ENTERGY ARKANSAS LLC

ENTERGY TEXAS, INC. AND SUBSIDIARIES

Net income decreased $31.8 million primarily due to lower volume/weather.

Net income decreased $34.9 million primarily due to higher depreciation and amortization expenses and higher other operation and maintenance expenses, partially offset by higher other income.

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

The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales and a decrease in weather-adjusted residential usage. The decrease in weather-adjusted residential usage is primarily due to the effects of Hurricane Beryl in the third quarter 2024.

The retail electric price variance is insignificant and primarily due to the effect on unbilled revenue resulting from the implementation of the distribution cost recovery factor rider effective with the first billing cycle in October 2024. See Note 2 to the financial statements herein for discussion of the distribution cost recovery factor rider filing.

Total electric energy sales for Entergy Texas for the three months ended September 30, 2024 and 2023 are as follows:

See Note 12 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.

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

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales and a decrease in weather-adjusted residential usage. The decrease in weather-adjusted residential usage is primarily due to the effects of Hurricane Beryl in the third quarter 2024.

The retail electric price variance is primarily due to an increase in base rates effective June 2023, partially offset by the implementation of the generation cost recovery relate-back rider for the Hardin County Peaking Facility effective over three months beginning in May 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case and the generation cost recovery rider filings.

Total electric energy sales for Entergy Texas for the nine months ended September 30, 2024 and 2023 are as follows:

See Note 12 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.

Other operation and maintenance expenses decreased primarily due to a decrease of $5.8 million in power delivery expenses primarily due to the timing of vegetation maintenance costs.

Other regulatory charges (credits) - net includes the reversal in third quarter 2023 of $21.9 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project.

Interest expense increased primarily due to the issuance of $350 million of 5.55% Series mortgage bonds in August 2024 and the issuance of $350 million of 5.80% Series mortgage bonds in August 2023, partially offset by an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project.

•a gain of $6.9 million on the partial sale of a service center in April 2023 as part of an eminent domain proceeding;

•an increase of $5.2 million in contract costs related to operational performance, customer service, and organizational health initiatives;

•an increase of $3.9 million in compensation and benefits costs primarily due to higher healthcare claims activity in 2024;

•an increase of $3.8 million in bad debt expense;

•an increase of $3.7 million in non-nuclear generation expenses primarily due to a higher scope of work performed in 2024 as compared to 2023; and

•an increase of $3.2 million in storm damage provisions.

Depreciation and amortization expenses increased primarily due to:

•the recognition of $27.6 million in depreciation expense in 2024 for the 2022 base rate case relate back period, effective over six months beginning January 2024. The recognition of depreciation expense for the relate back period is effective over the same period as collections from the relate back surcharge rider and results in no effect on net income;

•additions to plant in service; and

•an increase in depreciation rates effective with an increase in base rates in June 2023.

See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case.

Other regulatory charges (credits) - net includes the reversal in third quarter 2023 of $21.9 million of regulatory liabilities to reflect the recognition of certain receipts by Entergy Texas under affiliated PPAs that have been resolved. See Note 2 to the financial statements in the Form 10-K for discussion of the 2022 base rate case.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project, andhigher interest earned on money pool investments. The increase was partially offset by an increase of $5 million in net periodic pension and other postretirement benefit non-service costs as a result of an increase in amortizations of the previously deferred surplus and deferrals of the deficit in the annual amount of actuarially determined pension and other postretirement benefits chargeable under the Entergy Texas reserve. See Note 11 to the financial statements in the Form 10-K for discussion of the Entergy Texas reserve.

Interest expense increased primarily due to the issuance of $350 million of 5.80% Series mortgage bonds in August 2023 and the issuance of $350 million of 5.55% Series mortgage bonds in August 2024, partially offset by an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2024, including the Orange County Advanced Power Station project.

The effective income tax rates were 18.8% for the third quarter 2024 and 18.7% for the nine months ended September 30, 2024. The differences in the effective income tax ratesfor the third quarter 2024 and the nine months ended September 30, 2024 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items.

The effective income tax rates were 20.1% for the third quarter 2023 and 19.8% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items.

Net cash flow provided by operating activities increased $52.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to lower fuel and purchased power costs, the timing of recovery of fuel and purchased power costs, and a decrease of $23.7 million in income taxes paid in 2024 as a result of lower estimated income tax payments in comparison to 2023. The increase was partially offset by:

•lower collections from customers; and

•an increase of $46 million in interest paid.

See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery.

Net cash flow used in investing activities decreased$32.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to money pool activity. The decrease was partially offset by:

•an increase of $100 million in transmission construction expenditures primarily due to higher capital expenditures as a result of increased development in Entergy Texas’s service area and increased spending on various transmission projects in 2024; and

•an increase of $83.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2024 and higher capital expenditures as a result of increased development in Entergy Texas’s service area. The increase in storm restoration expenditures is primarily due to Hurricane Beryl restoration efforts in 2024.

Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased $280.9 million for the nine months ended September 30, 2024 compared to decreasing by $73.7 million for the nine months ended September 30, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.

Net cash flow provided by financing activities decreased $0.5 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to the issuance of $350 million of 5.80% Series mortgage bonds in August 2023 and other insignificant activity, substantially offset by the issuance of $350 million of 5.55% Series mortgage bonds in August 2024.

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

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

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

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

Entergy Texas is developing its capital investment plan for 2025 through 2027 and currently anticipates making $4.8 billion in capital investments during that period. In addition to routine capital spending to maintain operations, the preliminary estimate includes investments in generation projects to modernize, decarbonize, and diversify Entergy Texas’s portfolio, including Orange County Advanced Power Station, Lone Star Power Station, Segno Solar, and Votaw Solar; distribution and Utility support spending to improve reliability, resilience, and customer experience; transmission spending to improve reliability and resilience while also supporting renewables expansion and customer growth; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, government actions, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Texas’s receivables from the money pool were as follows:

Entergy Texas has a credit facility in the amount of $300 million scheduled to expire in June 2029. The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of September 30, 2024, there were no cash borrowings and $1.1 million in letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of September 30, 2024, $86.4 million in letters of credit were outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Legend Power Station and Lone Star Power Station

In June 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Legend Power Station, a 754 MW combined-cycle combustion turbine facility, which will be enabled with both carbon capture and storage and hydrogen co-firing optionality, to be located in Jefferson County, Texas, and the Lone Star Power Station, a 453 MW simple-cycle combustion turbine facility, which will be enabled with hydrogen co-firing optionality, to be located in Liberty County, Texas. In its application, Entergy Texas noted that the Legend Power Station was expected to cost an estimated $1.46 billion and the Lone Star Power Station was expected to cost an estimated $735.3 million, in each case inclusive of the estimated costs of the generation facilities, interconnection costs, transmission network upgrades, and an allowance for funds used during construction. As described in the application, Entergy Texas is considering alternative financing approaches for the Legend Power Station and plans to pursue the financing option that is in the best interest of its customers. In July 2024 the PUCT referred the proceeding to the State Office of Administrative Hearings and, also in July 2024, the ALJ with the State Office of Administrative Hearings adopted a procedural schedule, with a hearing on the merits scheduled to begin in October 2024. In September 2024, Entergy Texas filed, and the ALJ with the State Office of Administrative Hearings granted, a motion to extend the procedural schedule in this proceeding in order to address certain developments relating to the cost and scope of the Legend Power Station and the Lone Star Power Station. As soon as the required information is developed, Entergy Texas plans to update the economic analyses in the application for both projects and to file a proposed updated procedural schedule. Subject to receipt of required regulatory approval and other conditions, both facilities are expected to be in service by mid-2028.

Segno Solar and Votaw Solar

In July 2024, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Segno Solar facility, a 170 MW solar facility to be located in Polk County, Texas, and the Votaw Solar facility, a 141 MW solar facility to be located in Hardin County, Texas. The Segno Solar facility will cost an estimated $351.6 million, and the Votaw Solar facility will cost an estimated $303.8 million, in each case inclusive of estimated transmission interconnection and upgrade costs. In September 2024 the PUCT referred the proceeding to the State Office of Administrative Hearings and the ALJ with the State Office of Administrative Hearings adopted an agreed procedural schedule, with a hearing on the merits to be held in March 2025. A PUCT decision is expected in third quarter 2025. Subject to receipt of required regulatory approval and other conditions, the Segno Solar facility is expected to be in service by early 2027, and the Votaw Solar facility is expected to be in service by mid-2028.

In June 2024, Entergy Texas filed an application with the PUCT requesting approval of Phase I of its Texas Future Ready Resiliency Plan, a cost-effective set of measures to begin accelerating the resiliency of Entergy Texas’s transmission and distribution system. Phase I is comprised of projects totaling approximately $335.1 million, including approximately $198 million of projects contingent upon Entergy Texas’s receipt of grant funds in that amount from the Texas Energy Fund. The projects in Phase I include distribution and transmission hardening and modernization projects and targeted vegetation management projects to mitigate the risk of wildfire. These projects are expected to be implemented within approximately three years of PUCT approval. The PUCT referred the proceeding to the State Office of Administrative Hearings in June 2024. In July 2024, Entergy Texas filed a motion, on behalf of the parties to the proceeding, requesting the ALJ with the State Office of Administrative Hearings adopt an agreed proposed procedural schedule, with a hearing on the merits scheduled for September 2024. The ALJ with the State Office of Administrative Hearings adopted the agreed procedural schedule in August 2024. In September 2024, Entergy Texas filed, on behalf of the parties to the proceeding, and the ALJ with the State Office of Administrative Hearings granted, an unopposed motion to abate the procedural schedule, including the hearing on the merits, noting the parties had reached a settlement in principle and to allow the parties time to finalize a settlement agreement. In October 2024, Entergy Texas filed an unopposed settlement that would resolve all issues in the proceeding, supporting testimony, and a motion to admit evidence and remand the proceeding to the PUCT. Also in October 2024, the PUCT staff filed testimony in support of the unopposed settlement. A PUCT decision is expected in fourth quarter 2024.

Hurricane Beryl

In July 2024, Hurricane Beryl caused extensive damage to Entergy Texas’s service area. The storm resulted in widespread power outages, as a result of extensive debris and damage to distribution and transmission infrastructure, and the loss of sales during the power outages. Total restoration costs for the repair and/or replacement of Entergy Texas’s electric facilities damaged by Hurricane Beryl are currently estimated to be approximately $85 million. Based on the historic treatment of such costs in Entergy Texas’s service area, management believes that recovery of restoration costs is probable. There are well established mechanisms and precedent for addressing these catastrophic events and providing for recovery of prudently incurred storm costs in accordance with applicable regulatory and legal principles. Entergy Texas expects to recover the majority of the restoration costs associated with Hurricane Beryl through its transmission and distribution cost recovery factor riders.

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

2022 Base Rate Case

As discussed in the Form 10-K, in August 2023 the PUCT issued an order severing issues related to electric vehicle charging infrastructure in the 2022 base rate case proceeding to a separate proceeding. In December 2023 the PUCT referred the separate proceeding to resolve the issues related to electric vehicle charging infrastructure to the State Office of Administrative Hearings. A hearing on the merits was held in April 2024. In June 2024 the ALJ with the State Office of Administrative Hearings issued a proposal for decision concluding that it is appropriate for a vertically integrated electric utility, and Entergy Texas specifically, to own vehicle-charging facilities or other transportation electrification and charging infrastructure and recommending that both of Entergy Texas’s proposed transportation electrification riders be approved. In October 2024 the PUCT issued an order concluding that it is appropriate for Entergy Texas to own transportation electrification and charging infrastructure, including charging stations, and approving both of Entergy Texas’s proposed transportation electrification riders with a limitation that Entergy Texas’s infrastructure rider be applied only to publicly-available charging infrastructure and Entergy Texas not recover any outstanding fees from customers not taking service under the rider.

Distribution Cost Recovery Factor (DCRF) Rider

In June 2024, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The new rider was designed to collect from Entergy Texas’s retail customers approximately $40.3 million annually based on its capital invested in distribution between January 1, 2022 and March 31, 2024. In September 2024, the PUCT approved the DCRF rider, consistent with Entergy Texas’s as-filed request, and rates became effective with the first billing cycle in October 2024.

In September 2024, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $48.9 million annually, or $8.6 million in incremental annual revenues beyond Entergy Texas’s currently effective DCRF rider based on its capital invested in distribution between April 1, 2024 and June 30, 2024. In October 2024 the PUCT staff filed a recommendation that the PUCT approve Entergy Texas’s as-filed application. A PUCT decision is expected in fourth quarter 2024.

Transmission Cost Recovery Factor (TCRF) Rider

In October 2024, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $9.7 million annually based on its capital invested in transmission between January 1, 2022 and June 30, 2024 and changes in other transmission charges. Entergy Texas requested that the PUCT issue a decision in fourth quarter 2024, unless a hearing on the merits is requested.

In September 2024, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2022 through March 2024. During the reconciliation period, Entergy Texas incurred approximately $1.6 billion in eligible fuel and purchased power expenses to generate and purchase electricity to serve its customers, net of certain revenues credited to such expenses and other adjustments. Entergy Texas’s cumulative under-recovery balance for the reconciliation period was approximately $30 million, including interest, which Entergy Texas requested authority to carry over as part of the cumulative fuel balance for the subsequent reconciliation period beginning April 2024.

Industrial and Commercial Customers

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

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information -Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.

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

See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.

SYSTEM ENERGY RESOURCES, INC.

System Energy’s principal asset consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues. As discussed in “Complaints Against System Energy” below and in Note 2 to the financial statements in the Form 10-K, System Energy and the Unit Power Sales Agreement are currently the subject of several litigation proceedings at the FERC (or on appeal from the FERC to the United States Court of Appeals for the Fifth Circuit).

Net income decreased $1.6 million primarily due to the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy Arkansas effective with the November 2023 service month per the settlement agreement with the APSC and the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy New Orleans effective with the June 2024 service month per the settlement agreement with the City Council, substantially offset by an increase in operating revenues resulting from changes in rate base. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC. See Note 2 to the financial statements herein for discussion of the settlement with the City Council.

Net income increased $1 million primarily due to an increase in operating revenues resulting from changes in rate base, partially offset by the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy Arkansas effective with the November 2023 service month per the settlement agreement with the APSC and the lower authorized rate of return on equity and capital structure limitations reflected in monthly bills issued to Entergy New Orleans effective with the June 2024 service month per the settlement agreement with the City Council. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC. See Note 2 to the financial statements herein for discussion of the settlement with the City Council.

The effective income tax rates were 24% for the third quarter 2024 and 22.5% for the nine months ended September 30, 2024. The differences in the effective income tax rates for the third quarter 2024 and the nine months ended September 30, 2024 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rates were 22.5% for the third quarter 2023 and 22.9% for the nine months ended September 30, 2023. The differences in the effective income tax rates for the third quarter 2023 and the nine months ended September 30, 2023 versus the federal statutory rate of 21% were primarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items and book and tax differences related to the allowance for equity funds used during construction.

Net cash flow provided by operating activities decreased $41.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to:

•the refund of $92.7 million made in 2024 to Entergy Arkansas as a result of the settlement with the APSC. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement with the APSC;

•an increase of $21.2 million in spending on nuclear refueling outage costs in 2024 as compared to 2023; and

•the timing of collection of receivables.

The decrease was partially offset by:

•aggregate refunds of $103.5 million made in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements in the Form 10-K for further discussion of the refunds and the related proceedings; and

•refunds of $19.3 million included in May 2023 service month bills under the Unit Power Sales Agreement to reflect the effects of the partial settlement agreement approved by the FERC in April 2023. See Note 2 to the financial statements in the Form 10-K for discussion of the Unit Power Sales Agreement complaint.

Net cash flow used in investing activities increased $214.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to:

•an increase in cash used of $85.8 million as a result of fluctuations in nuclear fuel activity due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and

•an increase of $43.5 million in nuclear construction expenditures primarily due to higher spending in 2024 on Grand Gulf outage projects and upgrades.

Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased $8.1 million for the nine months ended September 30, 2024 compared to decreasing by $85.2 million for the nine months ended September 30, 2023. The money pool is an intercompany cash management program that makes possible intercompany borrowing and lending arrangements, and the money pool and other borrowing arrangements are designed to reduce the Registrant Subsidiaries’ dependence on external short-term borrowings.

System Energy’s financing activities provided $206.1 million of cash for the nine months ended September 30, 2024 compared to using $35.2 million of cash for the nine months ended September 30, 2023 primarily due to the following activity:

•the repayment, at maturity, of $250 million of 4.10% Series mortgage bonds in April 2023;

•a capital contribution of $150 million received from Entergy Corporation in January 2024 in order to maintain System Energy’s capital structure;

•net long-term borrowings of $68.5 million in 2024 compared to net repayments of $43.4 million in 2023 on the nuclear fuel company variable interest entity’s credit facility;

•the repayment, prior to maturity, in March 2023 of a $50 million term loan due in November 2023;

•the issuance of $325 million of 6.00% Series mortgage bonds in March 2023; and

•money pool activity.

Decreases in System Energy’s payable to the money pool are a use of cash flow, and System Energy’s payable to the money pool decreased $12.2 million for the nine months ended September 30, 2024.

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

System Energy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio for System Energy is primarily due to the capital contribution of $150 million received from Entergy Corporation in 2024, partially offset by the net issuance of long-term debt in 2024.

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

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

System Energy is developing its capital investment plan for 2025 through 2027 and currently anticipates making $385 million in capital investments during that period. The preliminary estimate includes amounts associated with Grand Gulf investments and initiatives.

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

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in June 2027. As of September 30, 2024, $90 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.

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

Complaints Against System Energy

See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. System Energy and the Unit Power Sales Agreement are currently the subject of several litigation proceedings at the FERC(or on appeal from the FERC to the United States Court of Appeals for the Fifth Circuit), including challenges with respect to System Energy’s authorized return on equity and capital structure, renewal of its sale-leaseback arrangement, treatment of uncertain tax positions, a broader investigation of rates under the Unit Power Sales Agreement, and two prudence complaints, one challenging the extended power uprate completed at Grand Gulf in 2012 and the operation and management of Grand Gulf, particularly in the 2016-2020 time period, and the second challenging the operation and management of Grand Gulf in the 2021-2022 time period. Settlements that resolve all significant aspects of these complaints have been reached with the MPSC, the APSC, and the City Council and approved by the FERC. A settlement has been reached with the LPSC and is pending FERC approval, as described in “System Energy Settlement with the LPSC” below. If the settlement with the

LPSC is approved by the FERC, it would resolve all significant aspects of these pending complaints. The following are updates to the discussion in the Form 10-K.

Return on Equity and Capital Structure Complaints

As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the FERC’s Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $11.6 million, which includes interest through September 30, 2024, and the estimated resulting annual rate reduction would be approximately $6.8 million. As a result of the settlement agreements with the MPSC, the APSC, and the City Council, the estimated refund and rate reduction only includes the portion related to Entergy Louisiana, whose settlement with the LPSC is pending FERC approval. See “System Energy Settlement with the MPSC” in the Form 10-K, see “System Energy Settlement with the APSC” below and in the Form 10-K, and see“System Energy Settlement with the City Council” below for discussion of the settlements. The estimated refund will continue to accrue interest until a final FERC decision is issued.

The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021 the LPSC, the APSC, the MPSC, the City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions were filed in May 2021 by System Energy, the FERC trial staff, the LPSC, the APSC, the MPSC, and the City Council. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.

In August 2022 the D.C. Circuit issued an order addressing appeals of FERC’s Opinion No. 569 and 569-A, which established the methodology applied in the ALJ’s initial decision in the proceeding against System Energy discussed above and in the Form 10-K. The appellate order addressed the methodology for determining the return on equity applicable to transmission owners in MISO. The D.C. Circuit found the FERC’s use of the risk premium model as part of the methodology to be arbitrary and capricious and remanded the case back to the FERC. In October 2024 the FERC issued a remand order in the MISO transmission owners’ case, concluding that the record supported the methodology that it originally directed in Opinion No. 569 utilizing an equal weighting of the two-step discounted cash flow model and capital asset pricing model. As a result, it determined that the just and reasonable return on equity for the MISO transmission owners is 9.98%. In light of the System Energy settlements described below, the FERC’s changes to its return on equity methodology in the decision on the MISO transmission owners’ return on equity will not have any immediate effect on System Energy’s return on equity because System Energy’s return on equity is locked-in through the end of June 2026.

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

As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. The APSC, the MPSC, and the City Council subsequently intervened in the proceeding. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision, and in December 2022 the FERC issued an order on the ALJ’s initial decision, which affirmed it in part and modified it in part. The FERC’s order directed System Energy to calculate refunds on three issues, and to provide a compliance report detailing the calculations. The FERC’s order also disallows the future recovery of sale-leaseback renewal costs, which is estimated at approximately $11.5 million annually for purchases from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans through July 2036. The three refund issues are rental expenses related to the renewal of the sale-leaseback arrangements; refunds, if any, for the revenue requirement impact of including accumulated deferred income taxes resulting from the decommissioning uncertain tax positions from 2004 through the present; and refunds for the net effect of correcting the depreciation inputs for capital additions attributable to the portion of plant subject to the sale-leaseback.

In January 2023, System Energy filed its compliance report with the FERC. With respect to the sale-leaseback renewal costs, System Energy calculated a refund of $89.8 million, which represented all of the sale-leaseback renewal rental costs that System Energy recovered in rates, with interest. With respect to the decommissioning uncertain tax position issue, System Energy calculated that no additional refunds are owed because it had already provided a one-time historical credit (for the period January 2016 through September 2020) of $25.2 million based on the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position, and because it has been providing an ongoing rate base credit for the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position since October 2020. With respect to the depreciation refund, System Energy calculated a refund of $13.7 million, which is the net total of a refund to customers for excess depreciation expense previously collected, plus interest, offset by the additional return on rate base that System Energy previously did not collect, without interest.

In January 2023, System Energy filed a request for rehearing of the FERC’s determinations in the December 2022 order on sale-leaseback refund issues and future lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the proper accounting of System Energy’s accumulated deferred income taxes adjustment for the Tax Cuts and Jobs Act of 2017; and a motion for confirmation of its interpretation of the December 2022 order’s remedy concerning the decommissioning tax position. In January 2023 the retail regulators filed a motion for confirmation of their interpretation of the refund requirement in the December 2022 FERC order and a provisional request for rehearing. In February 2023 the FERC issued a notice that the rehearing requests have been deemed denied by operation of law. The deemed denial of the rehearing request initiated a sixty-day period in which aggrieved parties could petition for federal appellate court review of the underlying FERC orders; however, the FERC may issue a substantive order on rehearing as long as it continues to have jurisdiction over the case. In March 2023, System Energy filed in the United States Court of Appeals for the Fifth Circuit a petition for review of the December 2022 order. In March 2023, System Energy also filed an unopposed motion to stay the proceeding in the Fifth Circuit pending the FERC’s disposition of the pending motions, and the court granted the motion to stay.

In August 2023 the FERC issued an order addressing arguments raised on rehearing and partially setting aside the prior order (rehearing order). The rehearing order addresses rehearing requests that were filed in January 2023 separately by System Energy and the LPSC, the APSC, and the City Council.

In the rehearing order, the FERC directs System Energy to recalculate refunds for two issues: (1) refunds of rental expenses related to the renewal of the sale-leaseback arrangements and (2) refunds for the net effect of correcting the depreciation inputs for capital additions associated with the sale-leaseback. With regard to the sale-leaseback renewal rental expenses, the rehearing order allows System Energy to recover an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback as of the expiration of the initial lease term. With regard to the depreciation input issue, the rehearing order allows System Energy to offset refunds so that System Energy may collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. The rehearing order further directs System Energy to submit within 60 days of the date of the rehearing order an additional compliance filing to revise the total refunds for these two issues. As discussed above, System Energy’s January 2023 compliance filing calculated $103.5 million in total refunds, and the refunds were paid in January 2023. In October 2023, System Energy filed its compliance report with the FERC as directed in the August 2023 rehearing order. The October 2023 compliance report reflected recalculated refunds totaling $35.7 million for the two issues resulting in $67.8 million in refunds that could be recouped by System Energy. As discussed below in “System Energy Settlement with the APSC,” System Energy reached a settlement in principle with the APSC to resolve several pending cases under the FERC’s jurisdiction, including this one, pursuant to which it has agreed not to recoup the $27.3 million calculated for Entergy Arkansas in the compliance filing. Consistent with the compliance filing, in October 2023, Entergy Louisiana and Entergy New Orleans paid recoupment amounts of $18.2 million and $22.3 million, respectively, to System Energy.

On the third refund issue identified in the rehearing requests, concerning the decommissioning uncertain tax positions, the rehearing order denied all rehearing requests, re-affirmed the remedy contained in the December 2022 order, and did not direct System Energy to recalculate refunds or to submit an additional compliance filing. On this issue, as reflected in its January 2023 compliance filing, System Energy believes it has already paid the refunds due under the remedy that the FERC outlined for the uncertain tax positions issue in its December 2022 order. In August 2023 the LPSC issued a media release in which it stated that it disagrees with System Energy’s determination that the rehearing order requires no further refunds to be made on this issue.

In September 2023, System Energy filed a protective appeal of the rehearing order with the United States Court of Appeals for the Fifth Circuit. The appeal was consolidated with System Energy’s prior appeal of the December 2022 order.

In September 2023 the LPSC filed with the FERC a request for rehearing and clarification of the rehearing order. The LPSC requests that the FERC reverse its determination in the rehearing order that System Energy may collect an implied return of and on the depreciated cost of the portion of the plant subject to the sale-leaseback, as of the expiration of the initial lease term, as well as its determination in the rehearing order that System Energy may offset the refunds for the depreciation rate input issue and collect interest on the rate base recalculations that were part of the overall depreciation rate recalculations. In addition, the LPSC requests that the FERC either confirm the LPSC’s interpretation of the refund associated with the decommissioning uncertain tax positions or explain why it is not doing so. In October 2023 the FERC issued a notice that the rehearing request has been deemed denied by operation of law. In November 2023 the FERC issued a further notice stating that it would not issue any further order addressing the rehearing request. Also in November 2023 the LPSC filed with the United States Court of Appeals for the Fifth Circuit a petition for review of the FERC’s August 2023 rehearing order and denials of the September 2023 rehearing request.

In December 2023 the United States Court of Appeals for the Fifth Circuit lifted the abeyance on the consolidated System Energy appeals, and it also consolidated the LPSC’s appeal with the System Energy appeals. In March 2024, separate petition briefs were filed by System Energy and by the LPSC. Also in March 2024, the City Council filed an intervenor brief supporting the LPSC. In June 2024 counsel for the FERC filed the respondent’s brief, arguing that the FERC’s August 2023 rehearing order concerning the sale-leaseback and depreciation rate remedy issues should be affirmed and arguing that the dispute over the uncertain tax position issue is not yet ripe. In July 2024, System Energy and the LPSC each filed separate reply briefs. In September 2024 the parties filed a joint motion to continue and stay oral argument, previously scheduled for October 2024, pending the FERC’s decision whether to approve the settlement between System Energy and the LPSC, and the United States Court of Appeals for the Fifth Circuit granted the motion.

LPSC Additional Complaints

As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at the FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement. The following are updates to that discussion.

Unit Power Sales Agreement Complaint

As discussed in the Form 10-K, the first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in September 2020. The first complaint raises two sets of rate allegations: violations of the filed rate and a corresponding request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales Agreement prospectively. In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of September 21, 2020, establishing hearing procedures, and holding those procedures in abeyance pending the FERC’s review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above.

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

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

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

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

In May 2023 the presiding ALJ issued an initial decision finding that System Energy should have excluded multiple identified categories of accumulated deferred income taxes from rate base when calculating Unit Power

Sales Agreement bills. Based on this finding, the initial decision recommended refunds; System Energy estimates that those refunds for Entergy Louisiana would total approximately $31.5 million plus $45.6 million of interest through September 30, 2024. The initial decision also finds that the Unit Power Sales Agreement should be modified such that a cash working capital allowance of negative $36.4 million is applied prospectively. If the FERC ultimately orders these modifications to cash working capital be implemented, the estimated annual revenue requirement impact is expected to be immaterial. On the other non-settled issues for which the complainants sought refunds or changes to the Unit Power Sales Agreement, the initial decision ruled against the complainants.

The initial decision is an interim step in the FERC litigation process, and an ALJ’s determination made in an initial decision is not controlling on the FERC. System Energy disagrees with the ALJ’s findings concerning the accumulated deferred income taxes issues and cash working capital. In July 2023, System Energy filed a brief on exceptions to the initial decision’s accumulated deferred income taxes findings. Also in July 2023, the APSC, the LPSC, the City Council, and the FERC trial staff filed separate briefs on exceptions. The APSC’s brief on exceptions challenges the ALJ’s determinations on the money pool interest and retained earnings issues. The LPSC’s brief on exceptions challenges the ALJ’s determinations regarding the sale-leaseback transaction costs, legal fees, and retained earnings issues. The City Council’s brief on exceptions challenges the ALJ’s determinations on the money pool and cash management issues. The FERC trial staff’s brief on exceptions challenges the ALJ’s determinations on the cash working capital issue as well as certain of the accumulated deferred income taxes issues. In August 2023 all parties filed separate briefs opposing exceptions. System Energy filed a brief opposing the exceptions of the APSC, the LPSC, and the City Council. The APSC, the LPSC, and the City Council filed separate briefs opposing the exceptions raised by System Energy and the FERC trial staff. The FERC trial staff filed its own brief opposing certain exceptions raised by System Energy, the APSC, the LPSC, and the City Council. The case is now pending a decision by the FERC. Refunds, if any, that might be required will become due only after the FERC issues its order reviewing the initial decision.

LPSC Petition for a Writ of Mandamus

In March 2024 the LPSC filed a petition for a writ of mandamus, requesting that the United States Court of Appeals for the Fifth Circuit direct the FERC to take action on (1) System Energy’s pending compliance filings (and the LPSC’s protests) in response to the FERC’s orders on the uncertain tax position rate base issue, as discussed above; and (2) the ALJ’s pending initial decision in the return on equity and capital structure proceeding, also as discussed above. System Energy filed a notice of intervention in the proceeding.

In March 2024 the United States Court of Appeals for the Fifth Circuit directed the FERC to respond to the LPSC’s petition. Also in March 2024, System Energy filed its response to the LPSC’s petition, in which it opposed the LPSC’s mandamus request on the compliance filing and took no position on the request for action on the return on equity and capital structure case. Later in March 2024, the FERC responded opposing both parts of the LPSC’s petition, and the LPSC filed an opposed motion for leave to answer and its answer to the FERC’s and System Energy’s responses. In July 2024 the Fifth Circuit held oral argument on the petition. During oral argument, the FERC’s counsel represented that the FERC intends to issue an order in the return on equity and capital structure proceeding by the end of the year. Later in July 2024 the Fifth Circuit issued an order denying the LPSC’s petition.

System Energy Settlement with the APSC

As discussed in the Form 10-K, in October 2023, System Energy, Entergy Arkansas, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the APSC to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. System Energy, Entergy Arkansas, additional Entergy parties, and the APSC filed the settlement agreement and supporting materials with the FERC in November 2023. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from

System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. System Energy previously settled with the MPSC with respect to these complaints before the FERC.

The terms of the settlement with the APSC align with the $588 million global black box settlement reached between System Energy and the MPSC in June 2022 and provide for Entergy Arkansas to receive a black box refund of $142 million from System Energy, inclusive of $49.5 million already received by Entergy Arkansas from System Energy.

In addition to the black box refund of $142 million described above, beginning with the November 2023 service month, the settlement provides for Entergy Arkansas’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.

In December 2023 the FERC trial staff and the LPSC filed comments. The FERC trial staff commented that it “believes that the settlement is fair, and in the public interest,” and neither it nor the LPSC oppose the settlement. In December 2023 the remaining black box refund to Entergy Arkansas was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet. In March 2024 the FERC approved the settlement “because it appears to be fair and reasonable and in the public interest.” System Energy paid the remaining black box refund of $92 million to Entergy Arkansas in May 2024.

System Energy Settlement with the City Council

In April 2024, System Energy, Entergy New Orleans, and additional named Entergy parties involved in multiple docketed proceedings pending before the FERC reached a settlement in principle with the City Council to globally resolve all of their actual and potential claims in those dockets and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. In May 2024, System Energy, Entergy New Orleans, additional named Entergy parties, and the City Council filed the settlement agreement and supporting materials with the FERC. The Unit Power Sales Agreement is a FERC-jurisdictional formula rate tariff for sales of energy and capacity from System Energy’s owned and leased share of Grand Gulf to Entergy Mississippi, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans.

The terms of the settlement with the City Council align with the $588 million global black box settlement amount reflected in the prior settlements reached between System Energy and the MPSC in June 2022 and between System Energy and the APSC in November 2023. The settlement provides for Entergy New Orleans to receive a black box refund of $116 million from System Energy, inclusive of approximately $18 million already received by Entergy New Orleans from System Energy. In March 2024 the $98 million black box refund to Entergy New Orleans was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet.

In addition to the black box refund of $116 million described above, beginning with the June 2024 service month, the settlement provides for Entergy New Orleans’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.

In August 2024 the FERC approved the settlement “because it appears to be fair and reasonable and in the public interest.” System Energy paid the remaining black box refund of $98 million to Entergy New Orleans in October 2024. As discussed above and in Note 2 to the financial statements in the Form 10-K, System Energy previously settled with the MPSC and the APSC with respect to these complaints before the FERC. The settlements with the APSC, the MPSC, and the City Council represent almost 85% of System Energy’s share of the output of Grand Gulf.

System Energy Settlement with the LPSC

In July 2024, System Energy and the LPSC staff reached a settlement in principle to globally resolve all of the LPSC’s actual and potential claims in multiple docketed proceedings pending before the FERC (including all docketed proceedings resolved by the MPSC, the APSC, and the City Council settlements) and with System Energy’s past implementation of the Unit Power Sales Agreement. The settlement also covers the amended and supplemental complaint, discussed in “Grand Gulf Prudence Complaint” in the Form 10-K, filed by the LPSC, the APSC, and the City Council at the FERC in October 2023. In August 2024 the LPSC approved the settlement. In September 2024 the settling parties filed the settlement for approval by the FERC.

The terms of the settlement with the LPSC align with the $588 million global black box settlement amount reflected in the prior settlements reached between System Energy and the MPSC in June 2022, between System Energy and the APSC in November 2023, and between System Energy and the City Council in April 2024. The settlement provides for Entergy Louisiana to receive a black box refund of $95 million from System Energy, inclusive of approximately $15 million already received by Entergy Louisiana from System Energy. In June 2024 the remaining $80 million black box refund to Entergy Louisiana was reclassified from long-term other regulatory liabilities to accounts payable - associated companies on System Energy’s balance sheet.

In addition to the black box refund of $95 million described above, beginning with the September 2024 service month, the settlement provides for Entergy Louisiana’s bills from System Energy to be adjusted to reflect an authorized rate of return on equity of 9.65% and a capital structure not to exceed 52% equity.

The settlement also includes an agreement that, subject to the receipt of necessary regulatory approvals, Entergy Louisiana will divest to Entergy Mississippi all of its interest in Grand Gulf capacity and energy under the Unit Power Sales Agreement and its purchases from Entergy Arkansas under the MSS-4 replacement tariff. Subject to the receipt of all required regulatory approvals, divestiture will be effective on January 1, 2025. In October 2024 Entergy Louisiana and Entergy Mississippi filed with the FERC a power purchase agreement under which Entergy Mississippi would purchase Entergy Louisiana’s purchases of Grand Gulf capacity and energy. The power purchase agreement is governed by the MSS-4 replacement tariff, a tariff governing the sales of energy and capacity among the Utility operating companies. The parties requested that the FERC issue an order accepting the power purchase agreement no later than December 2024.

System Energy Regulatory Liability for Pending Complaints

As discussed in the Form 10-K, System Energy had recorded a regulatory liability related to complaints against System Energy, which was consistent with the settlement agreements reached with the MPSC and the APSC, taking into account amounts already or expected to be refunded. System Energy’s remaining regulatory liability related to complaints against System Energy as of December 31, 2023 was $178 million. As discussed above in “System Energy Settlement with the City Council,” in first quarter 2024 the $98 million black box refund to Entergy New Orleans was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet. As discussed above in “System Energy Settlement with the LPSC,” in second quarter 2024 the $80 million black box refund to Entergy Louisiana was reclassified from the regulatory liability to accounts payable - associated companies on System Energy’s balance sheet.

Unit Power Sales Agreement

System Energy Formula Rate Annual Protocols Formal Challenge Concerning 2022 Calendar Year Bills

In February 2024, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC and the City Council filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2022. The formal challenge alleges: (1) that the equity ratio charged in rates was excessive; and (2) that all issues in the pending Unit Power Sales Agreement complaint proceeding should also be reflected in calendar year 2022 bills. These allegations are identical to issues that were raised in the formal challenge to the calendar year 2020 and 2021 bills.

In March 2024, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.

Pension Costs Amendment Proceeding

As discussed in the Form 10-K, in October 2021, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement to include in the rate base the prepaid and accrued pension costs associated with System Energy’s qualified pension plans. Based on data ending in 2020, the increased annual revenue requirement associated with the filing is approximately $8.9 million. In March 2022 the FERC accepted System Energy’s proposed amendments with an effective date of December 1, 2021, subject to refund pending the outcome of the settlement and/or hearing procedures. In August 2023 the FERC chief ALJ terminated settlement procedures and designated a presiding ALJ to oversee hearing procedures. In October 2023, System Energy filed direct testimony in support of its proposed amendments. Under the procedural schedule, testimony was filed through April 2024, and the hearing occurred in late May and early June 2024.

In September 2024 the presiding ALJ issued an initial decision recommending that the FERC approve inclusion of a line item for prepaid and accrued pension costs; however, the presiding ALJ did not agree with System Energy’s proposed methodology to calculate the value of the prepaid and accrued pension cost input. Instead, the presiding ALJ recommended limiting System Energy’s recovery to the prepaid and accrued pension costs that were incurred beginning in 2015 and later.

System Energy disputes the presiding ALJ's determination concerning the methodology used to calculate the prepaid and accrued pension input, and System Energy filed exceptions to these rulings in October 2024. If the ALJ’s determination is affirmed by the FERC, System Energy estimates refunds, including interest through September 30, 2024, of approximately $15 million to $19 million would be owed related to the ALJ’s findings. The ALJ's initial decision is not binding on the FERC and is an interim step in the hearing process. No refunds will be owed in connection with this proc eeding and no changes to System Energy’s pension cost recovery methodology will be implemented unless and until the FERC requires them in a final order. This proceeding is not covered by the global settlements described above.

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

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks. See “Other Information -Environmental Regulation” in Part II, Item 5 herein for updates regarding environmental proceedings and regulation.

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

See the “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements and the “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis herein for updates to the discussion of new accounting pronouncements.