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Summary Of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.
Entergy Arkansas [Member]  
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.
Entergy Louisiana [Member]  
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.
Entergy Mississippi [Member]  
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.
Entergy New Orleans [Member]  
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.
Entergy Texas [Member]  
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.
System Energy [Member]  
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

See Note 19 to the financial statements for details of Entergy’s and the Registrant Subsidiaries’ revenues.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$7,096

 

$6,964

 

$132

 

$—

Other
 
4,171

 
4,069

 
102

 

Transmission
 
6,592

 
6,590

 
2

 

Distribution
 
8,343

 
8,343

 

 

Other
 
2,022

 
2,011

 
2

 
9

Construction work in progress
 
2,889

 
2,815

 
74

 

Nuclear fuel
 
861

 
754

 
107

 

Property, plant, and equipment - net
 

$31,974

 

$31,546

 

$419

 

$9


2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 

Transmission
 
5,844

 
5,842

 
2

 

Distribution
 
8,000

 
8,000

 

 

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 

Nuclear fuel
 
923

 
822

 
101

 

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



Depreciation rates on average depreciable property for Entergy approximated 2.8% in 2018, 3% in 2017, and 2.8% in 2016.  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2018, 2.6% in 2017, and 2.6% in 2016, and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 18.6% in 2018, 22.3% in 2017, and 5.2% in 2016. The increased depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The decreased depreciation rate in 2018 for Entergy Wholesale Commodities is due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $177 million as of December 31, 2018 and $167 million as of December 31, 2017.

Construction expenditures included in accounts payable is $311 million as of December 31, 2018 and $368 million as of December 31, 2017.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2018 and 2017, is shown below:
2018
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,494

 

$3,725

 

$—

 

$—

 

$—

 

$1,745

Other
 
820

 
2,029

 
509

 
196

 
515

 

Transmission
 
1,792

 
2,571

 
1,046

 
78

 
1,063

 
40

Distribution
 
2,329

 
2,882

 
1,342

 
471

 
1,319

 

Other
 
311

 
699

 
242

 
233

 
193

 
39

Construction work in progress
 
244

 
1,865

 
128

 
147

 
325

 
70

Nuclear fuel
 
221

 
298

 

 

 

 
235

Property, plant, and equipment - net
 

$7,211

 

$14,069

 

$3,267

 

$1,125

 

$3,415

 

$2,129

2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 

 

 

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019



Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2018
2.5%
 
2.3%
 
3.2%
 
3.5%
 
2.7%
 
1.9%
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%


Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $161.2 million as of December 31, 2018 and $152.3 million as of December 31, 2017. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million as of December 31, 2018 and $0.5 million as of December 31, 2017.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million as of December 31, 2018 and $4.9 million as of December 31, 2017.

As of December 31, 2018, construction expenditures included in accounts payable are $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 million for System Energy. As of December 31, 2017, construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2018, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:

Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
810

 
31.50
%
 

$141

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$35

 

$28

  White Bluff
Units 1 and 2
 
Coal
 
1,637

 
57.00
%
 

$553

 

$368

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$173

 

$151

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$282

 

$200

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
20.83
%
 

$19

 

$8

  Big Cajun 2
Unit 3
 
Coal
 
581

 
24.15
%
 

$151

 

$120

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$76

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$1

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$57

 

$5

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,652

 
25.00
%
 

$270

 

$158

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$29

 

$4

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$201

 

$116

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
15.39
%
 

$7

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
581

 
17.85
%
 

$113

 

$77

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,391

 
90.00
%
 

$5,036

 

$3,212

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$74

 

$52

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$114

 

$64

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.64
%
 

$2

 

$1

(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.

Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$848.7

 
 

 

$411.6

 
 

 

($583.6
)
 
 

Basic shares and earnings (loss) per average common share
181.4

 

$4.68

 
179.7

 

$2.29

 
178.9

 

($3.26
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.3

 
(0.01
)
 
0.2

 

 

 

Other equity plans
0.7

 
(0.02
)
 
0.6

 
(0.01
)
 

 

Equity forwards
1.0

 
(0.02
)
 

 

 

 

Diluted shares and earnings (loss) per average common shares
183.4

 

$4.63

 
180.5

 

$2.28

 
178.9

 

($3.26
)

The calculation of diluted earnings (loss) per share excluded 956,550 options outstanding at December 31, 2018, 2,927,512 options outstanding at December 31, 2017, and 7,137,210 options outstanding at December 31, 2016 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.   The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years. Entergy accounts for forfeitures of stock-based compensation when they occur. Entergy recognizes all income tax effects related to share-based payments through the income statement.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value. Effective January 1, 2018, with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds are recorded in earnings as they occur rather than in other comprehensive income. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the unrealized trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity. Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. The assessment of whether an investment in an available-for-sale debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Effective January 1, 2019 with the adoption of ASU 2017-12 there will no longer be separate recognition of the ineffective portion of highly effective hedges. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

New Accounting Pronouncements

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy adopted ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 in the first quarter 2019. Entergy does not expect that ASU 2016-02 will materially affect its results of operations, financial position, or cash flows. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million for Entergy and the following right-of-use assets and corresponding lease liabilities for the Registrant Subsidiaries: $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas.

In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
    
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 was effective for Entergy for the first quarter 2019. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.

In September 2018 the FASB issued ASU No. 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service.”  The ASU requires entities to capitalize implementation costs associated with cloud computing arrangements classified as hosting arrangements and amortize those costs over the contract term.  These costs are required to be capitalized in the same line as prepayments of the costs, and subsequently amortized in the same lines as the hosting service element of the arrangement.  ASU 2018-15 is effective for Entergy for the first quarter 2020.  Entergy does not expect to early adopt the standard.  Entergy expects that it will elect to adopt ASU 2018-15 on a prospective basis, which will affect its statement of financial position by presenting implementation costs for hosting arrangements as prepayments, and net income by amortizing those costs as operation and maintenance expense over the contract term of the arrangement. Entergy is evaluating ASU 2018-15 for other effects on its results of operations, financial position, or cash flows.