Company: EAI
Filing Date: 2025-10-31
Form Type: 10-Q
Source: 0000065984-25-000132
Chunk: 354

Company: ENTERGY ARKANSAS, LLC
Filing Date: 2025-10-31
Form: 10-Q
Item: Item 1
Chunk 354
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  Entergy uses derivatives primarily to mitigate commodity price risk associated with the price of fuel.The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation.  To the extent approved by their retail regulators, the Utility operating companies use commodity and financial instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs, that are recovered from customers.DerivativesEntergy designates a significant portion of its derivative instruments as normal purchase/normal sale transactions due to their physical settlement provisions, including power purchase and sales agreements, fuel purchase agreements, and capacity contracts.  Certain derivative instruments do not qualify for designation as normal purchase/normal sale transactions due to their financial settlement provisions.  See further discussion below regarding the accounting for these derivative instruments.Entergy manages fuel price volatility for Entergy Louisiana and Entergy Mississippi through the purchase of natural gas swaps that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub.  These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities.  All benefits or costs of the program are recorded in fuel costs.  The notional volumes of these swaps are based on a portion of projected annual exposure to gas price volatility for electric generation at Entergy Louisiana and Entergy Mississippi.  The maximum length of time over which Entergy has executed natural gas swaps as of September 30, 2025 is 6 months for Entergy Mississippi.  The total volume of natural gas swaps outstanding as of September 30, 2025 is 10,249,700 MMBtu for Entergy and Entergy Mississippi.  As of September 30, 2025, Entergy Louisiana had no outstanding natural gas swaps.  Credit support for these natural gas swaps is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.  Prior to the sale of the Entergy New Orleans natural gas distribution business, Entergy also managed fuel price volatility related to projected winter purchases for gas distribution at Entergy New Orleans through the purchase of natural gas swaps.  See Note 13 to the financial statements herein for discussion of the sale of the Entergy New Orleans and Entergy Louisiana natural gas distribution businesses on July 1, 2025.During the second quarter 2025, Entergy participated in the annual financial transmission rights auction process for the MISO planning year