equivalents at beginning of period	5,278	12,915
Cash and cash equivalents at end of period	$4,213	$58,269

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$79,716	$70,803


See Notes to Financial Statements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$352	$1,911
Temporary cash investments	3,861	3,367
Total cash and cash equivalents	4,213	5,278

Accounts receivable:
Customer	138,675	140,513
Allowance for doubtful accounts	(5,236)	(6,528)
Associated companies	38,081	45,336
Other	69,155	101,096
Accrued unbilled revenues	135,114	116,816
Total accounts receivable	375,789	397,233

Deferred fuel costs	16,475	139,739
Fuel inventory - at average cost	57,974	51,144
Materials and supplies - at average cost	318,400	288,260
Deferred nuclear refueling outage costs	65,057	56,443


Prepayments and other	50,866	26,576
TOTAL	888,774	964,673

OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds	1,326,627	1,199,860

Other	2,306	2,414
TOTAL	1,328,933	1,202,274

UTILITY PLANT
Electric	14,475,635	14,077,844

Construction work in progress	476,253	417,244
Nuclear fuel	177,770	176,174
TOTAL UTILITY PLANT	15,129,658	14,671,262
Less - accumulated depreciation and amortization	5,879,574	5,729,304
UTILITY PLANT - NET	9,250,084	8,941,958

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	1,862,241	1,810,281
Deferred fuel costs	68,883	68,883
Other	23,784	18,507
TOTAL	1,954,908	1,897,671

TOTAL ASSETS	$13,422,699	$13,006,576

See Notes to Financial Statements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$415,000	$290,000

Accounts payable:
Associated companies	212,328	276,362
Other	307,962	310,339
Customer deposits	106,383	102,799
Taxes accrued	96,211	100,526

Interest accrued	29,237	18,816


Other	64,726	43,394
TOTAL	1,231,847	1,142,236

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	1,539,103	1,498,234
Accumulated deferred investment tax credits	27,871	28,472
Regulatory liability for income taxes - net	424,591	435,157
Other regulatory liabilities	583,673	475,758
Decommissioning	1,515,753	1,472,736
Accumulated provisions	53,392	79,998
Pension and other postretirement liabilities	99,010	118,020
Long-term debt	4,023,803	3,876,500
Other	104,713	97,650
TOTAL	8,371,909	8,082,525

Commitments and Contingencies



EQUITY
Member's equity	3,793,970	3,753,990
Noncontrolling interest	24,973	27,825
TOTAL	3,818,943	3,781,815

TOTAL LIABILITIES AND EQUITY	$13,422,699	$13,006,576

See Notes to Financial Statements.


ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Noncontrolling Interest	Member's Equity	Total
	(In Thousands)

Balance at December 31, 2021	$33,110	$3,542,745	$3,575,855

Net income (loss)	(1,387)	66,954	65,567




Balance at March 31, 2022	31,723	3,609,699	3,641,422

Net income (loss)	(529)	63,639	63,110
Common equity distributions	—	(36,000)	(36,000)


Distributions to noncontrolling interest	(190)	—	(190)
Balance at June 30, 2022	$31,004	$3,637,338	$3,668,342









Balance at December 31, 2022	$27,825	$3,753,990	$3,781,815

Net income (loss)	(1,629)	61,026	59,397



Common equity distributions	—	(80,000)	(80,000)

Distributions to noncontrolling interest	(104)	—	(104)
Balance at March 31, 2023	26,092	3,735,016	3,761,108

Net income (loss)	(1,006)	67,954	66,948



Common equity distributions	—	(9,000)	(9,000)

Distributions to noncontrolling interest	(113)	—	(113)
Balance at June 30, 2023	$24,973	$3,793,970	$3,818,943










See Notes to Financial Statements.

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2023 Compared to Second Quarter 2022

Net income decreased $53.4 million primarily due to the net effects of Entergy Louisiana’s storm cost securitization in May 2022, including a $290 million reduction in income tax expense, partially offset by a $224.4 million ($165.4 million net-of-tax) regulatory charge to reflect its obligation to share the benefits of the securitization with customers. The decrease was partially offset by higher other income, higher retail electric price, and lower other operation and maintenance expenses. See Note 2 to the financial statements in the Form 10-K for discussion of the May 2022 storm cost securitization.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net income increased $39.8 million primarily due to the net effects of Entergy Louisiana’s storm cost securitization in March 2023, including a $133.4 million reduction in income tax expense, partially offset by a $103.4 million ($76.4 million net-of-tax) regulatory charge to reflect Entergy Louisiana’s obligation to share the benefits of the securitization with customers, higher retail electric price, higher other income, and lower other operation and maintenance expenses. The net income increase was partially offset by the net effects of Entergy Louisiana’s storm cost securitization in May 2022, including a $290 million reduction in income tax expense, partially offset by a $224.4 million ($165.4 million net-of-tax) regulatory charge. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the storm cost securitizations.

Operating Revenues

Second Quarter 2023 Compared to Second Quarter 2022

Following is an analysis of the change in operating revenues comparing the second quarter 2023 to the second quarter 2022:


			Amount
			(In Millions)
2022 operating revenues			$1,515.8
Fuel, rider, and other revenues that do not significantly affect net income			(320.9)
Storm restoration carrying costs			(37.5)
Volume/weather			(7.9)
Return of unprotected excess accumulated deferred income taxes to customers			9.2
Retail electric price			46.9
2023 operating revenues			$1,205.6

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.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales and a decrease in commercial and industrial usage. The decreased usage from these commercial and industrial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the second quarter 2022, $9.2 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for the second quarter 2023. There was no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an increase in formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan proceeding.

Total electric energy sales for Entergy Louisiana for the three months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	3,694	3,824	(3)
Commercial	2,801	2,879	(3)
Industrial	8,014	8,148	(2)
Governmental	206	208	(1)
Total retail	14,715	15,059	(2)
Sales for resale:
Associated companies	678	1,315	(48)
Non-associated companies	464	467	(1)
Total	15,857	16,841	(6)

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2023 to the six months ended June 30, 2022:


			Amount
			(In Millions)
2022 operating revenues			$2,781.8
Fuel, rider, and other revenues that do not significantly affect net income			(300.9)
Volume/weather			(29.5)
Storm restoration carrying costs			(6.9)
Return of unprotected excess accumulated deferred income taxes to customers			18.4
Retail electric price			87.9
2023 operating revenues			$2,550.8

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.

Storm restoration carrying costs represent the equity component of storm restoration carrying costs, recorded in second quarter 2022, recognized as part of the securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida restoration costs in May 2022, partially offset by the equity component of storm restoration carrying costs, recorded in first quarter 2023, recognized as part of the securitization of Hurricane Ida restoration costs in March 2023. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the storm cost securitizations.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the six months ended June 30, 2022, $18.4 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for the six months ended June 30, 2023. There was no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy Louisiana for the six months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	6,378	6,893	(7)
Commercial	5,248	5,300	(1)
Industrial	15,845	15,754	1
Governmental	400	399	—
Total retail	27,871	28,346	(2)
Sales for resale:
Associated companies	2,355	2,656	(11)
Non-associated companies	688	1,323	(48)
Total	30,914	32,325	(4)

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

Other Income Statement Variances

Second Quarter 2023 Compared to Second Quarter 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $11.8 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits 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 benefits costs;
a decrease of $7.4 million in power delivery expenses primarily due to lower transmission repairs and maintenance costs;
a decrease of $7.4 million in 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;
a decrease of $6.6 million in nuclear generation expenses primarily due to lower nuclear labor costs; and
a decrease of $4.9 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to 2022.

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

Other regulatory charges (credits) - net includes a regulatory charge of $224.4 million, recorded in second quarter 2022, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the May 2022 storm cost securitization. In addition, Entergy Louisiana records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.

Other income increased primarily due to an increase of $38.7 million in affiliated dividend income from affiliated preferred membership interests, related to storm cost securitizations, and a $31.6 million charge, recorded

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

in second quarter 2022, for the LURC’s 1% beneficial interest in the storm trust I established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida May 2022 storm cost securitization. See Note 2 to the financial statements in the Form 10-K for discussion of the May 2022 storm cost securitization.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $18.1 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023, a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first quarter 2023. 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 benefits costs;
a decrease of $13 million in 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;
a decrease of $9.8 million in power delivery expenses primarily due to lower transmission repairs and maintenance costs and the timing of vegetation maintenance;
a decrease of $8 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to prior year; and
a decrease of $6.6 million in nuclear generation expenses primarily due to lower nuclear labor costs and lower costs associated with materials and supplies in 2023 as compared to 2022.

The decrease was partially offset by an increase of $3.2 million in insurance expenses primarily due to lower nuclear insurance refunds received in 2023.

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

Other regulatory charges (credits) - net includes:

a regulatory charge of $103.4 million, recorded in first quarter 2023, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the March 2023 storm cost securitization; and
a regulatory charge of $224.4 million, recorded in second quarter 2022, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements in the Form 10-K for discussion of the May 2022 storm cost securitization.

In addition, Entergy Louisiana records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation-related costs collected in revenue.

Other income increased primarily due to an increase of $62.2 million in affiliated dividend income from affiliated preferred membership interests, related to storm cost securitizations, and a $31.6 million charge, recorded in second quarter 2022, for the LURC’s 1% beneficial interest in the storm trust I established as part of the Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida May 2022 storm cost securitization. The increase was partially offset by a $14.6 million charge, recorded in first quarter 2023, for the LURC’s 1% beneficial interest in the storm trust II established as part of the March 2023 Hurricane Ida storm cost

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

securitization. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the storm cost securitizations.

Income Taxes

The effective income tax rate was 20.7% for the second quarter 2023. The difference in the effective income tax rate for the second quarter 2023 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of a tax rate change.

The effective income tax rate was (9.1%) for the six months ended June 30, 2023. The difference in the effective income tax rate for the six months ended June 30, 2023 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the March 2023 securitization of storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021 and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of a tax rate change. See Notes 2 and 10 to the financial statements herein for a discussion of the March 2023 storm cost securitization under Act 293.

The effective income tax rate was (3,258.7%) for the second quarter 2022. The difference in the effective income tax rate for the second quarter 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, the amortization of excess accumulated deferred income taxes, the amortization of investment tax credits, and book and tax differences related to the allowance for equity funds used during construction, partially offset by the accrual for state income taxes. See Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the May 2022 storm cost securitization under Act 293. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (144.7%) for the six months ended June 30, 2022. The difference in the effective income tax rate for the six months ended June 30, 2022 versus the federal statutory rate of 21% was primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, and the amortization of excess accumulated deferred income taxes, partially offset by the accrual for state income taxes. See Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the May 2022 storm cost securitization under Act 293. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2023 and 2022 were as follows:


	2023	2022
	(In Thousands)
Cash and cash equivalents at beginning of period	$56,613	$18,573

Net cash provided by (used in):
Operating activities	928,060	206,713
Investing activities	(2,658,135)	(3,653,859)
Financing activities	2,530,488	3,494,744
Net increase in cash and cash equivalents	800,413	47,598

Cash and cash equivalents at end of period	$857,026	$66,171

Operating Activities

Net cash flow provided by operating activities increased $721.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

the timing of payments to vendors;
a decrease of $210.8 million in storm spending primarily due to Hurricane Ida restoration efforts in 2022;
the refund of $27.8 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refunds and related proceedings;
lower fuel costs and the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery; and
higher collections from customers.

Investing Activities

Net cash flow used in investing activities decreased $995.7 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

a decrease in investment in affiliates due to the $3,163.6 million purchase by the storm trust I of preferred membership interests issued by an Entergy affiliate, partially offset by the $1,390.6 million redemption of preferred membership interests. See Note 2 to the financial statements in the Form 10-K for a discussion of the May 2022 storm cost securitization;
a decrease of $613.7 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023;
a decrease of $283.5 million in net payments to storm reserve escrow accounts;
a decrease of $162 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2023 and decreased spending on various transmission projects in 2023; and
the $46.6 million redemption, in February 2023, of preferred membership interests held by the storm trust I, as part of periodic redemptions that are expected to occur, subject to certain conditions, for the preferred membership interests that were issued in connection with the May 2022 storm cost securitization. See Note

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

2 to the financial statements in the Form 10-K for a discussion of the May 2022 storm cost securitization and the storm trust I’s investment in preferred membership interests.

The decrease was partially offset by:

an increase in investment in affiliates in 2023 due to the $1,457.7 million purchase by the storm trust II of preferred membership interests issued by an Entergy affiliate. See Note 2 to the financial statements herein for a discussion of the March 2023 storm cost securitization and the storm trust II’s investment in preferred membership interests;
an increase of $95.2 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2023;
money pool activity; and
an increase of $31.7 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.

Increases in Entergy Louisiana’s receivables from the money pool are a use of cash flow, and Entergy Louisiana’s receivable from the money pool increased $275.6 million for the six months ended June 30, 2023 compared to decreasing by $7.2 million for the six months ended June 30, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities decreased $964.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

proceeds from securitization of $1.5 billion received by the storm trust II in 2023 compared to proceeds from securitization of $3.2 billion received by the storm trust I in 2022;
money pool activity; and
an increase of $35.3 million in common equity distributions paid in 2023 in order to maintain Entergy Louisiana’s capital structure.

The decrease was partially offset by:

a capital contribution of approximately $1.5 billion in 2023 as compared to a capital contribution of approximately $1 billion in 2022, both received indirectly from Entergy Corporation and related to the March 2023 storm cost securitization and the May 2022 storm cost securitization, respectively;
the repayment, prior to maturity, in May 2022 of $435 million, a portion of the outstanding principal, of 0.62% Series mortgage bonds due November 2023; and
a decrease of $99 million in 2023 in net repayments on Entergy Louisiana’s revolving credit facility.

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 $226.1 million for the six months ended June 30, 2023.

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. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the storm cost securitizations.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Capital Structure

Entergy Louisiana’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for Entergy Louisiana is primarily due to the $1.5 billion capital contribution received indirectly from Entergy Corporation in March 2023.


	June 30, 2023		December 31, 2022
Debt to capital	48.6	%	53.0	%


Effect of subtracting cash	(2.0	%)	(0.1	%)
Net debt to net capital (non-GAAP)	46.6	%	52.9	%

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 Louisiana 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 Louisiana’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Louisiana 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 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.

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


June 30, 2023	December 31, 2022	June 30, 2022	December 31, 2021
(In Thousands)
$275,559	($226,114)	$7,377	$14,539

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 2028. 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 June 30, 2023, 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 June 30, 2023, $20 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 2025. As of June 30, 2023, $56.4 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of June 30, 2023, $49.8 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.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida

As discussed in the Form 10-K, 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 February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages. In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages.

In April 2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida were estimated to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs of $57 million through December 2022, Entergy Louisiana was seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, eligible for recovery from customers. As part of this filing, Entergy Louisiana also was seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount was exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana was requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, eligible for recovery from customers. As discussed in the Form 10-K, in March 2022 the LPSC approved financing of a $1 billion storm escrow account from which funds were withdrawn to finance costs associated with Hurricane Ida restoration. In June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. In October 2022 the LPSC staff recommended a finding that the requested storm restoration costs of $2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s plans to securitize these costs, net of the $1 billion in funds withdrawn from the storm escrow account described above. The parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in December 2022. The settlement agreement contains the following key terms: $2.57 billion of restoration costs from Hurricane Ida, Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and eligible for recovery; carrying costs of $59.2 million were recoverable; and Entergy Louisiana was authorized to finance $1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. In January 2023, the LPSC approved the stipulated settlement subject to certain modifications. These modifications include the recognition of accumulated deferred income tax benefits related to damaged assets and system restoration costs as a reduction of the amount authorized to be financed utilizing the securitization process authorized by Act 55, as supplemented by Act 293, from $1.657 billion to $1.491 billion. These modifications did not affect the LPSC’s conclusion that all system restoration costs sought by Entergy Louisiana were reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to authorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to issue the bonds authorized in the LPSC’s financing order.

In March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to the damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).

Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023 on the preferred membership interests issued to the storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to the LURC for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is subject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.

Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of April 2023 and the system restoration charge is expected to remain in place for up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.

From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana as a capital contribution.

As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions. In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.

As discussed in Note 3 and Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust II as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $14.6 million in other income to reflect the LURC’s beneficial interest in the storm trust II.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

System Resilience and Storm Hardening

As discussed in the Form 10-K, in December 2022, Entergy Louisiana filed an application with the LPSC seeking a public interest finding regarding Phase I of Entergy Louisiana’s Future Ready resilience plan and approval of a rider mechanism to recover the program’s costs. Phase I reflects the first five years of a ten-year resilience plan and includes investment of approximately $5 billion, including hardening investment, transmission dead-end structures, enhanced vegetation management, and telecommunications improvement. In April 2023 a procedural schedule was established with a hearing scheduled for January 2024.

The LPSC had previously opened a formal rulemaking proceeding in December 2021 to investigate efforts to improve resilience of electric utility infrastructure. In April 2023 the LPSC staff issued a draft rule in the rulemaking proceeding related to a requirement to file a grid resilience plan. The procedural schedule entered in the rulemaking proceeding contemplates adoption of a final rule in September 2023.

2022 Solar Portfolio and Expansion of the Geaux Green Option

In February 2023, Entergy Louisiana filed an application with the LPSC seeking certification of the Iberville/Coastal Prairie facility, which will provide 175 MW of capacity through a PPA with a third party, and the Sterlington facility, a 49 MW self-build project located near the deactivated Sterlington power plant. Entergy Louisiana is seeking to include these within the portfolio supporting the Geaux Green Option (Rider GGO) rate schedule to help fulfill customer interest in access to renewable energy. Entergy Louisiana has requested the costs of these facilities, as offset by Rider GGO revenues, be deemed eligible for recovery in accordance with the terms of the formula rate plan and fuel adjustment clause rate mechanisms that exist at the time the facilities are placed into service. The Louisiana Energy Users Group and the Alliance for Affordable Energy have intervened, and discovery is underway. A procedural schedule has been established with a hearing scheduled for December 2023 and settlement negotiations are ongoing. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Liquidity and Capital Resources - Uses of Capital - 2021 Solar Certification and the Geaux Green Option” in the Form 10-K for further discussion of the Rider GGO**.**

Alternative RFP and Certification

In March 2023, Entergy Louisiana made the first phase of a bifurcated filing to seek approval from the LPSC for an alternative to the requests for proposals (RFP) process that would enable the acquisition of up to 3 GW of solar resources on a faster timeline than the current RFP and certification process allows. The initial phase of the filing established the need for the acquisition of additional resources and the need for an alternative to the RFP process. The second phase of the filing, which contains the details of the proposal for the alternative competitive procurement process and the information necessary to support certification, was filed in May 2023. In addition to the acquisition of up to 3 GW of solar resources, the filing also seeks approval of a new renewable energy credits-based tariff. Several parties have intervened, and a procedural schedule was established in May 2023 with a hearing scheduled for March 2024.

Nelson Industrial Steam Company

Entergy Louisiana is a partner in the Nelson Industrial Steam Company (NISCO) partnership which owns two petroleum coke generating units. In April 2023 these generating units suspended operations in the MISO market, and Entergy Louisiana currently is working with the partners to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. In May 2023, Entergy Louisiana filed an application with the FERC for transaction authorization pursuant to Section 203 of the Federal Power Act. In June 2023 the LPSC filed a notice to intervene in the proceeding. Entergy Louisiana is evaluating the effect of the transaction on its results of operations, cash flows, and financial condition, but at this time does not expect the effect to be material.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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.

Retail Rates

2022 Formula Rate Plan Filing

In May 2023, Entergy Louisiana filed its formula rate plan evaluation report for its 2022 calendar year operations. The 2022 test year evaluation report produced an earned return on common equity of 8.33%, requiring an approximately $70.7 million increase to base rider revenue. Due to a cap for the 2021 and 2022 test years, however, base rider formula rate plan revenues are only being increased by approximately $4.9 million, leaving an ongoing revenue deficiency of approximately $65.9 million and providing for prospective return on common equity opportunity of approximately 8.38%. Other changes in formula rate plan revenue driven by increases in capacity costs, primarily legacy capacity costs, additions eligible for recovery through the transmission recovery mechanism and distribution recovery mechanism, and higher sales during the test period, are offset by reductions in net MISO costs as well as credits for FERC-ordered refunds. Also included in the 2022 test year distribution recovery mechanism revenue requirement is a $6 million credit relating to the distribution recovery mechanism performance accountability standards and requirements. In total, the net increase in formula rate plan revenues, including base formula rate plan revenues inside the formula rate plan bandwidth and subject to the cap, as well as other formula rate plan revenues outside of the bandwidth, is $85.2 million.

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 April 2023, Entergy Louisiana filed an application proposing to utilize approximately $1.6 billion in certain low interest debt to generate earnings to apply toward the reduction of the COVID-19 regulatory asset, as well as to conduct additional outside right-of-way vegetation management activities and to apply to the minor storm reserve account. In that filing, Entergy Louisiana proposed to delay repayment of certain shorter-term first mortgage bonds that were issued to finance storm restoration costs until the costs could be securitized and to invest the funds that otherwise would be used to repay those bonds in the money pool to take advantage of the spread between prevailing interest rates on investments in the money pool and the interest rates on the bonds. The LPSC approved Entergy Louisiana’s requested relief in June 2023 and a subsequent filing will be required to permit the LPSC to review the COVID-19 regulatory asset. As of June 30, 2023, Entergy Louisiana had a regulatory asset of $47.8 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.

Entergy Louisiana, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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, “multiple/repetitive degraded cornerstone column,” or Column 4, and “unacceptable performance,” or Column 5. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Continued plant operation is not permitted for plants in Column 5. Waterford 3 is currently in Column 1, and River Bend is currently in Column 2.

In September 2022 the NRC placed Waterford 3 in Column 2 based on an error associated with a radiation monitor calibration. Entergy corrected the issue with the radiation monitor in February 2022 and also corrected a subsequent radiation monitor calibration issue. In May 2023 the NRC completed a supplemental inspection of Waterford 3 in accordance with its inspection procedures for nuclear plants in Column 2 and Waterford 3 was returned to Column 1.

In July 2023 the NRC placed River Bend in Column 2, effective April 2023, based on failure to inspect wiring associated with the high pressure core spray system. River Bend will remain in Column 2 pending successful completion of a supplemental inspection.

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 Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended



	2023	2022	2023	2022
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$1,191,909	$1,497,942	$2,511,661	$2,735,179
Natural gas	13,703	17,843	39,159	46,578
TOTAL	1,205,612	1,515,785	2,550,820	2,781,757

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	230,365	253,505	605,635	615,579
Purchased power	133,376	420,549	328,310	596,746
Nuclear refueling outage expenses	12,588	10,029	27,861	21,976
Other operation and maintenance	249,717	293,746	496,088	547,747
Decommissioning	18,820	17,911	37,406	35,599
Taxes other than income taxes	61,663	58,566	125,618	120,181
Depreciation and amortization	181,247	171,719	357,342	340,802
Other regulatory charges (credits) - net	(24,767)	203,461	49,229	182,564
TOTAL	863,009	1,429,486	2,027,489	2,461,194

OPERATING INCOME	342,603	86,299	523,331	320,563

OTHER INCOME
Allowance for equity funds used during construction	8,654	2,859	17,715	9,585
Interest and investment income (loss)	31,880	(68,382)	60,723	(84,380)
Interest and investment income - affiliated	81,877	43,203	137,303	75,101
Miscellaneous - net	(42,583)	36,986	(90,668)	52,503
TOTAL	79,828	14,666	125,073	52,809

INTEREST EXPENSE
Interest expense	94,931	92,755	192,102	186,539
Allowance for borrowed funds used during construction	(4,321)	(1,218)	(8,714)	(4,244)
TOTAL	90,610	91,537	183,388	182,295

INCOME BEFORE INCOME TAXES	331,821	9,428	465,016	191,077

Income taxes	68,561	(307,231)	(42,268)	(276,442)

NET INCOME	263,260	316,659	507,284	467,519

Net income attributable to noncontrolling interests	819	258	1,373	258

EARNINGS APPLICABLE TO MEMBER'S EQUITY	$262,441	$316,401	$505,911	$467,261

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended


	2023	2022	2023	2022
	(In Thousands)		(In Thousands)

Net Income	$263,260	$316,659	$507,284	$467,519

Other comprehensive loss
Pension and other postretirement liabilities (net of tax benefit of $653, $181, $943, and $407)	(1,773)	(491)	(2,559)	(1,104)
Other comprehensive loss	(1,773)	(491)	(2,559)	(1,104)

Comprehensive Income	261,487	316,168	504,725	466,415
Net income attributable to noncontrolling interests	819	258	1,373	258
Comprehensive Income Applicable to Member’s Equity	$260,668	$315,910	$503,352	$466,157

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)

	2023	2022
	(In Thousands)
OPERATING ACTIVITIES
Net income	$507,284	$467,519
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	423,535	414,975
Deferred income taxes, investment tax credits, and non-current taxes accrued	185	(198,525)
Changes in working capital:
Receivables	67,807	(114,357)
Fuel inventory	(14,907)	(183)
Accounts payable	(147,001)	(20,380)
Taxes accrued	48,015	(1,686)
Interest accrued	(5,396)	(3,263)
Deferred fuel costs	188,801	(367,321)
Other working capital accounts	(213,571)	(107,409)
Changes in provisions for estimated losses	3,909	294,067
Changes in other regulatory assets	448,144	859,908
Changes in other regulatory liabilities	217,746	(40,596)
Effect of securitization on regulatory asset	(491,150)	(1,190,338)


Changes in pension and other postretirement liabilities	(12,364)	(17,123)
Other	(92,977)	231,425
Net cash flow provided by operating activities	928,060	206,713
INVESTING ACTIVITIES
Construction expenditures	(889,118)	(1,565,051)
Allowance for equity funds used during construction	17,715	9,585


Nuclear fuel purchases	(88,403)	(77,561)
Proceeds from sale of nuclear fuel	16,733	37,634
Receipts from storm reserve escrow account	—	1,000,217

Payments to storm reserve escrow account	(6,602)	(1,290,282)
Purchase of preferred membership interests of affiliate	(1,457,676)	(3,163,572)
Redemption of preferred membership interests of affiliate	46,643	1,390,587

Proceeds from nuclear decommissioning trust fund sales	229,972	411,600
Investment in nuclear decommissioning trust funds	(258,420)	(419,873)
Changes in money pool receivable - net	(275,559)	7,162

Litigation proceeds from settlement agreement	—	5,695

Insurance proceeds received for property damages	6,184	—
Other	396	—
Net cash flow used in investing activities	(2,658,135)	(3,653,859)
FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	833,484	1,777,192
Retirement of long-term debt	(851,617)	(2,327,116)
Proceeds received by storm trust related to securitization	1,457,676	3,163,572
Capital contributions from parent	1,457,676	1,000,000



Change in money pool payable - net	(226,114)	—

Common equity distributions paid	(160,250)	(125,000)

Other	19,633	6,096
Net cash flow provided by financing activities	2,530,488	3,494,744

Net increase in cash and cash equivalents	800,413	47,598
Cash and cash equivalents at beginning of period	56,613	18,573
Cash and cash equivalents at end of period	$857,026	$66,171

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest - net of amount capitalized	$192,861	$183,686
Income taxes	($6,037)	$—

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$260	$50,318
Temporary cash investments	856,766	6,295
Total cash and cash equivalents	857,026	56,613

Accounts receivable:
Customer	246,351	339,291
Allowance for doubtful accounts	(4,871)	(7,595)
Associated companies	349,096	88,896
Other	51,940	53,241
Accrued unbilled revenues	238,146	199,077
Total accounts receivable	880,662	672,910

Deferred fuel costs	—	159,183
Fuel inventory	56,766	41,859
Materials and supplies - at average cost	620,627	555,860
Deferred nuclear refueling outage costs	78,449	53,833



Prepayments and other	208,093	76,646
TOTAL	2,701,623	1,616,904

OTHER PROPERTY AND INVESTMENTS
Investment in affiliate preferred membership interests	4,574,605	3,163,572
Decommissioning trust funds	1,973,128	1,779,090
Storm reserve escrow account	300,008	293,406
Non-utility property - at cost (less accumulated depreciation)	401,134	350,723

Other	14,270	19,679
TOTAL	7,263,145	5,606,470

UTILITY PLANT
Electric	27,191,346	27,498,136

Natural gas	308,598	301,719

Construction work in progress	689,520	736,969
Nuclear fuel	272,045	212,941
TOTAL UTILITY PLANT	28,461,509	28,749,765
Less - accumulated depreciation and amortization	10,261,350	10,087,942
UTILITY PLANT - NET	18,200,159	18,661,823

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	1,608,035	2,056,179
Deferred fuel costs	168,122	168,122
Other	39,389	35,057
TOTAL	1,815,546	2,259,358

TOTAL ASSETS	$29,980,473	$28,144,555

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$1,010,000	$1,010,000

Accounts payable:
Associated companies	90,509	356,688
Other	452,457	589,355
Customer deposits	165,813	161,666
Taxes accrued	84,019	36,004

Interest accrued	95,940	101,336
Deferred fuel costs	29,618	—





Other	99,325	72,525
TOTAL	2,027,681	2,327,574

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	2,368,751	2,374,878
Accumulated deferred investment tax credits	95,555	97,868
Regulatory liability for income taxes - net	328,105	337,836

Other regulatory liabilities	1,265,439	1,037,962
Decommissioning	1,780,412	1,736,801
Accumulated provisions	320,223	316,314
Pension and other postretirement liabilities	377,536	389,631
Long-term debt	9,677,807	9,688,922

Other	429,271	343,321
TOTAL	16,643,099	16,323,533

Commitments and Contingencies

EQUITY

Member's equity	11,209,667	9,406,343
Accumulated other comprehensive income	52,811	55,370
Noncontrolling interests	47,215	31,735
TOTAL	11,309,693	9,493,448

TOTAL LIABILITIES AND EQUITY	$29,980,473	$28,144,555

See Notes to Financial Statements.


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)

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

Balance at December 31, 2021	$—	$8,172,294	$8,278	$8,180,572

Net income	—	150,860	—	150,860
Other comprehensive loss	—	—	(613)	(613)



Distributions declared on common equity	—	(125,000)	—	(125,000)


Other	—	(13)	—	(13)
Balance at March 31, 2022	—	8,198,141	7,665	8,205,806

Net income	258	316,401	—	316,659
Other comprehensive loss	—	—	(491)	(491)


Contributions from parent	—	1,000,000	—	1,000,000


Beneficial interest in storm trust	31,636	—	—	31,636
Other	—	(13)	—	(13)
Balance at June 30, 2022	$31,894	$9,514,529	$7,174	$9,553,597












Balance at December 31, 2022	$31,735	$9,406,343	$55,370	$9,493,448

Net income	554	243,470	—	244,024
Other comprehensive loss	—	—	(786)	(786)

Contributions from parent	—	1,457,676	—	1,457,676
Common equity distributions	—	(160,250)	—	(160,250)

Beneficial interest in storm trust	14,577	—	—	14,577
Distribution to LURC	(470)	—	—	(470)
Other	—	(28)	—	(28)
Balance at March 31, 2023	46,396	10,947,211	54,584	11,048,191

Net income	819	262,441	—	263,260
Other comprehensive loss	—	—	(1,773)	(1,773)







Other	—	15	—	15
Balance at June 30, 2023	$47,215	$11,209,667	$52,811	$11,309,693












See Notes to Financial Statements.

ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Earnings Applicable to Member’s Equity

Second Quarter 2023 Compared to Second Quarter 2022

Earnings increased $12.9 million primarily due to higher retail electric price and lower other operation and maintenance expenses, partially offset by lower volume/weather, higher depreciation and amortization expenses, and higher interest expense.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Earnings increased $5.7 million primarily due to higher retail electric price, partially offset by lower volume/weather, higher depreciation and amortization expenses, and higher interest expense.

Operating Revenues

Second Quarter 2023 Compared to Second Quarter 2022

Following is an analysis of the change in operating revenues comparing the second quarter 2023 to the second quarter 2022:


			Amount
			(In Millions)
2022 operating revenues			$405.5
Fuel, rider, and other revenues that do not significantly affect net income			20.0
Retail electric price			27.7
Volume/weather			(8.1)

2023 operating revenues			$445.1

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 August 2022 and April 2023. 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 to the effect of less favorable weather on residential sales.

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy Mississippi for the three months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	1,323	1,419	(7)
Commercial	1,105	1,167	(5)
Industrial	565	593	(5)
Governmental	99	106	(7)
Total retail	3,092	3,285	(6)
Sales for resale:
Non-associated companies	1,209	677	79
Total	4,301	3,962	9

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2023 to the six months ended June 30, 2022:


			Amount
			(In Millions)
2022 operating revenues			$754.5
Fuel, rider, and other revenues that do not significantly affect net income			85.6
Retail electric price			39.8
Volume/weather			(22.3)
2023 operating revenues			$857.6

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy Mississippi for the six months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	2,412	2,714	(11)
Commercial	2,120	2,188	(3)
Industrial	1,132	1,154	(2)
Governmental	192	201	(4)
Total retail	5,856	6,257	(6)
Sales for resale:
Non-associated companies	2,773	1,212	129
Total	8,629	7,469	16

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

Other Income Statement Variances

Second Quarter 2023 Compared to Second Quarter 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $2.5 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023 and a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits 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 benefits costs;
a decrease of $1.7 million in transmission costs allocated by MISO; and
a decrease of $1.7 million in non-nuclear generation expenses primarily due to a lower scope of work, including during plant outages, performed in 2023 as compared to 2022 and lower non-nuclear labor costs.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in local franchise taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Sunflower Solar facility, which was placed in service in September 2022.

Other income decreased primarily due to lower interest income from carrying costs related to the deferred fuel balance.

Interest expense increased primarily due to the issuance of $300 million of 5.0% Series mortgage bonds in May 2023 and the $150 million unsecured term loan drawn in June 2022.

Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $3.6 million in second quarter 2023 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/losses that would have been allocated to the tax equity partner under its respective ownership percentage in

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $4.4 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023, a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first quarter of 2023. 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 benefits costs; and
a decrease of $3.5 million in transmission costs allocated by MISO.

The decrease was partially offset by:

an increase of $1.7 million in power delivery expenses primarily due to higher reliability costs and higher vegetation maintenance costs;
an increase of $1.6 million in non-nuclear generation expenses primarily due to higher long term service agreement expenses; and
several individually insignificant items.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in local franchise taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Sunflower Solar facility, which was placed in service in September 2022.

Other income decreased primarily due to lower interest income from carrying costs related to the deferred fuel balance.

Interest expense increased primarily due to the $150 million unsecured term loan drawn in June 2022 and the issuance of $300 million of 5.0% Series mortgage bonds in May 2023.

Net loss attributable to noncontrolling interest reflects the earnings or losses attributable to the noncontrolling interest partner of the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $5.1 million for the six months ended June 30, 2023 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/losses that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.

Income Taxes

The effective income tax rates were 25% for the second quarter 2023 and 24.8% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

The effective income tax rates were 22% for the second quarter 2022 and 21.3% for the six months ended June 30, 2022. The differences in the effective income tax rates for the second quarter 2022 and the six months ended June 30, 2022 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.

Income Tax Legislation

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2023 and 2022 were as follows:


	2023	2022
	(In Thousands)
Cash and cash equivalents at beginning of period	$16,979	$47,627

Net cash provided by (used in):
Operating activities	173,548	20,404
Investing activities	(276,717)	(295,818)
Financing activities	94,643	253,895
Net decrease in cash and cash equivalents	(8,526)	(21,519)

Cash and cash equivalents at end of period	$8,453	$26,108

Operating Activities

Net cash flow provided by operating activities increased $153.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
higher collections from customers; and
the timing of payments to vendors.

The increase was partially offset by an increase of $10.8 million in storm spending in 2023 as compared to 2022 and an increase of $9.2 million in interest paid.

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Investing Activities

Net cash flow used in investing activities decreased $19.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to the initial payment of approximately $105.1 million in May 2022 as compared to the substantial completion payment of approximately $30.4 million in April 2023 for the purchase of the Sunflower Solar facility by a consolidated tax equity partnership. The decrease was partially offset by:

an increase of $36.7 million in transmission construction expenditures primarily due to increased spending on various transmission projects in 2023;
an increase of $11.2 million in distribution construction expenditures primarily due to increased investment in the reliability and infrastructure of Entergy Mississippi’s distribution system; and
money pool activity.

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 $26.9 million for the six months ended June 30, 2023 compared to decreasing by $37.4 million for the six months ended June 30, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility’s subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities decreased $159.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

the repayment, prior to maturity, of $250 million of 3.10% Series mortgage bonds in June 2023;
proceeds received in June 2022 from a $150 million unsecured term loan due December 2023;
borrowings of $100 million in 2022 on Entergy Mississippi’s credit facility;
the repayment, prior to maturity, in May 2023, of $50 million of an unsecured term loan due December 2023; and
$40 million in common equity distributions paid in 2023 in order to maintain Entergy Mississippi’s capital structure.

The decrease was partially offset by:

the issuance of $300 million of 5.0% Series mortgage bonds in May 2023;
capital contributions of $25.7 million received in April 2023 as compared to $9.6 million received in May 2022, both from the noncontrolling tax equity investor in MS Sunflower Partnership, LLC and used by the partnership for payments in the acquisition of the Sunflower Solar facility. See Note 14 to the financial statements in the Form 10-K for discussion of the Sunflower Solar facility purchase; and
money pool activity.

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 by $104.6 million for the six months ended June 30, 2023.

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 Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Capital Structure

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


	June 30, 2023		December 31, 2022
Debt to capital	52.7	%	53.4	%
Effect of subtracting cash	(0.1	%)	(0.2	%)
Net debt to net capital (non-GAAP)	52.6	%	53.2	%

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. The net debt to net capital ratio is a non-GAAP measure. 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’s receivables from or (payables to) the money pool were as follows:


June 30, 2023	December 31, 2022	June 30, 2022	December 31, 2021
(In Thousands)
($104,624)	$26,879	$2,984	$40,456

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

As of June 30, 2023, Entergy Mississippi had three separate credit facilities in the aggregate amount of $95 million, each of which expired in July 2023. As of June 30, 2023, there were no cash borrowings outstanding under these credit facilities. Also, Entergy Mississippi has a credit facility in the amount of $150 million scheduled to expire in July 2025. As of June 30, 2023, there were no cash borrowings outstanding under the credit facility. 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 June 30, 2023, $6.7 million in MISO letters of credit and $9.2 million in 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.

Sunflower Solar

As discussed in the Form 10-K, 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. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that were then used to make an initial payment of $105 million for acquisition of the facility. Commercial operation at the Sunflower Solar facility commenced in September 2022. In April 2023 both Entergy Mississippi and the tax equity investor made additional capital contributions to the tax equity partnership that were

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

then used to make the substantial completion payment of $30.4 million for acquisition of the facility. See Note 14 to the financial statements in the Form 10-K for a discussion of Entergy Mississippi’s investment in the Sunflower Solar facility.

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.

Retail Rates

2023 Formula Rate Plan Filing

In March 2023, Entergy Mississippi submitted its formula rate plan 2023 test year filing and 2022 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 2022 calendar year to be below the formula rate plan bandwidth and projected earned return for the 2023 calendar year to be below the formula rate plan bandwidth. The 2023 test year filing shows a $39.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on rate base to the specified point of adjustment of 6.67%, within the formula rate plan bandwidth. The 2022 look-back filing compares actual 2022 results to the approved benchmark return on rate base and reflects the need for a $19.8 million temporary increase in formula rate plan revenues, including the refund of a $1.3 million over-recovery resulting from the demand-side management costs true-up in 2022. In fourth quarter 2022, Entergy Mississippi recorded a regulatory asset of $18.2 million in connection with the look-back feature of the formula rate plan to reflect that the 2022 estimated earned return was below the formula rate plan bandwidth. In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $27.9 million interim rate increase, reflecting a cap equal to 2% of 2022 retail revenues, effective in April 2023.

In May 2023, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed a 2023 test year filing resulting in a total revenue increase of $26.5 million for 2023. Pursuant to the joint stipulation, Entergy Mississippi’s 2022 look-back filing reflected an earned return on rate base of 6.10% in calendar year 2022, which is below the look-back bandwidth, resulting in a $19.0 million increase in the formula rate plan revenues on an interim basis through June 2024. Entergy Mississippi recorded a regulatory credit of $0.8 million in June 2023 to reflect the increase in the look-back regulatory asset. In addition, certain long-term service agreement and conductor handling costs were authorized for realignment from the formula rate plan to the annual power management and grid modernization riders effective January 2023, resulting in regulatory credits recorded in June 2023 of $4.1 million and $4.3 million, respectively. Also, the amortization of Entergy Mississippi’s COVID-19 bad debt deferral was suspended for calendar year 2023 and will resume in 2024. In June 2023 the MPSC approved the joint stipulation with rates effective in July 2023.

Fuel and purchased power recovery

In June 2023 the MPSC approved the joint stipulation agreement between Entergy Mississippi and the Mississippi Public Utilities Staff for Entergy Mississippi’s 2023 formula rate plan filing. The stipulation directed Entergy Mississippi to make a compliance filing to revise its power management cost adjustment factor, to revise its grid modernization cost adjustment factor, and to include a revision to reduce the net energy cost factor to a level necessary to reflect an average natural gas price of $4.50 per MMBtu. The MPSC approved the compliance filing in June 2023, effective for July 2023 bills. See “Retail Rates - 2023 Formula Rate Plan Filing” above for further discussion of the 2023 formula rate plan filing and the joint stipulation agreement.

Entergy Mississippi, LLC and Subsidiaries

Management's Financial Discussion and Analysis

RenewABLE Community Option

In January 2022, Entergy Mississippi filed its RenewABLE Community Option (Schedule RCO), an offering for qualifying non-residential customers to subscribe to renewable resource capacity to satisfy their environmental, sustainability, and governance goals. The MPSC approved Schedule RCO in December 2022. Registration for the Schedule RCO launched in May 2023 and subscriptions as of June 30, 2023 totaled 16 MW of the 40 MW available.

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 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 AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended
	2023	2022	2023	2022
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$445,130	$405,459	$857,558	$754,488

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	140,530	43,671	301,815	110,948
Purchased power	59,140	89,346	122,954	150,558
Other operation and maintenance	68,600	74,898	138,418	140,709

Taxes other than income taxes	35,301	32,484	71,035	65,214
Depreciation and amortization	65,346	60,618	129,375	120,702
Other regulatory charges (credits) - net	(25,947)	23,853	(58,790)	27,760
TOTAL	342,970	324,870	704,807	615,891

OPERATING INCOME	102,160	80,589	152,751	138,597

OTHER INCOME
Allowance for equity funds used during construction	2,169	1,495	4,053	2,573
Interest and investment income	1,319	34	1,783	98
Miscellaneous - net	(3,438)	990	(5,521)	(164)
TOTAL	50	2,519	315	2,507

INTEREST EXPENSE
Interest expense	25,433	21,003	49,377	41,437
Allowance for borrowed funds used during construction	(902)	(658)	(1,685)	(1,123)
TOTAL	24,531	20,345	47,692	40,314

INCOME BEFORE INCOME TAXES	77,679	62,763	105,374	100,790

Income taxes	19,414	13,808	26,169	21,481

NET INCOME	58,265	48,955	79,205	79,309

Net loss attributable to noncontrolling interest	(3,623)	—	(5,764)	—

EARNINGS APPLICABLE TO MEMBER'S EQUITY	$61,888	$48,955	$84,969	$79,309

See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
	2023	2022
	(In Thousands)
OPERATING ACTIVITIES
Net income	$79,205	$79,309
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	129,375	120,702
Deferred income taxes, investment tax credits, and non-current taxes accrued	26,736	17,628
Changes in assets and liabilities:
Receivables	(6,155)	(38,137)
Fuel inventory	(5,919)	(5,352)
Accounts payable	(32,930)	23,252
Taxes accrued	(45,044)	(36,021)
Interest accrued	(724)	498
Deferred fuel costs	149,189	(124,752)
Other working capital accounts	(25,035)	(36,211)
Provisions for estimated losses	1,731	(194)
Other regulatory assets	(39,846)	3,332
Other regulatory liabilities	(55,443)	15,441
Pension and other postretirement liabilities	(8,261)	(8,004)
Other assets and liabilities	6,669	8,913
Net cash flow provided by operating activities	173,548	20,404

INVESTING ACTIVITIES
Construction expenditures	(276,530)	(230,683)
Allowance for equity funds used during construction	4,053	2,573

Changes in money pool receivable - net	26,879	37,472
Payment for purchase of assets	(30,433)	(105,149)

Increase in other investments	(686)	(31)
Net cash flow used in investing activities	(276,717)	(295,818)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	396,861	249,746
Retirement of long-term debt	(400,000)	—

Capital contributions from noncontrolling interest	25,708	9,595
Change in money pool payable - net	104,624	—

Common equity distributions paid	(40,000)	—

Other	7,450	(5,446)
Net cash flow provided by financing activities	94,643	253,895

Net decrease in cash and cash equivalents	(8,526)	(21,519)
Cash and cash equivalents at beginning of period	16,979	47,627
Cash and cash equivalents at end of period	$8,453	$26,108

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$48,771	$39,620


See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$26	$26
Temporary cash investments	8,427	16,953
Total cash and cash equivalents	8,453	16,979
Accounts receivable:
Customer	112,206	99,504
Allowance for doubtful accounts	(2,371)	(2,472)
Associated companies	7,724	37,673
Other	17,369	34,564
Accrued unbilled revenues	87,090	73,473
Total accounts receivable	222,018	242,742
Deferred fuel costs	—	143,211

Fuel inventory - at average cost	21,467	15,548
Materials and supplies - at average cost	95,976	84,346

Prepayments and other	13,735	9,603
TOTAL	361,649	512,429

OTHER PROPERTY AND INVESTMENTS
Non-utility property - at cost (less accumulated depreciation)	4,504	4,512
Storm reserve escrow account	34,304	33,549
Other	841	910
TOTAL	39,649	38,971

UTILITY PLANT
Electric	7,288,046	7,079,849


Construction work in progress	236,022	170,191
TOTAL UTILITY PLANT	7,524,068	7,250,040
Less - accumulated depreciation and amortization	2,351,620	2,264,786
UTILITY PLANT - NET	5,172,448	4,985,254

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	559,306	519,460
Other	26,680	22,650
TOTAL	585,986	542,110

TOTAL ASSETS	$6,159,732	$6,078,764

See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$100,000	$400,000

Accounts payable:
Associated companies	153,510	60,532
Other	162,222	176,162
Customer deposits	90,302	89,668
Taxes accrued	79,861	124,905

Interest accrued	17,484	18,208
Deferred fuel costs	5,978	—



Other	29,338	38,908
TOTAL	638,695	908,383

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	810,639	780,030
Accumulated deferred investment tax credits	14,393	14,591

Regulatory liability for income taxes - net	196,612	202,058

Other regulatory liabilities	29,868	79,865
Asset retirement cost liabilities	8,010	7,797
Accumulated provisions	39,240	37,509
Pension and other postretirement liabilities	15,266	23,742
Long-term debt	2,228,900	1,931,096
Other	72,659	53,156
TOTAL	3,415,587	3,129,844

Commitments and Contingencies



EQUITY
Member's equity	2,082,159	2,037,190
Noncontrolling interest	23,291	3,347
TOTAL	2,105,450	2,040,537

TOTAL LIABILITIES AND EQUITY	$6,159,732	$6,078,764

See Notes to Financial Statements.


ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Noncontrolling Interest	Member's Equity	Total
		(In Thousands)

Balance at December 31, 2021	$—	$1,839,568	$1,839,568

Net income	—	30,355	30,355

Balance at March 31, 2022	—	1,869,923	1,869,923

Net income	—	48,955	48,955
Capital contribution from noncontrolling interest	9,595	—	9,595
Balance at June 30, 2022	$9,595	$1,918,878	$1,928,473






Balance at December 31, 2022	$3,347	$2,037,190	$2,040,537

Net income (loss)	(2,141)	23,081	20,940
Common equity distributions	—	(12,500)	(12,500)
Balance at March 31, 2023	1,206	2,047,771	2,048,977

Net income (loss)	(3,623)	61,888	58,265

Common equity distributions	—	(27,500)	(27,500)
Capital contribution from noncontrolling interest	25,708	—	25,708
Balance at June 30, 2023	$23,291	$2,082,159	$2,105,450





See Notes to Financial Statements.

ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2023 Compared to Second Quarter 2022

Net income decreased $5.7 million primarily due to lower volume/weather, partially offset by higher retail electric price and lower other operation and maintenance expenses.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net income decreased $10.7 million primarily due to lower volume/weather, a higher effective income tax rate, and higher taxes other than income taxes, partially offset by higher retail electric price, lower other operation and maintenance expenses, and higher other income.

Operating Revenues

Second Quarter 2023 Compared to Second Quarter 2022

Following is an analysis of the change in operating revenues comparing the second quarter 2023 to second quarter 2022:


			Amount
			(In Millions)
2022 operating revenues			$254.2
Fuel, rider, and other revenues that do not significantly affect net income			(57.8)
Volume/weather			(13.6)
Retail electric price			5.2
2023 operating revenues			$188.0

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 volume/weather variance is primarily due to a decrease in weather-adjusted residential and commercial usage and the effect of less favorable weather on residential and commercial sales.

The retail electric price variance is primarily due to a rate increase effective September 2022 in accordance with the terms of the 2022 formula rate plan filing. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy New Orleans for the three months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	576	669	(14)
Commercial	508	543	(6)
Industrial	97	116	(16)
Governmental	187	206	(9)
Total retail	1,368	1,534	(11)
Sales for resale:
Non-associated companies	551	605	(9)
Total	1,919	2,139	(10)

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

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2023 to the six months ended June 30, 2022:


			Amount
			(In Millions)
2022 operating revenues			$452.5
Fuel, rider, and other revenues that do not significantly affect net income			(46.6)
Volume/weather			(18.3)
Retail electric price			9.2
2023 operating revenues			$396.8

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales and a decrease in weather-adjusted residential usage.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy New Orleans for the six months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	1,030	1,207	(15)
Commercial	995	1,008	(1)
Industrial	196	210	(7)
Governmental	368	383	(4)
Total retail	2,589	2,808	(8)
Sales for resale:
Non-associated companies	1,594	1,321	21
Total	4,183	4,129	1

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

Other Income Statement Variances

Second Quarter 2023 Compared to Second Quarter 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $1.5 million in bad debt expense;
a decrease of $0.9 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits liabilities and lower health and welfare costs as a result of higher prescription drug rebates in 2023. 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 benefits costs;
a decrease of $0.8 million in energy efficiency expenses primarily due to the timing of recovery from customers; and
several individually insignificant items.

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

Other income increased primarily due to higher interest earned on money pool investments, partially offset by higher net periodic pension and other postretirement benefits non-service costs as a result of an increase in the discount rates used to value the benefits liabilities and the amortization of 2022 trust asset losses. 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 benefits costs.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Other operation and maintenance expenses decreased primarily due to:

a decrease of $2.4 million in bad debt expense;
a decrease of $1.8 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits liabilities and lower health and welfare costs as a result of higher prescription drug rebates in 2023. 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 benefits costs; and
a decrease of $1 million in energy efficiency expenses primarily due to the timing of recovery from customers.

Taxes other than income taxes increased primarily due to increases in local franchise taxes and increases in ad valorem taxes resulting from higher assessments.

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

Other income increased primarily due to higher interest earned on money pool investments.

Interest expense increased primarily due to interest on the $34 million regulatory liability recorded when Entergy New Orleans received a refund from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the refund and the related proceedings.

Income Taxes

The effective income tax rates were 29.4% for second quarter 2023 and 30.5% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of tax rate changes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 27.2% for second quarter 2022. The difference in the effective income tax rate for second quarter 2022 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 23.4% for the six months ended June 30, 2022. The difference in the effective income tax rate for the six months ended June 30, 2022 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes, partially offset by the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.

Income Tax Legislation

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2023 and 2022 were as follows:


	2023	2022
	(In Thousands)
Cash and cash equivalents at beginning of period	$4,464	$42,862

Net cash provided by (used in):
Operating activities	100,950	55,623
Investing activities	12,900	(81,900)
Financing activities	23,057	9,766
Net increase (decrease) in cash and cash equivalents	136,907	(16,511)

Cash and cash equivalents at end of period	$141,371	$26,351

Operating Activities

Net cash flow provided by operating activities increased $45.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

the timing of payments to vendors;
the timing of recovery of fuel and purchased power costs. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power cost recovery;
higher collections from customers;
the refund of $34 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the refund and the related proceedings; and
a decrease of $16.9 million in storm spending primarily due to Hurricane Ida restoration efforts in 2022.

The increase was partially offset by higher receipts from associated companies in 2022.

Investing Activities

Entergy New Orleans’s investing activities provided $12.9 million of cash for the six months ended June 30, 2023 compared to using $81.9 million of cash for the six months ended June 30, 2022 primarily due to the following activity:

money pool activity;
a decrease of $33.7 million in distribution construction expenditures primarily due to higher capital expenditures for Hurricane Ida storm restoration efforts in 2022, partially offset by increased investment in the reliability and infrastructure of Entergy New Orleans’s distribution system in 2023; and
an increase of $9.9 million in transmission construction expenditures primarily due to increased investment in the reliability and infrastructure of Entergy New Orleans’s transmission system.

Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $101.8 million for the six months ended June 30, 2023

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

compared to decreasing by $33.5 million for the six months ended June 30, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $13.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to additional borrowings of $15 million in May 2023 on an unsecured term loan due June 2024. 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.


	June 30, 2023		December 31, 2022
Debt to capital	52.1	%	52.6	%
Effect of excluding securitization bonds	(0.4	%)	(0.6	%)
Debt to capital, excluding securitization bonds (non-GAAP) (a)	51.7	%	52.0	%
Effect of subtracting cash	(5.0	%)	(0.1	%)
Net debt to net capital, excluding securitization bonds (non-GAAP) (a)	46.7	%	51.9	%

(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. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. 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 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’s receivables from the money pool were as follows:


June 30, 2023	December 31, 2022	June 30, 2022	December 31, 2021
(In Thousands)
$45,487	$147,254	$2,937	$36,410

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

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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 June 30, 2023, there were no cash borrowings and no letters of credit outstanding under the credit 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 June 30, 2023, 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.

System Resilience and Storm Hardening

As discussed in the Form 10-K, in October 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening. In July 2022, Entergy New Orleans filed with the City Council a response identifying a plan for storm hardening and resiliency projects, including microgrids, to be implemented over ten years at an approximate cost of $1.5 billion. In February 2023 the City Council approved a revised procedural schedule requiring Entergy New Orleans to make a filing containing a narrowed list of proposed hardening projects, with final comments on that filing due July 2023. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking City Council approval of the first phase (five years and approximately $559 million) of a ten-year infrastructure hardening plan totaling approximately $1 billion. Entergy New Orleans also sought, among other relief, City Council approval of a rider to recover from customers the costs of the infrastructure hardening plan. In July 2023, Entergy New Orleans filed comments in support of its application.

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.

Retail Rates

2023 Formula Rate Plan Filing

In April 2023, Entergy New Orleans submitted to the City Council its formula rate plan 2022 test year filing. The 2022 test year evaluation report produced an electric earned return on equity of 7.34% and a gas earned return on equity of 3.52% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans seeks approval of a $25.6 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula results in an increase in authorized electric revenues of $17.4 million and an increase in authorized gas revenues of $8.2 million. Entergy New Orleans also seeks to commence collecting $3.4 million in electric 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. In July 2023, Entergy New Orleans filed a report to decrease its requested formula rate plan revenues by approximately $0.5 million to account for minor errors discovered after the filing. The City Council advisors issued a report seeking a reduction in requested formula rate plan revenues of approximately $8.3 million, combined for electric and gas, due to alleged errors. The City Council advisors proposed additional rate mitigation in the amount of $12 million through offsets to the formula rate plan rate increase by certain regulatory liabilities. The parties have until August 9, 2023 to reach an agreement on the final amount of the formula rate plan revenue increase. If no agreement is reached, Entergy New Orleans has the right to implement its requested rate subject to final resolution through a subsequent litigated proceeding. Resulting rates will be effective with the first billing cycle of September 2023 pursuant to the formula rate plan tariff. For any disputed rate adjustments, however, the City Council would set a procedural schedule that would extend the process for City Council approval of disputed rate adjustments.

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

Reliability Investigation

As discussed in the Form 10-K, in April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in the management and maintenance of the reliability of its distribution system. Entergy New Orleans responded to this resolution in June 2018 and filed a revised reliability plan with the City Council in July 2018. The City Council also approved a resolution that opened a prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation asserting that it had been prudent in managing system reliability. In April 2019 the City Council advisors filed comments and testimony asserting that Entergy New Orleans did not act prudently in maintaining and improving its distribution system reliability in recent years and recommending that a financial penalty in the range of $1.5 million to $2 million should be assessed. Entergy New Orleans disagreed with the recommendation and submitted rebuttal testimony and rebuttal comments in June 2019. In November 2019 the City Council passed a resolution that penalized Entergy New Orleans $1 million for alleged imprudence in the maintenance of its distribution system. In December 2019, Entergy New Orleans filed suit in Louisiana state court seeking judicial review of the City Council’s resolution. In June 2022 the Orleans Civil District Court issued a written judgment that the penalty be set aside, reversed, and vacated. In August 2022 the Orleans Civil District Court issued written reasons for its judgment and also granted a post-judgment motion to remand for the City Council to take actions consistent with its judgment. In April 2023 the City Council approved a resolution that established a procedural schedule to allow for the submission of additional evidence regarding the penalty discussed above. In May 2023, Entergy New Orleans filed with the Orleans Civil District Court a petition for judicial review and (or alternatively) declaratory judgment of, together with a request for injunctive relief from, the City Council’s April 2023 resolution. In June 2023 the City Council filed responsive pleadings requesting the Orleans Civil District Court dismiss the suit as premature. Entergy New Orleans expects to file its opposition to the responsive pleadings by the applicable deadlines.

Also in August 2022 the City Council approved a resolution establishing a 30-day comment period on proposed minimum reliability standards and an associated penalty mechanism. In September 2022, Entergy New Orleans filed comments to the proposed plan including a request for an additional round of comments. In February 2023 the City Council approved a resolution adopting the proposed reliability standards, including a minimum annual performance level for Entergy New Orleans’s distribution system, as well as associated penalty mechanisms. In April 2023, Entergy New Orleans filed the compliance filings required by the resolution for calendar year 2023. The first year for which the City Council may assess a penalty for distribution system reliability performance is calendar year 2024.

Renewable Portfolio Standard Rulemaking

As discussed in the Form 10-K, in May 2021 the City Council approved the draft rule, as amended, establishing the Renewable and Clean Portfolio Standard. In May 2023, Entergy New Orleans submitted its compliance demonstration report to the City Council for the 2022 compliance year, which describes and demonstrates Entergy New Orleans’s compliance with the Renewable and Clean Portfolio Standard in 2022 and satisfies certain informational requirements. Entergy New Orleans requested, among other things, that the City Council determine that Entergy New Orleans achieved the target under the portfolio standard for 2022 and remains within the customer protection cost cap, and that the City Council approve a proposal to recover costs associated with 2022 compliance. In July 2023 intervenors filed comments on the compliance demonstration report, and Entergy New Orleans expects to respond to those comments in August 2023.

Federal Regulation

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

Entergy New Orleans, LLC and Subsidiaries

Management's Financial Discussion and Analysis

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 Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended
	2023	2022	2023	2022
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$168,216	$224,084	$337,911	$378,730
Natural gas	19,800	30,165	58,925	73,791
TOTAL	188,016	254,249	396,836	452,521

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	18,974	54,815	70,998	98,212
Purchased power	65,929	83,088	132,549	139,558
Other operation and maintenance	38,961	43,715	72,188	77,367
Taxes other than income taxes	14,480	14,444	30,904	28,433
Depreciation and amortization	20,064	17,951	39,639	37,766
Other regulatory charges (credits) - net	2,288	5,354	1,187	9,539
TOTAL	160,696	219,367	347,465	390,875

OPERATING INCOME	27,320	34,882	49,371	61,646

OTHER INCOME
Allowance for equity funds used during construction	280	(449)	730	(80)
Interest and investment income	2,400	68	4,451	92
Miscellaneous - net	(517)	1,221	(744)	950
TOTAL	2,163	840	4,437	962

INTEREST EXPENSE
Interest expense	10,003	8,698	19,622	17,392
Allowance for borrowed funds used during construction	(136)	159	(355)	(40)
TOTAL	9,867	8,857	19,267	17,352

INCOME BEFORE INCOME TAXES	19,616	26,865	34,541	45,256

Income taxes	5,759	7,319	10,542	10,584

NET INCOME	$13,857	$19,546	$23,999	$34,672

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
	2023	2022
	(In Thousands)
OPERATING ACTIVITIES
Net income	$23,999	$34,672
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	39,639	37,766
Deferred income taxes, investment tax credits, and non-current taxes accrued	10,247	16,265
Changes in assets and liabilities:
Receivables	23,357	9,240
Fuel inventory	3,868	(844)
Accounts payable	(24,536)	3,909
Taxes accrued	(657)	(2,524)
Interest accrued	194	(361)
Deferred fuel costs	4,315	(31,599)
Other working capital accounts	(14,016)	(9,725)
Provisions for estimated losses	3,550	6,319
Other regulatory assets	2,930	24,541
Other regulatory liabilities	30,722	(15,456)

Pension and other postretirement liabilities	(2,454)	(4,741)
Other assets and liabilities	(208)	(11,839)
Net cash flow provided by operating activities	100,950	55,623

INVESTING ACTIVITIES
Construction expenditures	(88,480)	(115,552)
Allowance for equity funds used during construction	730	(80)


Changes in money pool receivable - net	101,767	33,473


Changes in securitization account	555	259
Increase in other investments	(1,672)	—
Net cash flow provided by (used in) investing activities	12,900	(81,900)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	14,641	—
Retirement of long-term debt	(6,073)	(5,916)




Contributions from customer for construction	15,000	15,000


Other	(511)	682
Net cash flow provided by financing activities	23,057	9,766

Net increase (decrease) in cash and cash equivalents	136,907	(16,511)
Cash and cash equivalents at beginning of period	4,464	42,862
Cash and cash equivalents at end of period	$141,371	$26,351

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$18,719	$17,055
Income taxes	$2	$—

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$26	$27
Temporary cash investments	141,345	4,437
Total cash and cash equivalents	141,371	4,464
Securitization recovery trust account	1,680	2,235
Accounts receivable:
Customer	68,524	93,288
Allowance for doubtful accounts	(7,653)	(11,909)
Associated companies	47,689	149,927
Other	5,992	6,110
Accrued unbilled revenues	35,024	37,284
Total accounts receivable	149,576	274,700
Deferred fuel costs	5,838	10,153
Fuel inventory - at average cost	2,004	5,872
Materials and supplies - at average cost	26,860	22,498

Prepayments and other	19,067	6,312
TOTAL	346,396	326,234

OTHER PROPERTY AND INVESTMENTS
Non-utility property at cost (less accumulated depreciation)	832	1,050
Storm reserve escrow account	76,723	75,000
Other	624	675
TOTAL	78,179	76,725

UTILITY PLANT
Electric	1,989,407	1,934,837
Natural gas	396,968	390,252
Construction work in progress	26,582	39,607
TOTAL UTILITY PLANT	2,412,957	2,364,696
Less - accumulated depreciation and amortization	828,664	808,224
UTILITY PLANT - NET	1,584,293	1,556,472

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Deferred fuel costs	4,080	4,080
Other regulatory assets (includes securitization property of $7,952 as of June 30, 2023 and $13,363 as of December 31, 2022)	199,182	202,112
Other	51,549	46,778
TOTAL	254,811	252,970

TOTAL ASSETS	$2,263,679	$2,212,401

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$185,000	$170,000
Payable due to associated company	1,306	1,306
Accounts payable:
Associated companies	43,126	53,258
Other	40,231	57,291
Customer deposits	32,299	31,826
Taxes accrued	9,651	10,308
Interest accrued	8,274	8,080


Other	9,271	6,560
TOTAL	329,158	338,629

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	391,231	385,259
Accumulated deferred investment tax credits	16,469	16,481
Regulatory liability for income taxes - net	42,162	39,738
Other regulatory liabilities	49,033	20,735
Asset retirement cost liabilities	4,101	—
Accumulated provisions	90,598	87,048

Long-term debt (includes securitization bonds of $11,745 as of June 30, 2023 and $17,697 as of December 31, 2022)	590,225	596,047
Long-term payable due to associated company	8,279	8,279
Other	15,608	17,369
TOTAL	1,207,706	1,170,956

Commitments and Contingencies

EQUITY
Member's equity	726,815	702,816
TOTAL	726,815	702,816

TOTAL LIABILITIES AND EQUITY	$2,263,679	$2,212,401

See Notes to Financial Statements.


ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)


			Member's Equity
			(In Thousands)

Balance at December 31, 2021			$638,715

Net income			15,126

Balance at March 31, 2022			653,841

Net income			19,546

Balance at June 30, 2022			$673,387






Balance at December 31, 2022			$702,816

Net income			10,142

Balance at March 31, 2023			712,958

Net income			13,857

Balance at June 30, 2023			$726,815





See Notes to Financial Statements.

ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 2023 Compared to Second Quarter 2022

Net income decreased $9 million primarily due to the recognition of the equity component of carrying costs as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022, lower volume/weather, and higher taxes other than income taxes. The decrease was partially offset by higher retail electric price and lower other operation and maintenance expenses.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net income decreased $17.8 million primarily due to the recognition of the equity component of carrying costs as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022, lower volume/weather, higher taxes other than income taxes, and higher interest expense. The decrease was partially offset by higher retail electric price, lower other operation and maintenance expenses, and higher other income.

Operating Revenues

Second Quarter 2023 Compared to Second Quarter 2022

Following is an analysis of the change in operating revenues comparing the second quarter 2023 to the second quarter 2022:


			Amount
			(In Millions)
2022 operating revenues			$564.6
Fuel, rider, and other revenues that do not significantly affect net income			(92.4)
System restoration carrying costs			(21.7)
Volume/weather			(8.8)
Return of unprotected excess accumulated deferred income taxes to customers			7.2
Retail electric price			15.5
2023 operating revenues			$464.4

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.

System restoration carrying costs represent the equity component of system restoration carrying costs, recorded in second quarter 2022, recognized as part of the securitization of the Hurricane Laura, Hurricane Delta, and Winter Storm Uri system restoration costs in April 2022. See Note 2 to the financial statements in the Form 10-K for a discussion of the securitization.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the second quarter 2022, $7.2 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for the second quarter 2023. There was no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an interim increase in the annual base rate, including the realignment of the costs previously being collected through the distribution and transmission cost recovery factor riders and the generation cost recovery rider to base rates, effective June 2023 and the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective May 2023. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case and the generation cost recovery rider filings.

Total electric energy sales for Entergy Texas for the three months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	1,667	1,760	(5)
Commercial	1,181	1,231	(4)
Industrial	2,399	2,489	(4)
Governmental	67	67	—
Total retail	5,314	5,547	(4)
Sales for resale:
Associated companies	—	89	(100)
Non-associated companies	136	161	(16)
Total	5,450	5,797	(6)

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

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Following is an analysis of the change in operating revenues comparing the six months ended June 30, 2023 to the six months ended June 30, 2022:


			Amount
			(In Millions)
2022 operating revenues			$1,037.1
Fuel, rider, and other revenues that do not significantly affect net income			(60.3)
System restoration carrying costs			(21.7)
Volume/weather			(21.4)
Return of unprotected excess accumulated deferred income taxes to customers			13.7
Retail electric price			24.5
2023 operating revenues			$971.9

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the six months ended June 30, 2022, $13.7 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for the six months ended June 30, 2023. There was no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to:

an interim increase in the annual base rate, including the realignment of the costs previously being collected through the distribution and transmission cost recovery factor riders and the generation cost recovery rider to base rates, effective June 2023;
the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective May 2023; and
an increase in the transmission cost recovery factor rider effective March 2022.

See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case and the generation cost recovery rider filings. See Note 2 to the financial statements in the Form 10-K for discussion of the transmission cost recovery factor rider filing.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Total electric energy sales for Entergy Texas for the six months ended June 30, 2023 and 2022 are as follows:


	2023	2022	% Change
	(GWh)
Residential	2,914	3,220	(10)
Commercial	2,241	2,290	(2)
Industrial	4,592	4,753	(3)
Governmental	130	131	(1)
Total retail	9,877	10,394	(5)
Sales for resale:
Associated companies	—	279	(100)
Non-associated companies	239	305	(22)
Total	10,116	10,978	(8)

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

Other Income Statement Variances

Second Quarter 2023 Compared to Second Quarter 2022

Other operation and maintenance expenses decreased primarily due to:

a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding;
a decrease of $3 million in transmission costs allocated by MISO; and
several individually insignificant items.

The decrease was partially offset by an increase of $2.3 million in non-nuclear generation expenses primarily due to higher long-term service agreement expenses.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in local franchise taxes.

Depreciation and amortization expenses increased primarily due to additions to plant in service and an increase in depreciation rates effective with the approval of an interim increase in the annual base rate in June 2023. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the 2022 base rate case filing.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2023, including the Orange County Advanced Power Station project.

Interest expense increased primarily due to the issuance of $325 million of 5.00% Series mortgage bonds in August 2022, partially offset by an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2023, including the Orange County Advanced Power Station project.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Other operation and maintenance expenses decreased primarily due to:

a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding;
a decrease of $5.2 million in transmission costs allocated by MISO;
a decrease of $2.8 million in power delivery expenses primarily due to a lower scope of work performed in 2023 as compared to prior year and lower transmission repairs and maintenance costs;
a decrease of $2.8 million in compensation and benefits costs primarily due to lower health and welfare costs as a result of higher prescription drug rebates in 2023, a decrease in net periodic pension and other postretirement benefits service costs as a result of an increase in the discount rates used to value the benefits liabilities, and a revision to estimated incentive compensation expense in the first quarter 2023. 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 benefits costs; and
a decrease of $2.3 million in non-nuclear generation expenses primarily due to a lower scope of work performed in 2023 as compared to prior year.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in gross receipts taxes.

Interest expense increased primarily due to the issuance of $325 million of 5.00% Series mortgage bonds in August 2022 and the issuance of $290.85 million of senior secured system restoration bonds in April 2022, partially offset by an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2023, including the Orange County Advanced Power Station project.

Income Taxes

The effective income tax rates were 19.6% for the second quarter 2023 and 19.4% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes.

The effective income tax rates were 14.5% for the second quarter 2022 and 12.8% for the six months ended June 30, 2022. The differences in the effective income tax rates for the second quarter 2022 and the six months ended June 30, 2022 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

Income Tax Legislation

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2023 and 2022 were as follows:


	2023	2022
	(In Thousands)
Cash and cash equivalents at beginning of period	$3,497	$28

Net cash provided by (used in):
Operating activities	308,266	171,727
Investing activities	(319,798)	(326,373)
Financing activities	10,857	177,193
Net increase (decrease) in cash and cash equivalents	(675)	22,547

Cash and cash equivalents at end of period	$2,822	$22,575

Operating Activities

Net cash flow provided by operating activities increased $136.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to the timing of recovery of fuel and purchased power costs and higher collections from customers. The increase was partially offset by the timing of payments to vendors, an increase of $29.4 million in income taxes paid in 2023 as a result of higher estimated income tax payments in comparison to 2022, and an increase of $12.2 million in interest paid. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery.

Investing Activities

Net cash flow used in investing activities decreased $6.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

money pool activity;
cash collateral of $30 million posted in 2022 to support Entergy Texas’s obligations to MISO; and
the partial sale of a service center in April 2023 for $11 million as part of an eminent domain proceeding.

The decrease was partially offset by an increase of $100.1 million in non-nuclear generation construction expenditures primarily due to higher spending on the Orange County Advanced Power Station project and an increase of $31.7 million in transmission construction expenditures primarily due to increased investment in the reliability and infrastructure of Entergy Texas's transmission system and higher capital expenditures for storm restoration in 2023.

Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased $98.6 million for the six months ended June 30, 2023 compared

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

to increasing by $1.6 million for the six months ended June 30, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities decreased $166.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to the issuance of $290.85 million of senior secured system restoration bonds in April 2022. The activity was partially offset by money pool activity and an increase of $21.1 million in prepaid deposits related to contributions-in-aid-of-construction for generation interconnection agreements as a result of higher deposits in 2023 as compared to 2022.

Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased $79.6 million for the six months ended June 30, 2022.

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 net income in 2023.


	June 30, 2023		December 31, 2022
Debt to capital	50.8	%	52.0	%
Effect of excluding securitization bonds	(2.4	%)	(2.5	%)
Debt to capital, excluding securitization bonds (non-GAAP) (a)	48.4	%	49.5	%
Effect of subtracting cash	(0.1	%)	—	%
Net debt to net capital, excluding securitization bonds (non-GAAP) (a)	48.3	%	49.5	%

(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. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. 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.

Entergy Texas, Inc. 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 Texas’s uses and sources of capital. Following are updates to information provided in the Form 10-K.

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


June 30, 2023	December 31, 2022	June 30, 2022	December 31, 2021
(In Thousands)
$899	$99,468	$1,643	($79,594)

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

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in June 2028. 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 June 30, 2023, there were no cash borrowings and $1.1 million in 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 June 30, 2023, $8.8 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.

State and Local Rate Regulation and Fuel-Cost Recovery

Retail Rates

2022 Base Rate Case

As discussed in the Form 10-K, in July 2022, Entergy Texas filed a base rate case with the PUCT seeking a net increase in base rates of approximately $131.4 million. The base rate case was based on a 12-month test year ending December 31, 2021. Key drivers of the requested increase were changes in depreciation rates as the result of a depreciation study and an increase in the return on equity. In addition, Entergy Texas included capital additions placed into service for the period of January 1, 2018 through December 31, 2021, including those additions reflected in the then-effective distribution and transmission cost recovery factor riders and the generation cost recovery rider, all of which have been reset to zero as a result of this proceeding.

In May 2023, Entergy Texas filed on behalf of the parties an unopposed settlement resolving all issues in the proceeding, except for issues related to electric vehicle charging infrastructure, and Entergy Texas filed an agreed motion for interim rates, subject to refund or surcharge to the extent that the interim rates differ from the final approved rates. The unopposed settlement reflected a base rate increase to be effective and relate back to December 2022 of $54 million, exclusive of, and incremental to, the costs being realigned from the distribution and transmission cost recovery factor riders and the generation cost recovery rider and $4.8 million of rate case expenses to be recovered through a rider over a period of 36 months. The base rate increase of $54 million includes updated depreciation rates and a total annual revenue requirement of $14.5 million for the accrual of a self-insured storm reserve and the recovery of the regulatory assets for the pension and postretirement benefits expense deferral, costs associated with the COVID-19 pandemic, and retired non-advanced metering system electric meters. In May 2023 the ALJ with the State Office of Administrative Hearings granted the motion for interim rates, which became

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

effective in June 2023. Additionally, the ALJ remanded the proceeding, except for the issues related to electric vehicle charging infrastructure, to the PUCT to consider the settlement. In June 2023 the ALJ issued a proposal for decision related to the electric vehicle charging infrastructure issues and which noted recent legislation enacted which permits electric utilities to own and operate such infrastructure. The ALJ’s proposal for decision deferred to the PUCT regarding whether it is appropriate for any vertically integrated electric utility, or Entergy Texas specifically, to own electric vehicle charging infrastructure, and in the event that the PUCT decided ownership is permissible, the ALJ recommended approval of the proposed tariff to charge host customers for utility-owned and operated electric vehicle charging infrastructure sited on customer premises and denial of the proposed tariff to temporarily adjust billing demand charges for separately metered electric vehicle charging infrastructure, citing cost-shifting concerns. In July 2023 the parties filed exceptions and replies to exceptions to the proposal for decision. At its August 3, 2023 open meeting, the PUCT voted to issue a final order approving the unopposed settlement and to consider the issues related to electric vehicle charging infrastructure addressed in the ALJ’s proposal for decision in a separate future proceeding.

Generation Cost Recovery Rider

As discussed in the Form 10-K, in August 2022 the PUCT approved a unanimous settlement agreement adjusting Entergy Texas’s generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility, and rates became effective. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect. In April 2023 the PUCT approved Entergy Texas’s as-filed request with rates effective over three months beginning in May 2023.

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. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022. The base rate increase of $54 million in the unopposed settlement filed in the base rate case proceeding in May 2023, which is awaiting PUCT approval, includes an annual revenue requirement of $3.4 million related to recovery of the regulatory asset for costs associated with the COVID-19 pandemic. Entergy Texas began recovery of the regulatory asset with the interim increase in the annual base rate effective in June 2023.

Fuel and purchased power recovery

As discussed in the Form 10-K, in September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the reconciliation period, Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. In November 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2023 municipal intervenors filed testimony proposing a $5.2 million disallowance for fuel purchased during Winter Storm Uri. The PUCT staff proposed no disallowance. Entergy Texas filed rebuttal testimony in April 2023. In May 2023, Entergy Texas filed, and the ALJ with the State Office of Administrative Hearings granted, a joint motion to abate the proceeding to give parties additional time to finalize a settlement and cancelling the hearing on the merits previously scheduled for May 2023. In July 2023, Entergy Texas filed an unopposed

Entergy Texas, Inc. and Subsidiaries

Management's Financial Discussion and Analysis

settlement, supporting testimony, and an agreed motion to admit evidence and remand the proceeding to the PUCT. Pursuant to the unopposed settlement, Entergy Texas would receive no disallowance of fuel costs incurred over the three-year reconciliation period and retain $9.3 million in margins from off-system sales made during the reconciliation period. In July 2023 the ALJ with the State Office of Administrative Hearings granted the motion to admit evidence and remanded the proceeding to the PUCT for consideration of the unopposed settlement. A PUCT decision is expected in September 2023.

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 the estimates and judgments necessary in Entergy Texas’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 TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended
	2023	2022	2023	2022
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$464,430	$564,591	$971,936	$1,037,073

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	63,526	60,855	231,056	134,775

Purchased power	112,883	195,016	220,641	356,106
Other operation and maintenance	63,071	72,589	127,501	147,566

Taxes other than income taxes	28,717	23,482	56,713	43,931
Depreciation and amortization	66,009	57,248	125,400	113,309
Other regulatory charges (credits) - net	1,526	22,399	12,450	35,845
TOTAL	335,732	431,589	773,761	831,532

OPERATING INCOME	128,698	133,002	198,175	205,541

OTHER INCOME
Allowance for equity funds used during construction	6,760	3,163	11,849	5,759
Interest and investment income	846	347	2,263	535
Miscellaneous - net	(1,941)	(409)	(1,502)	(102)
TOTAL	5,665	3,101	12,610	6,192

INTEREST EXPENSE
Interest expense	26,847	23,101	53,809	44,013
Allowance for borrowed funds used during construction	(2,517)	(1,067)	(4,413)	(1,932)
TOTAL	24,330	22,034	49,396	42,081

INCOME BEFORE INCOME TAXES	110,033	114,069	161,389	169,652

Income taxes	21,576	16,584	31,259	21,764

NET INCOME	88,457	97,485	130,130	147,888

Preferred dividend requirements	518	518	1,036	1,036

EARNINGS APPLICABLE TO COMMON STOCK	$87,939	$96,967	$129,094	$146,852

See Notes to Financial Statements.

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
	2023	2022
	(In Thousands)
OPERATING ACTIVITIES
Net income	$130,130	$147,888
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	125,400	113,309
Deferred income taxes, investment tax credits, and non-current taxes accrued	23,480	24,421
Changes in assets and liabilities:
Receivables	12,534	(55,237)
Fuel inventory	(18,082)	16,888
Accounts payable	(5,725)	79,801
Taxes accrued	(45,549)	(7,158)
Interest accrued	(604)	1,923
Deferred fuel costs	98,042	(141,192)
Other working capital accounts	3,129	2,388
Provisions for estimated losses	455	(10)
Other regulatory assets	(19,688)	(143,294)
Other regulatory liabilities	(9,929)	(14,444)
Effect of securitization on regulatory asset	—	153,383
Pension and other postretirement liabilities	(4,191)	(9,475)
Other assets and liabilities	18,864	2,536
Net cash flow provided by operating activities	308,266	171,727

INVESTING ACTIVITIES
Construction expenditures	(448,550)	(304,702)
Allowance for equity funds used during construction	11,849	5,759
Proceeds from sale of assets	11,000	—

Litigation proceeds from settlement agreement	—	4,134
Changes in money pool receivable - net	98,569	(1,643)
Changes in securitization account	7,248	79
Decrease (increase) in other investments	86	(30,000)

Net cash flow used in investing activities	(319,798)	(326,373)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	—	286,842
Retirement of long-term debt	(8,856)	(29,064)


Change in money pool payable - net	—	(79,594)


Preferred stock dividends paid	(1,036)	(1,024)
Other	20,749	33
Net cash flow provided by financing activities	10,857	177,193

Net increase (decrease) in cash and cash equivalents	(675)	22,547
Cash and cash equivalents at beginning of period	3,497	28
Cash and cash equivalents at end of period	$2,822	$22,575

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$53,019	$40,816
Income taxes	$30,500	$1,085

See Notes to Financial Statements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$26	$500
Temporary cash investments	2,796	2,997
Total cash and cash equivalents	2,822	3,497
Securitization recovery trust account	3,631	10,879
Accounts receivable:
Customer	81,011	115,955
Allowance for doubtful accounts	(1,708)	(2,352)
Associated companies	7,884	115,549
Other	25,733	21,587
Accrued unbilled revenues	95,924	69,208
Total accounts receivable	208,844	319,947
Deferred fuel costs	160,073	258,115
Fuel inventory - at average cost	44,832	26,750
Materials and supplies - at average cost	94,414	93,031

Prepayments and other	13,764	20,568
TOTAL	528,380	732,787

OTHER PROPERTY AND INVESTMENTS
Investments in affiliates - at equity	237	250
Non-utility property - at cost (less accumulated depreciation)	376	376
Other	19,196	18,975
TOTAL	19,809	19,601

UTILITY PLANT
Electric	7,626,619	7,409,461
Construction work in progress	613,969	339,139
TOTAL UTILITY PLANT	8,240,588	7,748,600
Less - accumulated depreciation and amortization	2,257,215	2,135,400
UTILITY PLANT - NET	5,983,373	5,613,200

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets (includes securitization property of $260,786 as of June 30, 2023 and $269,523 as of December 31, 2022)	598,370	578,682

Other	96,391	99,694
TOTAL	694,761	678,376

TOTAL ASSETS	$7,226,323	$7,043,964

See Notes to Financial Statements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT LIABILITIES

Accounts payable:
Associated companies	$57,241	$70,321
Other	245,062	201,982
Customer deposits	39,666	38,764
Taxes accrued	47,484	93,033
Interest accrued	23,324	23,928




Other	14,068	16,963
TOTAL	426,845	444,991

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	774,147	744,227
Accumulated deferred investment tax credits	8,337	8,711
Regulatory liability for income taxes - net	124,742	132,647
Other regulatory liabilities	43,223	45,247
Asset retirement cost liabilities	11,428	11,121
Accumulated provisions	8,048	7,593

Long-term debt (includes securitization bonds of $266,389 as of June 30, 2023 and $275,064 as of December 31, 2022)	2,888,075	2,895,913
Other	132,923	74,053
TOTAL	3,990,923	3,919,512

Commitments and Contingencies

EQUITY
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2023 and 2022	49,452	49,452
Paid-in capital	1,050,125	1,050,125
Retained earnings	1,670,228	1,541,134
Total common shareholder's equity	2,769,805	2,640,711
Preferred stock without sinking fund	38,750	38,750
TOTAL	2,808,555	2,679,461

TOTAL LIABILITIES AND EQUITY	$7,226,323	$7,043,964

See Notes to Financial Statements.


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)

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

Balance at December 31, 2021	$38,750	$49,452	$1,050,125	$1,344,879	$2,483,206

Net income	—	—	—	50,403	50,403

Preferred stock dividends	—	—	—	(518)	(518)
Balance at March 31, 2022	38,750	49,452	1,050,125	1,394,764	2,533,091

Net income	—	—	—	97,485	97,485

Preferred stock dividends	—	—	—	(518)	(518)

Balance at June 30, 2022	$38,750	$49,452	$1,050,125	$1,491,731	$2,630,058









Balance at December 31, 2022	$38,750	$49,452	$1,050,125	$1,541,134	$2,679,461

Net income	—	—	—	41,673	41,673


Preferred stock dividends	—	—	—	(518)	(518)
Balance at March 31, 2023	38,750	49,452	1,050,125	1,582,289	2,720,616

Net income	—	—	—	88,457	88,457

Preferred stock dividends	—	—	—	(518)	(518)

Balance at June 30, 2023	$38,750	$49,452	$1,050,125	$1,670,228	$2,808,555






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. As discussed in “Complaints Against System Energy” below and in Note 2 to the financial statements in the Form 10-K, System Energy and the Unit Power Sales Agreement are currently the subject of several litigation proceedings at the FERC, including challenges with respect to System Energy’s authorized return on equity and capital structure, renewal of its sale-leaseback arrangement, treatment of uncertain tax positions, a broader investigation of rates under the Unit Power Sales Agreement, and a prudence complaint challenging the extended power uprate completed at Grand Gulf in 2012 and the operation and management of Grand Gulf, particularly in the 2016-2020 time period. The claims in these proceedings include claims for refunds and claims for rate adjustments; the aggregate amount of refunds claimed in these proceedings substantially exceeds the net book value of System Energy. In the event of an adverse decision in one or more of these proceedings requiring the payment of substantial additional refunds, System Energy would be required to seek financing to pay such refunds which may not be available on terms acceptable to System Energy, or may not be available at all, when required.

Results of Operations

Net Income

Second Quarter 2023 Compared to Second Quarter 2022

System Energy had net income of $25.8 million in the second quarter 2023 compared to a net loss of $380.1 million in the second quarter 2022 primarily due to a regulatory charge of $551 million ($413 million net-of-tax) recorded in the second quarter 2022 to reflect the effects of the partial settlement agreement and offer of settlement related to pending proceedings before the FERC. The increase was partially offset by the disallowance of the recovery of sale-leaseback lease renewal costs from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans per the December 2022 FERC order related to the Grand Gulf sale-leaseback renewal complaint and the lower authorized rate of return on equity and capital structure limitations on monthly bills issued to Entergy Mississippi per the June 2022 settlement agreement with the MPSC. See Note 2 to the financial statements in the Form 10-K for discussion of the partial settlement agreement. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Grand Gulf sale-leaseback renewal complaint.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

System Energy had net income of $53.3 million for the six months ended June 30, 2023 compared to a net loss of $348.7 million for the six months ended June 30, 2022 primarily due to a regulatory charge of $551 million ($413 million net-of-tax) recorded in the second quarter 2022 to reflect the effects of the partial settlement agreement and offer of settlement related to pending proceedings before the FERC. The increase was partially offset by the disallowance of the recovery of sale-leaseback lease renewal costs from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans per the December 2022 FERC order related to the Grand Gulf sale-leaseback renewal complaint and the lower authorized rate of return on equity and capital structure limitations on monthly bills issued to Entergy Mississippi per the June 2022 settlement agreement with the MPSC. See Note 2 to the financial statements in the Form 10-K for discussion of the partial settlement agreement. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Grand Gulf sale-leaseback renewal complaint.

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

Income Taxes

The effective income tax rates were 22.8% for the second quarter 2023 and 23.2% for the six months ended June 30, 2023. The differences in the effective income tax rates for the second quarter 2023 and the six months ended June 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rates were 25.2% for the second quarter 2022 and 25.3% for the six months ended June 30, 2022. The differences in the effective income tax rates for the second quarter 2022 and the six months ended June 30, 2022 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes.

Income Tax Legislation

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 2023 and 2022 were as follows:


	2023	2022
	(In Thousands)
Cash and cash equivalents at beginning of period	$2,940	$89,201

Net cash provided by (used in):
Operating activities	60,571	82,645
Investing activities	11,262	(94,001)
Financing activities	(26,518)	56,880
Net increase in cash and cash equivalents	45,315	45,524

Cash and cash equivalents at end of period	$48,255	$134,725

Operating Activities

Net cash flow provided by operating activities decreased $22.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 primarily due to:

aggregate refunds of $103.5 million made in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refunds and the related proceedings; and
refunds of $19.3 million included in May 2023 service month bills under the Unit Power Sales Agreement to reflect the effects of the partial settlement agreement approved by the FERC in April 2023. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the Unit Power Sales Agreement complaint.

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

The decrease was partially offset by a decrease in spending of $33.8 million on nuclear refueling outages in 2023 as compared to the same period in 2022 and the timing of collections of receivables.

Investing Activities

System Energy’s investing activities provided $11.3 million of cash for the six months ended June 30, 2023 compared to using $94 million of cash for the six months ended June 30, 2022 primarily due to the following activity:

a decrease of $52.1 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, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
a decrease of $49.8 million in nuclear construction expenditures primarily due to higher spending in 2022 for Grand Gulf outage projects and upgrades;
money pool activity; and
a decrease of $12.2 million in decommissioning trust fund investment activity.

Decreases in System Energy’s receivable from the money pool are a source of cash flow and System Energy’s receivable from the money pool decreased $80.1 million for the six months ended June 30, 2023 compared to decreasing by $60.3 million for the six months ended June 30, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

System Energy’s financing activities used $26.5 million of cash for the six months ended June 30, 2023 compared to providing $56.9 million of cash for the six months ended June 30, 2022 primarily due to the following activity:

the repayment, at maturity, of $250 million of 4.10% Series mortgage bonds in April 2023;
the issuance of a $50 million term loan in May 2022, which was repaid, prior to maturity, in March 2023;
net repayments of $34.8 million in 2023 compared to net long-term borrowings of $57.7 million in 2022 on the nuclear fuel company variable interest entity’s credit facilities;
the repayment, at maturity, of $50.3 million of 2.5% Series governmental bonds in April 2022; and
the issuance of $325 million of 6.00% Series mortgage bonds in March 2023.

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 net income in 2023 and the net retirement of long-term debt in 2023.


	June 30, 2023		December 31, 2022
Debt to capital	42.9	%	45.0	%
Effect of subtracting cash	(1.6	%)	(0.1	%)
Net debt to net capital (non-GAAP)	41.3	%	44.9	%

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

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. The net debt to net capital ratio is a non-GAAP measure. 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’s receivables from the money pool were as follows:


June 30, 2023	December 31, 2022	June 30, 2022	December 31, 2021
(In Thousands)
$14,880	$94,981	$15,411	$75,745

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

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in June 2025. As of June 30, 2023, $37.8 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

See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. The following are updates to that discussion.

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. 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

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

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 $39 million, which includes interest through June 30, 2023, and the estimated resulting annual rate reduction would be approximately $28 million. As a result of the 2022 settlement agreement with the MPSC, both the estimated refund and rate reduction exclude Entergy Mississippi's portion. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement. The estimated refund will continue to accrue interest until a final FERC decision is issued.

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, the APSC, the MPSC, the 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, the APSC, the 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. The APSC, the MPSC, and the City Council subsequently intervened in the proceeding. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision, and in December 2022 the FERC issued an order on the ALJ’s initial decision, which affirmed it in part and modified it in part. The FERC’s order directed System Energy to calculate refunds on three issues, and to provide a compliance report detailing the calculations. The FERC’s order also disallows the future recovery of sale-leaseback renewal costs, which is estimated at approximately $11.5 million annually for purchases from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans through July 2036. The three refund issues are rental expenses related to the renewal of the sale-leaseback arrangements; refunds, if any, for the revenue requirement impact of including accumulated deferred income taxes resulting from the decommissioning uncertain tax positions from 2004 through the present; and refunds for the net effect of correcting the depreciation inputs for capital additions attributable to the portion of plant subject to the sale-leaseback.

In January 2023, System Energy filed its compliance report with the FERC. With respect to the sale-leaseback renewal costs, System Energy calculated a refund of $89.8 million, which represented all of the sale-leaseback renewal rental costs that System Energy recovered in rates, with interest. With respect to the decommissioning uncertain tax position issue, System Energy calculated that no additional refunds are owed because it had already provided a one-time historical credit (for the period January 2016 through September 2020) of $25.2 million based on the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position, and because it has been providing an ongoing rate base credit for the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position since October 2020. With respect to the depreciation refund, System Energy calculated a refund of $13.7 million, which is the net total of a refund to customers for excess depreciation expense previously collected, plus interest, offset by the additional return on rate base that System Energy previously did not collect, without interest. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the regulatory charge and corresponding regulatory liability recorded in June 2022 related to these proceedings. In January 2023, System Energy paid the refunds of $103.5 million, which included refunds of $41.7 million to Entergy Arkansas, $27.8 million to Entergy Louisiana, and $34 million to Entergy New Orleans.

In January 2023, System Energy filed a request for rehearing of the FERC’s determinations in the December 2022 order on sale-leaseback refund issues and future lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the proper accounting of System Energy’s accumulated deferred income taxes adjustment for the Tax Cuts and Jobs Act of 2017; and a motion for confirmation of its interpretation of the December 2022 order’s remedy concerning the decommissioning tax position. In January 2023 the retail regulators

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

filed a motion for confirmation of their interpretation of the refund requirement in the December 2022 FERC order and a provisional request for rehearing. In February 2023 the FERC issued a notice that the rehearing requests have been deemed denied by operation of law. The deemed denial of the rehearing request initiates the sixty-day period in which aggrieved parties may petition for federal appellate court review of the underlying FERC orders; however, the FERC may issue a substantive order on rehearing as long as it continues to have jurisdiction over the case. In March 2023, System Energy filed in the United States Court of Appeals for the Fifth Circuit a petition for review of the December 2022 order. In March 2023, System Energy also filed an unopposed motion to stay the proceeding in the Fifth Circuit pending the FERC’s disposition of the pending motions, and the court granted the motion to stay.

In February 2023, System Energy submitted a tariff compliance filing with the FERC to clarify that, consistent with the releases provided in the MPSC settlement, Entergy Mississippi will continue to be charged for its allocation of the sale-leaseback renewal costs under the Unit Power Sales Agreement. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement. In March 2023 the MPSC filed a protest to System Energy’s tariff compliance filing. The MPSC argues that the settlement did not specifically address post-settlement sale-leaseback renewal costs and that the sale-leaseback renewal costs may not be recovered under the Unit Power Sales Agreement. Entergy Mississippi’s allocated sale-leaseback renewal costs are estimated at $5.7 million annually for the remaining term of the sale-leaseback renewal.

LPSC 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 following are updates to that discussion.

Unit Power Sales Agreement Complaint

As discussed in the Form 10-K, 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.

In November 2021 the LPSC, the APSC, and the City Council filed direct testimony and requested the FERC to order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement. System Energy filed answering testimony in January 2022. In March 2022 the FERC trial staff filed direct and answering testimony recommending refunds and prospective modifications to the Unit Power Sales Agreement.

In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations. In June 2022 the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the FERC trial staff’s testimony and to oppose its revised recommendation.

In May 2022 the LPSC, the APSC, and the City Council filed rebuttal testimony and asserted new claims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony and for the hearing to begin in September 2022. The hearing concluded in December 2022. Also in December 2022, a motion to extend the briefing schedule and the May 2023 deadline for the initial decision was granted.

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolves the following issues raised in the Unit Power Sales Agreement complaint: advance collection of lease payments, aircraft costs, executive incentive compensation, money pool borrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and termination of the capital funds agreement. The settlement provides that System Energy will provide a black-box refund of $18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the Utility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales Agreement. The settlement further provides that if the APSC, the City Council, or the LPSC agrees to the global settlement System Energy entered into with the MPSC (see “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement), and such global settlement includes a black-box refund amount, then the black-box refund for this settlement agreement shall not be incremental or in addition to the global black-box refund amount. The settlement agreement addresses other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023 the FERC approved the settlement agreement. The refund provided for in the settlement agreement was included in the May 2023 service month bills under the Unit Power Sales Agreement.

In May 2023 the presiding ALJ issued an initial decision finding that System Energy should have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power Sales Agreement bills. Based on this finding, the initial decision recommended refunds; System Energy estimates that those refunds for Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans would total approximately $115 million plus $142 million of interest through June 30, 2023. The initial decision also finds that the Unit Power Sales Agreement should be modified such that a cash working capital allowance of negative $36.4 million is applied prospectively. If the FERC ultimately orders these modifications to cash working capital be implemented, the estimated annual revenue requirement impact is expected to be immaterial. On the other non-settled issues for which the complainants sought refunds or changes to the Unit Power Sales Agreement, the initial decision ruled against the complainants.

The initial decision is an interim step in the FERC litigation process, and an ALJ’s determination made in an initial decision is not controlling on the FERC. System Energy disagrees with the ALJ’s findings concerning the accumulated deferred income taxes issues and cash working capital. In July 2023, System Energy filed a brief on exceptions to the initial decision’s accumulated deferred income taxes findings. Refunds, if any, that might be required will become due only after the FERC issues its order reviewing the initial decision.

Grand Gulf Prudence Complaint

As discussed in the Form 10-K, in March 2021, the second of the additional complaints was filed at the FERC by the LPSC, the APSC, and the City Council against System Energy, Entergy Services, Entergy Operations, and Entergy Corporation. In November 2022 the FERC issued an order setting the complaint for settlement and hearing procedures. In February 2023 the FERC issued an order denying rehearing and thereby affirming its order setting the complaint for settlement and hearing procedures. In July 2023 the FERC chief ALJ terminated settlement procedures and appointed a presiding ALJ to oversee hearing procedures. The procedural schedule for the hearing has not yet been established.

Based on analysis of the pending litigation, including the May 2023 initial decision in the Unit Power Sales Agreement complaint proceeding, management determined that System Energy’s regulatory liability related to complaints against System Energy as of June 30, 2023 is adequate.

System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2021 Calendar Year Bills

In March 2023, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC, the APSC, and the City Council filed with the FERC a formal challenge to System Energy’s

System Energy Resources, Inc.

Management's Financial Discussion and Analysis

implementation of the formula rate during calendar year 2021. The formal challenge alleges: (1) that it was imprudent for System Energy to accept the IRS’s partial acceptance of a previously uncertain tax position; (2) that System Energy used incorrect inputs for retained earnings that are used to determine the capital structure; (3) that the equity ratio charged in rates was excessive; and (4) that all issues in the ongoing Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2021 bills. The first, third, and fourth allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 bills. The formal challenge to the calendar year 2021 bills states that the impact of the first allegation is “tens of millions of dollars,” but it does not provide an estimate of the financial impact of the remaining allegations.

In May 2023, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.

Unit Power Sales Agreement

As discussed in Note 2 to the financial statements in the Form 10-K, in December 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to adopt updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses. The proposed amendments would result in higher charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. In February 2022 the FERC accepted System Entergy’s proposed increased depreciation rates with an effective date of March 1, 2022, subject to refund pending the outcome of the settlement and/or hearing procedures. In June 2023 System Energy filed with the FERC an unopposed offer of settlement that it had negotiated with intervenors to the proceeding. If it is approved by the FERC, the settlement will fully resolve the proceeding.

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 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.
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Three Months Ended		Six Months Ended
	2023	2022	2023	2022
	(In Thousands)		(In Thousands)
OPERATING REVENUES
Electric	$138,384	$163,872	$309,956	$305,248

OPERATING EXPENSES
Operation and Maintenance:
Fuel, fuel-related expenses, and gas purchased for resale	18,783	11,610	37,630	19,533
Nuclear refueling outage expenses	6,692	5,320	13,311	11,247
Other operation and maintenance	46,986	54,685	97,186	98,589
Decommissioning	10,391	10,016	20,678	19,933
Taxes other than income taxes	7,728	7,150	15,010	15,001
Depreciation and amortization	35,303	37,777	72,440	67,700
Other regulatory charges (credits) - net	(32,415)	527,515	(38,874)	518,991
TOTAL	93,468	654,073	217,381	750,994

OPERATING INCOME (LOSS)	44,916	(490,201)	92,575	(445,746)

OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction	1,605	2,581	3,423	4,628
Interest and investment income (loss)	1,638	(8,959)	7,402	(3,727)
Miscellaneous - net	(1,613)	(2,741)	(10,691)	(4,380)
TOTAL	1,630	(9,119)	134	(3,479)

INTEREST EXPENSE
Interest expense	13,635	9,112	24,126	18,593
Allowance for borrowed funds used during construction	(436)	(409)	(791)	(736)
TOTAL	13,199	8,703	23,335	17,857

INCOME (LOSS) BEFORE INCOME TAXES	33,347	(508,023)	69,374	(467,082)

Income taxes	7,588	(127,875)	16,070	(118,366)

NET INCOME (LOSS)	$25,759	($380,148)	$53,304	($348,716)

See Notes to Financial Statements.

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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)
	2023	2022
	(In Thousands)
OPERATING ACTIVITIES
Net income (loss)	$53,304	($348,716)
Adjustments to reconcile net income (loss) to net cash flow provided by operating activities:
Depreciation, amortization, and decommissioning, including nuclear fuel amortization	125,741	104,296
Deferred income taxes, investment tax credits, and non-current taxes accrued	17,865	(124,202)
Changes in assets and liabilities:
Receivables	13,558	(14,753)
Accounts payable	(26,332)	(27,368)
Prepaid taxes and taxes accrued	(10,704)	(2,664)
Interest accrued	3,035	(247)
Other working capital accounts	5,569	(41,234)
Other regulatory assets	(16,683)	(22,768)
Other regulatory liabilities	27,611	338,280
Pension and other postretirement liabilities	(4,758)	(7,494)
Other assets and liabilities	(127,635)	229,515
Net cash flow provided by operating activities	60,571	82,645

INVESTING ACTIVITIES
Construction expenditures	(54,140)	(100,953)
Allowance for equity funds used during construction	3,423	4,628
Nuclear fuel purchases	(31,822)	(77,704)
Proceeds from sale of nuclear fuel	25,091	18,845
Increase in other investments	(4)	—
Proceeds from nuclear decommissioning trust fund sales	151,463	177,584
Investment in nuclear decommissioning trust funds	(162,850)	(176,735)
Changes in money pool receivable - net	80,101	60,334

Net cash flow provided by (used in) investing activities	11,262	(94,001)

FINANCING ACTIVITIES
Proceeds from the issuance of long-term debt	585,898	556,696
Retirement of long-term debt	(612,416)	(499,816)





Net cash flow provided by (used in) financing activities	(26,518)	56,880

Net increase in cash and cash equivalents	45,315	45,524
Cash and cash equivalents at beginning of period	2,940	89,201
Cash and cash equivalents at end of period	$48,255	$134,725

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest - net of amount capitalized	$20,289	$19,454


See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT ASSETS
Cash and cash equivalents:
Cash	$2,015	$78
Temporary cash investments	46,240	2,862
Total cash and cash equivalents	48,255	2,940
Accounts receivable:
Associated companies	65,892	158,601
Other	5,195	6,145
Total accounts receivable	71,087	164,746

Materials and supplies - at average cost	147,318	135,346
Deferred nuclear refueling outage costs	19,681	33,377
Prepaid taxes	3,107	—
Prepayments and other	12,426	9,097
TOTAL	301,874	345,506

OTHER PROPERTY AND INVESTMENTS
Decommissioning trust funds	1,260,251	1,142,914
TOTAL	1,260,251	1,142,914

UTILITY PLANT
Electric	5,461,317	5,425,449

Construction work in progress	99,337	102,987
Nuclear fuel	146,230	193,004
TOTAL UTILITY PLANT	5,706,884	5,721,440
Less - accumulated depreciation and amortization	3,439,474	3,412,257
UTILITY PLANT - NET	2,267,410	2,309,183

DEFERRED DEBITS AND OTHER ASSETS
Regulatory assets:

Other regulatory assets	431,804	415,121

Other	898	1,422
TOTAL	432,702	416,543

TOTAL ASSETS	$4,262,237	$4,214,146

See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2023 and December 31, 2022
(Unaudited)
	2023	2022
	(In Thousands)
CURRENT LIABILITIES
Currently maturing long-term debt	$46	$300,037

Accounts payable:
Associated companies	11,431	21,701
Other	30,897	58,178
Taxes accrued	—	7,597

Interest accrued	14,626	11,591

Sale-leaseback/depreciation regulatory liability	—	103,497
Other	4,065	4,071
TOTAL	61,065	506,672

NON-CURRENT LIABILITIES
Accumulated deferred income taxes and taxes accrued	395,069	376,070
Accumulated deferred investment tax credits	44,004	44,692
Regulatory liability for income taxes - net	109,366	110,840
Other regulatory liabilities	797,606	665,024
Decommissioning	1,063,139	1,042,461
Pension and other postretirement liabilities	35,992	40,750
Long-term debt	752,923	477,868
Other	2	2
TOTAL	3,198,101	2,757,707

Commitments and Contingencies

COMMON EQUITY
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2023 and 2022	1,086,850	1,086,850
Accumulated deficit	(83,779)	(137,083)
TOTAL	1,003,071	949,767

TOTAL LIABILITIES AND EQUITY	$4,262,237	$4,214,146

See Notes to Financial Statements.


SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2023 and 2022
(Unaudited)

	Common Equity
	Common Stock	Retained Earnings (Accumulated Deficit)	Total
	(In Thousands)

Balance at December 31, 2021	$951,850	$139,510	$1,091,360

Net income	—	31,432	31,432

Balance at March 31, 2022	951,850	170,942	1,122,792

Net loss	—	(380,148)	(380,148)

Balance at June 30, 2022	$951,850	($209,206)	$742,644






Balance at December 31, 2022	$1,086,850	($137,083)	$949,767

Net income	—	27,545	27,545

Balance at March 31, 2023	1,086,850	(109,538)	977,312

Net income	—	25,759	25,759

Balance at June 30, 2023	$1,086,850	($83,779)	$1,003,071





See Notes to Financial Statements.

ENTERGY CORPORATION AND SUBSIDIARIES

PART II. OTHER INFORMATION

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