8-KRegulation FDOther EventsExhibits & Filings

ENTERGY CORP /DE/ 8-K Report, Regulation FD Disclosure (May 16, 2023)

Filed May 16, 2023For Securities:ETR

Summary

Entergy Corporation (ETR) disclosed an initial decision from an Administrative Law Judge (ALJ) on a Unit Power Sales Agreement Complaint within FERC Docket No. EL20-72. While the ALJ's decision is advisory and not binding on the Federal Energy Regulatory Commission (FERC), it addresses several key issues concerning System Energy Resources, Inc. (SERI). The ALJ recommended refunds totaling approximately $115 million plus $135 million in interest related to accumulated deferred income taxes, and a prospective negative cash working capital allowance. SERI disagrees with these findings and will appeal. The company believes its positions are legally and factually correct. Importantly, Entergy has affirmed its 2023 adjusted earnings per share guidance of $6.55 to $6.85 and outlooks for 2024 and 2025, indicating that management does not deem it necessary to increase the existing regulatory liability associated with this litigation, which currently stands at approximately $230 million after previous settlements and refunds. The company continues to evaluate SERI's financial viability due to ongoing litigation.

Key Highlights

  • 1An ALJ issued an initial decision on the Unit Power Sales Agreement Complaint (FERC Docket No. EL20-72), which is one of four major pieces of litigation against System Energy (SERI).
  • 2The ALJ recommended refunds of approximately $115 million plus $135 million in interest related to accumulated deferred income taxes.
  • 3A prospective negative cash working capital allowance was also recommended, with an immaterial estimated annual revenue impact.
  • 4SERI disagrees with the ALJ's findings on accumulated deferred income taxes and cash working capital and will file a brief on exceptions.
  • 5The initial decision is advisory to FERC; refunds are not due until a final FERC order is issued, which is not expected for at least 12 months.
  • 6Entergy affirmed its 2023 adjusted EPS guidance ($6.55-$6.85) and 2024-2025 outlooks, indicating no need to increase the existing regulatory liability.
  • 7The remaining regulatory liability associated with SERI litigation is approximately $230 million after prior settlements and refunds.

Frequently Asked Questions

The ALJ's initial decision is an important, albeit advisory, step in the FERC litigation process concerning System Energy Resources, Inc. (SERI). It outlines recommendations on key financial and ratemaking issues, including potential refunds related to accumulated deferred income taxes and adjustments to cash working capital. However, it is not a final order, and refunds are contingent on a subsequent FERC decision.

While the ALJ recommended significant refunds ($115 million plus interest) related to accumulated deferred income taxes, Entergy has affirmed its existing guidance and outlooks. Management believes it is not necessary to increase the current regulatory liability of approximately $230 million associated with the SERI litigation. The company's forward-looking financial statements already reflect expectations of resolving the remaining litigation.

The ALJ's decision is not final. It will be reviewed by FERC, which does not have a statutory timeline for issuing a decision. Given the complexity, Entergy does not expect a FERC order for at least another 12 months or longer. Refunds, if any are ultimately ordered, would only become due after FERC issues its final decision.

Entergy, through SERI, disagrees with the ALJ's conclusions on accumulated deferred income taxes and cash working capital issues. SERI maintains its positions are correct and will file a brief on exceptions with FERC by the established deadline to present its arguments. The company continues to evaluate the overall financial viability of SERI in light of ongoing litigation.